Escalating sanctions on Iran

Patrick Clawson

  • What do the latest U.S. and European sanctions say about international pressure on Iran?

In May, the European Union imposed sanctions on more than 100 individuals and companies tied to Iran's nuclear program, while the United States sanctioned seven foreign companies involved in supplying Iran refined oil as well as sixteen firms and individuals involved in the missile and nuclear program. In April, the European Union also sanctioned 32 Iranians for human rights abuses.

A few years ago European governments were reluctant to forego business opportunities with Iran and the State Department seemed inactive on the sanctions front-in contrast to activism by the Treasury Department. Now the United States and Europe seem to be on the same page of tougher sanctions.

The new European steps were quite harsh. The European Union's sanctions against the Europaisch Iranische Bank (EIB) in Hamburg will arguably have a more costly impact on exports to Iran than any measure Washington has imposed. EIB acted as the intermediary for most German exports to Iran, which totaled Euro 3.8 billion in 2010.  But the EU sanctions were not only tough economically, they also sent a strong diplomatic signal. Notably, the European Union did not remove earlier sanctions on Ali-Akbar Salehi, former head of Iran's nuclear program who has since been appointed Tehran's top diplomat.  It is extremely unusual to impose sanctions on a serving foreign minister, who now will presumably need an exemption for any trip to Europe.

Europe has assumed a more punitive stance against the Islamic Republic--to the point of imposing harsher sanctions than the United States. The moves reflect Europe's general readiness to impose sanctions for human rights violations, as distinct from national security issues.  Since the contested 2009 Iranian elections, European public opinion has become quite hostile towards the Islamic Republic over human rights issues.

Meanwhile, Washington is making use of a wider range of authorities to impose more sanctions on Iran.  On May 18, the Treasury Department sanctioned Iranian Revolutionary Guard general Mohsen Chizari under Executive Order 13572, which targets people for committing human rights abuses against the Syrian people.  Chizari was cited for his role in helping the Syrian government repress protests.

  • Why is there a renewed push now?

On January 21-22, Iran met in Istanbul for talks with the five permanent members of the U.N. Security Council plus Germany, a group known as the P5+1.  After that meeting failed,  U.S. and European officials expected to mobilize new U.N. sanctions on Iran as well as sanctions by individual countries.  But developments in the Middle East complicated their plans, especially after disagreements among P5+1 countries over a U.N. resolution on Libya.

Russia and China are now unlikely to agree to another tough Security Council resolution on Iran. In the wake of the Arab Spring, many Arab countries are more focused on their own domestic problems or to alleged Iranian meddling in their internal affairs than on Tehran's nuclear intentions.  Western officials are so preoccupied with the Arab Spring that they have had less time to deal with the diplomatic impasse on Iran's nuclear program.

As a result, the United States and European Union have had to take their own actions to increase pressure on Iran.  They have been consulting for some time about further measures, and additional actions can be expected over the summer.

Iran may be hurt the most, however, by the Indian-Iranian impasse over how to pay for the crude oil worth about $1 billion a month which Iran ships to India. Iran continues to ship the oil but has had trouble getting paid. Under strong pressure from the United States, the Reserve Bank of India (India's central bank) stopped transferring funds to Iran in December, though it made a single payment of $2.1 billion through EIB before that bank was sanctioned. 

India now owes Iran more than $3 billion.  The Indian cabinet is due to vote shortly on a plan to pay Iran for oil in Indian rupees, which could only in turn be used to buy Indian goods. That
arrangement would be a problem for Iran, which in the past has bought only about $1 billion a year from India.  If Iran is not able to profitably sell oil to India, Iran will assuredly be able to sell it elsewhere, but Iran will almost certainly have to accept a considerable discount.

  • What do sanctions push say about the Obama administration's Iran policy?

Washington now has low expectations about prospects for engagement or serious negotiation-in sharp contrast to President Obama's 2009 video address during the Iranian new year (Nowruz). Two years ago, he said, "I would like to speak clearly to Iran's leaders" and talked about diplomacy, engagement, mutual respect, and constructive ties, with no mention of human rights.

In two recent speeches, however, Obama has signaled greater U.S. focus on Iranian repression and human rights violations.  In his 2011 Nowruz video message, he focused entirely on Tehran's "campaign of intimidation and abuse" and the "rights of the Iranian people," without mentioning engagement with Iran's leaders or the nuclear standoff. And in his May 19 speech on the changing Middle East, he vowed, "We will continue to insist that the Iranian people deserve their universal rights and a government that does not smother their aspirations."

The Obama administration has taken some concrete actions to back up this focus on the Iranian people rather than the Iranian regime: It appointed a State Department Persian language spokesman. And it revised visa requirements to allow Iranian students multiple-entry two-year visas instead of one-time visas for only 60 days.  The administration is considering other outreach measures, another major shift after initial reluctance to undertake any steps that Tehran might view as supporting regime change.  The administration appears to have reverted to the Bush-era policy of political and financial support for democratic and human rights forces in Iran.

