The International Atomic Energy Agency’s report detailing
how Iran has conducted secret activities “specific to nuclear weapons” was a
bombshell that surprised nobody.
While the report, based on the IAEA’s inspections and
information from intelligence agencies of more than 10 nations, stopped short
of saying that Iran had a functioning nuclear- weapons program, it made clear
that the Tehran regime was up to no good - working to adapt a Pakistani nuclear
weapon design to fit its medium-range missiles, seeking to secure uranium for a
secret enrichment programme, using information gleaned from a Russian scientist
to calibrate the explosive force of a bomb’s uranium core, trying to build
detonators suitable for nuclear weapons and so on.
Given that IAEA Director General Yukiya Amano has said
repeatedly that Iran hampered his inspectors, one suspects it is up to plenty
more as well.
In any case, the report, combined with the alleged Iranian
plot to kill the Saudi ambassador in Washington and Iran’s continued
sponsorship of terrorism, demands a reaction from the US and its allies.
There are three main retaliatory paths to choose among. The
first is forging a deal that would allow Iran a uranium-enrichment program for
peaceful energy purposes monitored by outside parties. Tehran’s record of
serial duplicity does not inspire confidence in this approach, and we urge the
US and Europe to abandon it.
A second, terrifying option is a strike by the US or Israel
on Iran’s suspected nuclear and weapons sites. Although this is militarily
feasible and could buy the world time, the obvious potential downsides [the
Middle East engulfed in war] vastly outweigh the potential gains, at least for
The third path is by far the least bad: to apply enough
economic pressure on the mullahs that they are forced to rethink the wisdom not
only of a nuclear weapons program, but also of their foreign adventurism and
A call for sanctions is inevitably met with skepticism. And
it’s true that Iran’s history of evading measures, the unwillingness of
countries such as China and Russia to honor them, and the lure of Iran’s oil,
make it impossible to shut the country out of the global economy. But the
beauty of sanctions is that a total blockade isn’t necessary.
Rather, the goal is to make economic dealings with Iran such
a hassle for the rest of the world that Tehran, faced with a sinking economy
and unhappy populace, changes its political calculus.
The US and its allies have made significant strides on this
front, pushing through the United Nations four rounds sanctions since 2006
targeting individuals and corporations linked to nuclear efforts. Unilateral
measures banning most financial transactions have successfully “increased the
cost of doing business, limited foreign direct investment and technology
transfer, and have affected international trade and financial transactions,”
according to a report in August from the International Monetary Fund.
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The measures have hit Iran hard: The IMF expects the
inflation rate to reach 22.5 percent this year; the economy is growing at only
about 1 percent a year; and, though it’s not always wise to take statements
from Iranian leaders at face value, President Mahmoud Ahmadinejad complained to
his parliament this month that “our banks cannot make international
What more can be done to turn the screws? Russia has said it
will veto any serious UN measures, but unilateral steps to consider include
closing a loophole in current sanctions that allows European refiners to use
Iranian crude oil in gasoline exported to the US, expanding sanctions to
Iranian commercial banks and more individuals, penalizing foreign subsidiaries
of US companies doing business with Iran, cracking down on shipping and other
front companies registered in third-party nations but controlled by Iran,
sanctioning Iran’s imports of refined gasoline, and requiring nations exporting
petroleum products to the US -- the plastic in Chinese consumer electronics,
for example -- to prove that no Iranian oil was used in their manufacture.
In addition, diplomatic pressure could be applied on allies
such as the Persian Gulf states, Japan, South Korea and Turkey to enforce some
existing US sanctions and to limit their business with Iran’s energy sector.
A more controversial option would be sanctions directed
against the Iranian central bank, known as Bank Markazi. This would make it
much more difficult for Iran to sell its crude oil and could destabilize its
currency. More than 90 US senators signed a letter pressuring President Barack
Obama to take this step in August. It would be an extreme measure: With Iran
producing about 3.6 million barrels of oil per day, and only about 2.8 million
barrels per day of spare production capacity available from OPEC nations, it
would risk driving energy prices significantly higher. It could also inflict
severe punishment on Iran’s people.
Although the reticence of China and Russia to put pressure
on Iran is unfortunate, it is important that the US and European Union not turn
this into a diplomatic war - the long- term idea should be to convince Beijing
and Moscow that curbing Iran’s nuclear ambitions is in their self interest.
After all, it took European nations years to realize the threat that Iran posed
to them and to become, finally, willing partners in the sanctions regime.
(This is a Bloomberg Views editorial.)For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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