Iran is rich in oil. Its economy and government coffers rely on oil revenue, but output is falling due to dilapidated infrastructure. While Iran has plenty of crude, Iran has to import refined petroleum because it cannot refine enough domestically.
Iran needs to import most machines and hi-tech goods, goods and technology needed to make a nation run.
Our bill sanctions firms that provide refined petroleum, refinery equipment and technology, as well as goods, services and technology that would allow Iran to get oil or natural gas out of the ground and to market. Ancillary services such as finance, shipping and insurance that would make such activity possible are also targeted. Companies face a stark choice, stop doing business with Iran, or pay the consequences in the U.S.
Early results are positive. Most major oil firms are getting out of Iran and Tehran must pay a premium for refined petroleum imports.
I have been critical of three successive U.S. administrations for not enforcing the old Iran Sanctions Act. This law was essentially ignored by the Clinton administration after 1998, the entire Bush administration, and the first year of the Obama administration. I am told that President Obama and Secretary Clinton are committed to enforcing this new law.
Moreover, these sanctions are partially self-enforcing, by requiring a certification from every federal contractor that they and all their corporate affiliates conduct no activities that would trigger sanctions. So, the largest corporations in the world will have to forego business with Iran or lose all their U.S. government contracts.
The bill also targets companies that provide technology that allows the Iranian government to spy on or repress the speech of dissidents. Senator Charles Schumer (D-NY) and I authored provisions that deny federal contracts to such firms, most notably Siemens and Nokia. The bill allows firms -- including American firms -- to provide internet and telecom infrastructure, but would hammer firms that provide tools for the government to repress the Green Movement and others fighting for freedom.
The bill would also hammer the Iranian Revolutionary Guard Corps (IRGC) and other entities in Iran designated for proliferation activity. The IRGC operates through front companies and affiliates that play an outsize role in the economy of Iran. Any bank that touches them will have their business in the U.S. severely curtailed. Given the role played by the Guards in the Iranian economy, and the fact that they obscure their identity through front companies, banks will do business in Iran at considerable peril.
Critics also argued that these measures will hurt the Iranian people. Quite frankly, we need to do just that. In the 1980s, the U.S. and other countries enacted tough sanctions against apartheid South Africa. Those sanctions did not just hit the elite white population; they were not “targeted.” They hit the South African economy and hit it hard. The very people we were trying to help -- the non-white population -- were hurt. But the sanctions created enough economic dislocation and unrest that they literally drove a regime to provide for its own destruction through democratic elections – elections guaranteed to bring the ANC to power. Ultimately, Nelson Mandela thanked us for the sanctions.
Critics also counter that these measures will cause a trade war with Europe because they have extraterritorial effect. This time, unlike the 1990s, the European Union has no appetite to threaten trade war over business with Iran. In fact the E.U. has enacted a sanctions regime that prevents E.U. companies from doing most, if not quite all, of the activities targeted by the American extraterritorial statute. There is actually very little space between the U.S. and the E.U. on Iran.
Critics also claim that there is no guarantee that they will work. No one can guarantee anything, especially in foreign policy. But these sanctions provide the best hope for convincing Iran’s government that it literally risks its own existence by continuing its nuclear program.
Nor, however, should they be viewed as the last word in Iran sanctions from Congress. We may need to tighten the screws further, and I will soon introduce legislation to do just that.