Watering Down the New Iran Sanctions Bill

Obama and Democrats protect the interests of banking lobbyists.

Despite claiming to be doing everything he can to pressure the Iranians to suspend uranium enrichment and give up their ambition to build a nuclear bomb, President Barack Obama and Democrats in the Senate are seeking to water down congressional sanctions on Iran passed in the House last December.

Specifically, the administration is seeking to weaken sanctions dealing with the insurance and banking industries -- two high-powered lobbies in Washington -- who stand to lose millions of dollars if the sanctions take effect. The bill has been stuck in limbo since May as differences between the Senate and the House version have to be ironed out before Congress can vote on the entire package.

A vote on the measure is expected before Congress adjourns for the August recess next week.

In Iran, Supreme Leader Ayatollah Khamenei has made it clear that sanctions will not deter the Iranians from continuing their enrichment activities. But the sanctions are beginning to bite very hard for ordinary citizens, as inflation and shortages have hit the Iranian economy hard in recent months.

The sanctions maneuvering in Congress and the harsh effects being felt by the Iranian people serves as a backdrop to the continuing efforts by the European Union to engage the Iranians in serious discussions about their nuclear program. EU foreign policy chief Catherine Ashton will meet with the lead Iranian negotiator "soon" to see if they can get the moribund talks restarted.

The House version of the sanctions bill passed overwhelmingly last December. It largely targeted insurance companies who do business with the Iranian oil industry and transactions by the Iranian Central Bank. The Washington Free Beacon reports that the sanctions would punish "any insurance company that underwrites activities that bolster the Iranian oil industry. Insurance providers could be sanctioned for underwriting shipping companies, cargo carriers, or airlines that have been subject to sanctions." The measure would also make it easier to ferret out Iranian front companies that Tehran has set up to avoid sanctions on its oil industry.

This is vital because Iran has been able to circumvent restrictions on selling oil by creating a blizzard of fake companies. Emanuele Ottolengh, writing in the Weekly Standard, explains:

Whenever an Iranian company's ties emerge to proliferation efforts or to Iran's Revolutionary Guards, a new company is incorporated with a yet unblemished record to take over the business of the sanctioned entity. By the time the West catches up, Iran has already prepared the papers for the next front company.

And the West has a hard time "catching up" because of international rules that require proof that the entity is violating the sanctions regime. Since much of the information comes via intelligence agencies who are reluctant to reveal their methods, regulators must find other means to prove that Iran is cheating. It hardly matters, as Ottolengh notes:

In short, until a complete shutdown of all exports of technology is introduced and the oil embargo is enforced without discounts, waivers, and exceptions, the IRGC, guardian of Iran’s nuclear weapons program, will continue to thrive, and our efforts to block Iran's progress towards nuclear weapons will only make it costlier and more slowly for Iran, but will ultimately fail to stop its leaders from their deadly pursuit.

And those waivers have been legion. The Obama administration has granted thousands of them to individual companies which allows them to continue to do business with the Islamic Republic, as well as granting permission to China and India to circumvent the oil embargo and purchase crude from Iran. How serious is the president about applying "crippling" sanctions to Iran when he and the Senate Democrats are pulling the teeth from what once was considered a very tough bill?

For instance, one of the major restrictions was aimed directly at the Iranian Central Bank. Congress had pressured the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, a consortium of big banks, to prevent Iranian banks from transferring funds internationally by refusing to supply them with the electronic means to do so. This would have put a severe crimp in the Iranian financial sector. But the banking industry has apparently succeeded in watering down that provision. Along with insurance companies who are pushing to weaken the bill for their own commercial reasons, some Republicans think the bill "won't even be worth the paper it's printed on."

“This is really a game of whack-a-mole,” said Mark Dubowitz, of the Foundation for Defense of Democracies and an expert on Iranian sanctions. “These are incremental measures. What are needed now are measures more akin to economic warfare than these targeted, pinpoint measures.”

