To End Iran's Nuclear Program, It's Time for America to Step Up Its Economic Warfare

(Foreign Policy) Mark Dubowitz - Iran suffers from hyperinflation, stagnant growth, and a crumbling currency, Yet sanctions have so far failed to force Iranian Supreme Leader Ali Khamenei to halt the nuclear weapons program. The painful truth is that Western sanctions have been underwhelming. Three rounds of failed talks in Istanbul, Baghdad, and Moscow have shown that the U.S. and its allies do not yet have the kind of leverage that could make Khamenei yield. He has reason to believe that Iranian physicists can construct a nuclear bomb faster than Western countries can undermine his economy. Sanctions have had a devastating effect on Iran's economy. The National Iranian Oil Co. has been forced to provide Chinese traders discounts of $20 per barrel or give them extended payment terms. Some 67 million barrels of Iranian crude are currently sitting in storage. But with $60-105 billion in foreign currency reserves, Khamenei's economic expiration date may still be far off. For the past seven years, the U.S. Treasury Department has sanctioned hundreds of financial and commercial entities controlled by the IRGC, but Iran can spin off new front companies faster than Treasury officials can target them, conjuring up "clean" entities with which international companies can maintain their business relationships. Blacklisting Iran's entire energy sector would solve that problem. Central Bank sanctions should also be extended beyond formal financial institutions, targeting foreign exchange houses in the Persian Gulf that assist Iran in accessing hard currency, gold suppliers that allow countries like China to pay for Iranian oil in gold, companies that provide services to the Central Bank of Iran for the printing of Iranian currency, and alternative payment and settlement mechanisms, like the Swiss-based Iranian company Naftiran Intertrade Co., which Iran is using to funnel funds to its Central Bank. Economic warfare should not be limited to the energy sector. The U.S. and its allies should also target other areas of the Iranian economy. Aggressive action against sectors controlled by the IRGC in construction, engineering, telecommunications, and technology should be a no-brainer. The writer is executive director of the Foundation for Defense of Democracies and head of its Iran Energy Project.

2012-06-29 00:00:00

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