US, Europe to Increase Sanctions on Iran

The United States ratcheted up their own sanctions on Iran earlier this week, and next week the European Union is set to increase those affected by their sanctions as well. The US upped sanctions on Iran’s oil and gas industry and is seeking to further isolate Iranian banking.

The EU, in line with European Council conclusions, “has started to examine additional measures and is set to substantially update the list of [Iranian] entities and individuals subject to restrictive measures… as a first step,” according to a European diplomat who spoke with The Mideast Update.

The diplomat said the EU Foreign Affairs Council is set to address the matter on December 1. The EU and the US aren’t the only ones upping the pressure. The UK and Canada are tacking on extra steps as well.

The moves come following an International Atomic Energy Agency (IAEA) report on Iran’s nuclear program that is more detailed and perhaps more troubling than ever. The Director General of the United Nations nuclear watchdog, Yukiya Amano, said in comments published by the IAEA website that they have information indicating Iran has conducted activities relevant to nuclear weapons work prior to 2003 and “some activities may still be ongoing.”

The European diplomat told The Mideast Update that the IAEA report “increases concerns and confirms the need to look into stronger measures against Iran.”

US Targets Oil, Banks

The US sanctions, meanwhile, will hit Iran in several different ways. According to a the transcript of comments made by US senior administration officials to reporters and published by the US State Department, the sanctions seek to close some loopholes. This is particularly true with regard to the Iranian oil and gas industry.

Previously, according to a senior US administration official, the American sanctions sought to prohibit large-scale financial investment in Iran’s oil drilling and refining work. The new round of sanctions go beyond investment by acting similarly on actual products being sold to Iran for that work, such as drilling equipment.

The steps also allow the US to sanction those providing goods and services to the Iranian petrochemical industry, which according to one senior administration official accounts for half of Iran’s non-crude oil exports. The US is also launching a diplomatic campaign to encourage governments and companies to buy petrochemicals from other sources besides Iran.

“This is not like crude oil, where there are difficulties in companies simply agreeing to forego imports of Iranian crude oil. There are lots of good producers of petrochemical products, and they can switch easily. And if they did, this would dramatically reduce Iran’s export earnings,” the official was quoted as saying. “So we think this is a very significant step.”

According to a message to Congress from US President Barack Obama and posted on the White House website, the petrochemical sanctions also target another loophole in which Iran was using that industry to plug gaps in its already-sanctioned petroleum refining industry.

While not technically a sanction, the other significant step dealt with the Iranian banking system—with which US banks are already mostly prohibited from dealing. The US has made a note that an expected law change will require US banks to take “additional due diligence steps” with their foreign partners to ensure they are not using the relationship with the US bank to grant Iran direct or indirect access to the US financial system.

The US Treasury Department identified the jurisdiction of Iran as a “primary money laundering concern,” with banks engaging in troubling illicit activities ranging from terrorism funding to financing the proliferation of weapons of mass destruction. The step is noteworthy since it is placed on an entire financial jurisdiction, as opposed to just one bank, for the first time since 2003. US Secretary of Treasury Tim Geithner also warned that Iran is a risky financial entity due to its illegal activities.

A senior US administration official said the move won’t halt every nation’s financial links with Iran, but “we’ve seen in the past that when we do use this action, foreign financial institutions take it very seriously, and I think it’s going to create a serious chilling effect on the willingness of any foreign financial institution anywhere in the world to continue to do business with Iran.”

Israel has been especially concerned by the Iranian nuclear ambitions, and US Secretary of State Hillary Clinton spoke with Israeli Prime Minister Benjamin Netanyahu about the American sanctions. In comments posted on the Prime Minister’s Office website, Netanyahu said, “Such sanctions make it clear to the Iranians that the price will be high if they continue with their nuclear project.”

Ball in Iran’s Court

In another statement released by the US State Department on Monday, Clinton said the US remains committed to engaging Iran to resolve the concerns about their nuclear program, but “only if Iran is prepared to engage seriously and concretely without preconditions. So far, we have seen little indication that Iran is serious about negotiations.”

The five permanent members of the UN Security Council—the US, the UK, France, Russia and China—plus Germany, known as the P5+1, are still waiting to hear from Iran on further nuclear talks. EU foreign policy chief Catharine Ashton is the group’s primary intermediary with Iran.

A European diplomat told The Mideast Update that Ashton has written to the Iranian negotiator of behalf of the P5+1 and “is awaiting response.” Ashton, in comments released by the EU last Friday, said she sent the letter to the Iranian negotiator on October 21.

She said that over the past year “I have been engaged in relentless efforts aimed at convincing Iran that it has to demonstrate its readiness to engage in a confidence-building process in order to address all existing concerns on its nuclear program…

“I urge Iran once again to respond positively to the offers and proposals made by myself” and the P5+1.

So far the Iranians have been incensed by the latest IAEA report, although they have presented a willingness to work with the IAEA if their conditions are met. “We are ready to cooperate more than ever with the agency if the agency balances its position and respects the rules and safeguards agreements,” Iranian Foreign Minister Ali Akbar Salehi was quoted by the Fars News Agency as saying.

Meanwhile, Fars also reported that the Iranian Parliament Speaker Ali Larijani has threatened to review the country’s participation with the nuclear watchdog in light of the latest report.

“The Islamic Consultative Assembly [Parliament] warns the IAEA that this method means animosity [towards Iran] and is a rewriting of the US orders, and thus, it believes that it is necessitated to review Iran’s cooperation with the Agency,” Larijani was quoted as telling the parliament. “Therefore, the parliament’s National Security [and Foreign Policy] Commission is required to start studying the issue in cooperation with other bodies and report back the results.”

Larijani later appeared to soften his stance slightly in a separate Fars report, saying, “If the [UN nuclear] agency acts within the framework of the charter, we accept that we are a member of it and will carry out our responsibilities. But if the agency wants to deviate from its responsibilities then it should not expect our cooperation.”

(By Joshua Spurlock,, November 23, 2011)