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Tue 22 Nov 2011 10:52 AM

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US targets Iran’s oil, central bank to thwart nukes

Fresh sanctions aim to cut Persian state off from global financial transactions

US targets Iran’s oil, central bank to thwart nukes
Iranian President Mahmoud Ahmadinejad. The state has said it will sidestep new curbs

The US, the UK and Canada expanded measures aimed at
thwarting Iran’s nuclear program, targeting its central bank and oil industry
with sweeping actions intended to cut the regime off from international
financial transactions.

Sunday’s actions are in response to a Nov 8 United Nations
atomic agency report concluding that previous sanctions have not stopped the
regime from clandestine nuclear-bomb work.

The Obama administration for the first time yesterday
declared that the entire Iranian financial sector, including its central bank,
is involved in money laundering. It invoked the anti-terrorism USA Patriot Act
to target direct and indirect financing to Iran’s regime.

Any institution or company in the world that engages in transactions
with Iran’s banking system is “at risk of supporting Iran’s illicit activities:
its pursuit of nuclear weapons, its support for terrorism,” Treasury Secretary
Timothy F. Geithner said in a press conference in Washington. “Financial
institutions around the world should think hard about the risks of doing
business with Iran.”

The new US sanctions also target companies that provide
goods or services to Iran’s oil and gas industries. Existing US laws have
forced most international oil companies out of Iran and the new measures aim to
stop it from obtaining technology and money from smaller foreign companies.

The administration authorized sanctions against anyone
helping Iran develop petroleum resources in any transaction worth $1m or
any series of deals valued at $5m in a one-year period, the Treasury Department
said.

President Barack Obama said the US acted because Iran has
violated its obligations under the Nuclear Non-Proliferation Treaty and its
commitments to the UN’s International Atomic Energy Agency, known as the IAEA.

The measures “target for the first time Iran’s petrochemical
sector, prohibiting the provision of goods, services, and technology to this
sector and authorizing penalties against any person or entity that engages in
such activity,” Obama said in a statement.

Oil is Iran’s major source of income, with $80bn in annual
revenues from its daily output of about 3.5 million barrels, according to
Iranian official figures and IAEA estimates. Petroleum sales fund the majority
of Iran’s government budget, according to figures compiled by the
Washington-based Foundation for the Defense of Democracies.

An Iranian cabinet minister yesterday said Iran will find
new ways evade sanctions and do its business.

 

“With stricter sanctions, our techniques to circumvent also
become more elaborate,” Industries, Mines and Commerce Minister Mehdi
Ghazanfari said in Tehran, according to the official Islamic Republic News
Agency.

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A Nov 8 report by the Vienna-based IAEA said Iran used front
companies and foreign scientists to pursue nuclear weapons. Iran insists its
nuclear program is for peaceful energy use and medical research.

Mark Dubowitz, director of the Iran Energy Project at the
Foundation for the Defense of Democracies, said the measures announced
yesterday send a signal to the financial world to wind down business with Iran
or face the prospect of not doing business with the US

“If you’re buying oil from Iran and settling oil-related
transactions, you’re doing business with a central bank that is aiding and
abetting” terrorism and nuclear weapons activities, Dubowitz said in an
interview.

Japan, China, India and South Korea are the top four buyers
of Iranian oil, according to the US Energy Department.

The challenge is “to target Iran’s oil sales without
spooking markets and driving up the price of oil,” Dubowitz said.

American financial institutions were already prohibited from
doing business with Iranian financial firms, including the central bank. The US
has not invoked section 311 of the Patriot Act to designate any country’s
entire financial system for money laundering since it named Myanmar in 2003.
The move will require US firms to ensure that none of their relationships with
foreign banks are used to benefit Iran.

Matthew Levitt, a former deputy assistant secretary of
Treasury for intelligence and analysis during the Bush administration, called
the decision to invoke the Patriot Act “a huge action that I think is going to
have a huge effect.”

Levitt, now a senior fellow at the Washington Institute for
Near East Policy, said in an interview that the only banks that should feel
comfortable doing business with Iran now are those “who have no footprint in
the US and no interest in dollarizing transactions, and that’s a very small
number of banks.”

David Caruso, chief executive officer of Dominion Advisory
Group LLC, an anti-money laundering firm based in Centreville, Virginia, said
in an interview that US banks “will be scrambling over the next several weeks
to put in additional procedures” to check on foreign correspondent banks,
because they don’t want any connection to money laundering.

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Secretary of State Hillary Clinton said yesterday’s actions
"do not exhaust’’ the US ability to impose further pressure on Iran.
Praising the UK and Canada, Clinton said the US expects action from other
allies soon.

UK Chancellor of the Exchequer George Osborne banned his
country’s financial institutions from doing business with Iranian counterparts,
including the central bank. Canada is blocking “virtually all transactions”
with Iran and its central bank, Peter Van Loan, the government’s leader in the
House of Commons, told lawmakers.

French President Nicolas Sarkozy called for additional
financial pressure, including freezing Iran’s central bank’s assets, according
to a statement from the president’s office. In a letter sent yesterday to
leaders of the US, Germany, Japan, the UK, Canada and the European Union, the
French president said nations should stop purchasing Iranian oil.

Iran is the second-largest oil producer in the Organization
of Petroleum Exporting Countries, after Saudi Arabia.

The European Union has said it will impose further sanctions
Dec 1. China and Russia have so far blocked the passage of any new sanctions on
Iran at the United Nations Security Council.

The US will continue trying to engage in negotiations with
Iran while also pressing for sanctions, Clinton said.

Since June 2006, the five nuclear-armed, permanent members
of the UN Security Council - the US, Britain, France, Russia and China - along
with Germany have pursued negotiations with Iran. Iran is under four rounds of
Security Council sanctions imposed between 2006 and 2010, and numerous
restrictions by individual countries.