Oct
29
Running on Empty
Posted by Clif Burns at 8:32 pm on October 29, 2009
Category: Iran Sanctions
The House Committee on Foreign Affairs yesterday approved proposed legislation, the Iran Refined Petroleum Sanctions Act of 2009, which would, if adopted, further tighten sanctions on Iran. In an appropriations measure sent to the President earlier this month, companies that sold more than $1,000,000 dollars in refined petroleum products to Iran or engaged in services worth more than $1,000,000 that contributed to the ability of Iran to import such products would be precluded from selling oil to the Department of Energy for the Strategic Petroleum Reserve. Under the House’s proposed legislation companies that imported only $200,000 of petroleum products into Iran, or provided only $200,000 worth of services assisting such imports, would be subject to the sanctions provided under the Iran Sanctions Act. Those sanctions include. among the six available sanctions, denial of export licenses and prohibitions of imports into the United States.
Of course, U.S. companies are already prohibited from exporting petroleum products to Iran, so the appropriations measure and the House proposal are both directed at foreign companies that provide gasoline to Iran. Iran gets most of its gasoline from British Petroleum (BP), France’s Total, Switzerland’s Vitol and Glencore, the Swiss-Dutch firm Trafigura, and India’s Reliance.
When the Iran Sanctions Act, which prohibited investments over $20 million in Iran’s energy sector, became law in 1996, the EU threatened a row at the WTO claiming that such secondary boycotts violated the U.S.’s WTO obligations. The Clinton administration used the national security exception in section 9(c) of the Act to avoid imposing sanction on European companies investing in Iran’s energy sector. That option would remain available to the White House under the proposed House legislation but not under the appropriations measure which would appear to automatically impose the sanction of forbidding sales to the Strategic Petroleum Reserve.
Leaving aside the WTO implications of the House’s proposed legislation, there is a good argument that it would be counterproductive to U.S. interests. No one seriously claims that gasoline is materially contributing to Iran’s nuclear proliferation activities. Instead, the measure is intended to impose severe hardship to Iran’s economy. Average Iranians would be just as hard hit, if not more so, by the sanctions as the Iranian government. This is not likely to generate any good will for the United States among Iranians currently disaffected with their own government. When people can’t drive to their jobs, who are they going to blame?
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6 Comments:
HCFA Chairman Berman apparently believes that appeasing the anti-Iran segment in his district (San Fernando Valley) is more important than the national security interests of the rest of the United States.
Like other dumb US sanctions, this will only make Iran stronger and self sufficient faster than scheduled. Thanks USA~:)
Considering that the SPR is currently at full capacity, and that the DoE is not presently engaged in any purchasing this would seem more of a symbolic rather than substantive measure. It’s also worth noting that when the DoE does purchase, the quantities of crude oil delivered are in the region of 30-100kbpd, out of global crude production of some 73 mbpd – ie the quantities are barely a rounding error.
Of the companies mentioned, only Total and BP are in the crude production business, and might conceivably be persuaded to lose out on regular business with Iran; business that generates far more income than the occasional delivery to the SPR.
Just a couple of minor nitpicks – US “sanctions” on Iran that involve trying to penalise non-US corporations that do legal business with Iran are actually attempts to sanction non-US corporate entities; they are unambiguous breaches of US obligations under WTO rules.
Considering that Iran produces more than 60% of its gasoline itself, and that this oft and long-proposed sanction is unlikely to deter Chinese, Russian and other suppliers who would willingly step in to take up the slack if given the opportunity, there is no chance of this measure having any observable impact ( which, if one is cynical enough, one might conclude is the point – it’s all show and no substance ).
@Dan. Excellent points about the sanctions in the DoE appropriations bill. The proposed House legislation, however, permits more serious sanctions than the SPR sanction, including denial of imports from the offender.
While some sanctions make good sense, such as the embargo on ITAR controlled defense articles and dual use technology that could contribute directly to Iranian weapons production, the rest of the sanctions are based on a fundamentally false premise that making life hard for everyday Iranians will somehow undermine the mullahs and the government. Perhaps if these were UN sanctions in which all countries participated, it might have the desired effect, but the US is the only country which imposes a complete and total embargo on Iran. These sanctions have a far more adverse effect on the United States than Iran and in fact strenthen the mullahs, who prefer to isolate the general population from the US as much as possible. In fact, just as the Cuban embargo gives the Castros cover for their economic failures, the embargo of Iran gives the Iranian Revolutionary Guard, who have taken control of key industries, cover for their corruption and incompentency. When former Assistant Secretary of State Burns was interviewed on NPR a few weeks ago, he noted that our human intelligence in Iran was limited because we have had no businesses in Iran for 30 years. Whose fault is that? While the Peterson Institute estimates that the embargo costs the US between $5 an $10 billion a year in potential direct sales of non-strategic, the loss of sales to other potential buyers is far higher: US export controls on re-exports of US origin goods and foreign made product containing more than 10% US origin products and technology make US goods unattractive to all foreign buyers, especially OEMs, no matter how cheap a falling dollar makes them because they have to adopt special inventory controls in order to buy US goods, and they just don’t buy US goods if there are alternatives.
Cliff
Unfortunately my antiquated computer won’t open the House bill – but that doesn’t alter the fundamental point that the attempt to sanction non-US corporates for conducting legal business with Iran constitutes a violation of US WTO obligations.
I very much doubt that provisions to deny imports from the “offender” are workable. An example – PDVSA of Venezuela is broadly the source of 10% of US crude oil/petroleum product imports, it is also starting to supply Iran with gasoline. There is no prospect of the US banning supplies from Venezuela under any circumstances.