Thanks to Harry Reid, President Obama, and the banking and insurance lobbies, it doesn't appear likely.

In many ways, it's a shame because the sanctions that are already in place are beginning to affect the politics in Iran and are putting pressure on the leadership to deal with the rising desperation of ordinary people. Prices for some staples in Iran have tripled and severe restrictions have been placed on imported goods. The Iranian rial has lost half its value against the dollar. The official inflation rate is 21% but outside experts believe it to be much higher. Some of President Ahmadinejad's political opponents are seeking to blame him for the economic troubles besetting the country. Speaker of the Majlis, Ali Larijani, said, "The country's economic problems are only 20 percent due to the sanctions," adding, "Unfortunately, the main origin of the inflation comes from the maladroit application of the plan to suppress subsidies." Ahmadinejad has been phasing out subsidies for basics like meat, cooking oil, and medicine since 2010 but recently suspended the phase out.

Khamenei has even gone as far as pleading with the government to refrain from criticizing one another, while trying to gag the media and prevent them from showing the pain being experienced by ordinary citizens. In a sign of how bad things have become, much of the media is ignoring the government and running stories on how the sanctions are making life very difficult for the ordinary citizen.

In this sense only, the sanctions are "working." But in the far more important area of forcing the Iranian government to deal with the world on its uranium enrichment program, it appears to have had the opposite effect. The official Fars News Agency reports that Supreme Leader Khamenei told the Iranian people, “The enemies explicitly say that by intensifying the pressure and the sanctions, they are seeking to force Iranian officials to reconsider their calculations.” He added, “In reality, we will not rethink our calculations, and we will continue to trod the path of the Iranian nation more resolutely.”

And President Ahmadinejad boasted that there are now 11,000 centrifuges working at their two known enrichment facilities in Nantanz and the Fordo, the underground fortified bunker outside of Qom. This represents a significant increase in the number of working centrifuges since the International Atomic Energy Agency checked last May. And Iran is still refusing permission for the IAEA to inspect the huge military installation in Parchin, outside Tehran. Western experts believe that activity at the base reflects the possibility that nuclear research -- unmonitored and secret -- is being conducted there.

Clearly, regardless of how tough sanctions are designed to be, it matters little where it counts: convincing the Iranians to seriously negotiate an end to their uranium enrichment activities.

To that end, the West is still giving it the old college try. Despite zero progress made in previous negotiating sessions, the P5 + 1 group of nations -- United States, Britain, France, Russia, and China, plus Germany -- are once again seeking a substantive meeting with Iran's nuclear negotiators. Recent mid-level talks in Istanbul have resulted in an agreement for the EU's foreign policy chief Catherine Ashton to sit down with chief Iranian nuclear negotiator Saeed Jalili. No date has been set, nor has an agenda been agreed upon. The phrase "As long as they're talking, they're not shooting at each other" is about the best one can say about the status of negotiations with Iran.

Israel has its own timetable and is obviously losing patience with the on-again-off-again negotiations. Defense Minister Ehud Barak recently said that a nuclear armed Iran would be more dangerous than efforts to prevent them from acquiring those arms:

I am well aware and have in-depth knowledge of the difficulties and the complexities involved in thwarting Iran's reaching nuclear arms. But I have no doubt that dealing with that same threat once it ripens, if it ripens, will be vastly more complicated, dangerous and exacting in human lives and resources.

The political pressure placed on the regime by sanctions is still manageable. It would seem logical that increasing that pressure as much as possible in order to generate political unrest and put fear in the hearts of Iranian leaders would be a course of action short of war -- something the president is constantly carping on.

But when the administration and the Democrats in the Senate undercut that strategy by weakening the very sanctions that might be a tipping point in Iran's domestic politics, one can legitimately question the president's commitment to preventing the Iranians from building a nuclear weapon. This is no time to play politics when the clock is ticking both on Iran's ability to construct a weapon of mass destruction, and Israel's probable response.

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