The State Department on Thursday exempted China from new sanctions aimed at forcing Iran to abandon its alleged nuclear weapons program.
Starting Thursday, the United States is able to impose sanctions on foreign financial institutions that do business with Iran’s central bank, which deals with oil transactions. China is the world's largest purchaser of Iranian oil.
Secretary of State Hillary Clinton determined on Thursday that China and Singapore should qualify for an exemption for the next 180 days because they have “significantly reduced their volume of crude oil purchases from Iran,” joining 18 other nations that have already been granted exemptions.
"We have been clear all along that there is a path for Iran to fully re-join the global economy,” she said. “Iran’s leaders have the opportunity to address international concerns by engaging seriously and substantively in negotiations with the [international community]. I urge Iran to demonstrate its willingness to take concrete steps toward resolving the nuclear issue during the expert-level talks scheduled in Istanbul on July 3. Failure to do so will result in continuing pressure and isolation from the international community.”
In a conference call with reporters, administration officials made it clear they didn't think the Chinese exemption would undermine the sanctions.
"This decision further represents the success of our sanctions policy and our effort to build an international coalition to reduce Iran's oil exports, thereby applying significant pressure on Iran,” an official said. “We've seen the sanctions on Iran's central bank and oil sector are having a significant effect on the Iranian government and its economy. Just yesterday you saw an Iranian official admit that the sanctions, according to their estimates, amount to a 20 to 30 percent reduction in sales.”
China has voted four times in the United Nations to impose sanctions on Iran. The country has also seen a 25 percent year-on-year reduction between January and May in crude oil imports from Iran, the official said, with more reductions to come in 2012.
Meanwhile, a full European Union embargo on Iranian crude starts July 1, fostering hopes that Iran will be reeling by the time technical negotiations on its nuclear program resume on July 3. Still, some U.S. lawmakers aren't waiting, already pushing for tougher sanctions.
The decision to exempt China was immediately blasted by Rep. Ileana Ros-Lehtinen (R-Fla.), whose legislation to strengthen U.S. sanctions has already cleared the House. She is working with Sen. Robert Menendez (D-N.J.) to reconcile her legislation with the sanctions bill that passed the Senate last month.
"The Administration likes to pat itself on the back for supposedly being strong on Iran sanctions," she said in a statement. "But actions speak louder than words, and today the Administration has granted a free pass to Iran’s biggest enabler, China, which purchases more Iranian crude than any other country."
Menendez for his part applauded the decision but cautioned that China needs to make more progress.
"The additional exemptions announced today for China and Singapore demonstrate the tremendous effectiveness of the Central Bank sanctions in encouraging countries to halt or diversify their petroleum purchases away from Iran," he said. "With respect to China, Secretary Clinton has assured me that at this time China has met the significant reduction standard required by the law and recent precedent to qualify for an exemption from sanctions. The Chinese, however, will have to be mindful that the law requires a significant reduction every 180 days to continue qualifying for an exemption and that we will expect to see additional significant reductions by China and other nations that are continuing to purchase Iranian petroleum or petroleum products in order to qualify for future exemptions."
Here's Clinton's full statement:
Today I have made the determination that two additional countries, China and Singapore, have significantly reduced their volume of crude oil purchases from Iran. As a result, I will report to the Congress that sanctions pursuant to Section 1245(d)(1) of the National Defense Authorization Act (NDAA) for Fiscal Year 2012 will not apply to their financial institutions for a potentially renewable period of 180 days.
A total of 20 world economies have now qualified for such an exception. Their cumulative actions are a clear demonstration to Iran’s government that Iran’s continued violation of its international nuclear obligations carries an enormous economic cost. According to the International Energy Agency (IEA), Iran’s crude oil exports in 2011 were approximately 2.5 million barrels per day, and have dropped to roughly 1.5 million barrels per day, which in real terms means almost $8 billion in lost revenues every quarter. When the European Union oil embargo goes into effect July 1, Iran’s leaders will understand even more fully the urgency of the choice they face and the unity of the international community.
Today marks an important milestone in the implementation of the NDAA and U.S. sanctions toward Iran. Following the President’s determinations on March 30 and June 11 on the availability of non-Iranian supplies of oil, as of today, any foreign financial institution based in a country that has not received an NDAA exception is subject to U.S. sanctions if it knowingly conducts a significant transaction with the Central Bank of Iran for the sale or purchase of petroleum or petroleum products to or from Iran.
We have been clear all along that there is a path for Iran to fully re-join the global economy. Iran’s leaders have the opportunity to address international concerns by engaging seriously and substantively in negotiations with the P5+1. I urge Iran to demonstrate its willingness to take concrete steps toward resolving the nuclear issue during the expert-level talks scheduled in Istanbul on July 3. Failure to do so will result in continuing pressure and isolation from the international community.
This post was updated at 4:00 p.m. with comment from Rep. Ros-Lehtinen and Sen. Menendez