  • What do the new entities and sectors being targeted indicate about the new U.S. and EU sanctions?

Earlier U.S. sanctions targeted small firms from countries with which the United States has bad relations, such as Belarus.  In contrast, the new round targets firms that are more important economically and politically.  New sanctions target the world's tenth largest oil firm, Petroleos de Venezuela. They also target the Ofer Brothers Group, a politically well-connected Israeli firm, which is accused of turning a blind eye to its ships carrying refined oil to Iran under the table.  Sanctions on these two firms indicate that Washington is prepared to go after any firm, no matter how well-connected.

Washington has even convinced some foreign firms to go further than required by the new law.  In a May 24 briefing, Deputy Secretary of State James Steinberg revealed that "the State Department has also convinced the jet fuel suppliers in 17 cities in Europe and Asia to which IranAir flies to stop providing fuel." This action has left IranAir with only two fuel suppliers in Europe, in Belgrade and Budapest, forcing all IranAir flights to make expensive and awkward refueling stops in those cities. The fuel cutoff is not required to avoid sanctions under the 2010 Comprehensive Iran Sanctions, Accountability and Divestment Act, which exempts sales to Iranian companies of less than $10 million a year, which provides ample room to cover fuel sales to IranAir.

  • In Istanbul, President Mahmoud Ahmadenejad said in May that Iran was prepared to go back to the negotiating table. But EU foreign policy chief Baroness Catherine Ashton said Iran had not shown enough flexibility to resume talks. How will sanctions affect nuclear talks between Iran and the P5+1 ?

The P5+1 viewed the last two rounds of talks-- in Geneva December 6-7, 2010 and in Istanbul January 21-22, 2011--as failures.  In February, Ashton wrote Iran offering new talks. Tehran finally answered in May, 87 days later, using rhetoric that does not augur well for meaningful diplomacy. Iranian negotiator Saeed Jalili wrote, "What we witness today obviously proves that futile insistence of some governments to continue unequal relations in the world and confronting the will of nations and protecting the ruling dictators, [sic] cannot be continued in order to achieve their goals and the future management of the world would be based on the will of nations for their self-determination." Jalili proposed issues to discuss, most importantly, "the international norms and structures on different issues including the efforts for nuclear disarmament and non-proliferation as well as cooperation for peaceful uses of nuclear energy." The vague phrasing avoided the issue of U.N. resolutions and Iran's failure to meet its obligations to the International Atomic Energy Agency (IAEA).

There is little prospect of new talks unless conditions change. The West hopes additional sanctions will become so costly that Iran's leaders will opt to return to the negotiating table. But the high price of oil has given Iran a financial cushion to compensate for the economic cost of sanctions.

  • Is Iran's internal political dispute affecting prospects for diplomacy?

Like politicians everywhere, Iranian politicians are usually more concerned about local issues than about foreign policy.  The Islamic Republic has a long history of disputes among politicians, with former allies becoming bitter enemies.  That has happened once again, with a sharp confrontation between President Ahmadinejad's supporters and his critics.

Each of the last three Iranian presidents ran into political crises which weakened their authority in the last two years of their second term; the conflict surrounding Ahmadinejad fits this pattern. Internal political developments, as well as maneuvering for the 2012 Majlis and 2013 presidential elections, are likely to absorb Iranian politicians.  In an environment of bitter factional disputes, any politician who proposes a compromise with the West also runs a serious risk of being accused of doing a bad deal, if not selling out Iran's interests

  • How has Iran reacted to expanded sanctions?

Iran has escalated rhetorical attacks on the West in response to new sanctions.  On May 24, the Majles National Security and Foreign Policy Committee voted to impose sanctions on 26 Americans who, it said, "have violated human rights, perpetrated crimes against humanity, and enabled drug trafficking."  It was a peculiar list, including Admiral Jeffrey Harbeson who has been Guantanamo commandant since July 2010, a period during which there have been few if any accusations of mistreatment of prisoners, and Thomas Pickard, who was the acting FBI director for 71 days in 2001 but was no longer in that role by the time of the 9-11 attacks.

Threatened Iranian sanctions on the United States were accompanied by strong words about Europe. On May 19, Ahmadinejad said, "There is equipment that can move the water contained in clouds. This is what Europeans unfortunately did this year...And we had a drought all autumn."  Two days earlier, Mohammad-Javad Larijani, head of Iran's Supreme Council for Human Rights and brother to both the Majles speaker and the judiciary chief, threatened, "Westerners either have to be Iran's partner in the fight against drug trafficking or we must think otherwise and, for instance, allow the transit" of drugs through Iran.  Such claims and such threats do little to persuade Europe to be more accommodating to Iran.

Read Patrick Clawson's chapter on U.S. Sanctions in "The Iran Primer"

Patrick Clawson is Director for Research at The Washington Institute for
Near East Policy.

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