Congressional watchdog questions impact of U.S. sanctions on Iran

McClatchy NewspapersJanuary 16, 2008 

WASHINGTON — Two decades' worth of U.S. economic sanctions against Iran appear to have had little impact, Congress' investigative arm said Wednesday, calling into question a key pillar of President Bush's strategy to curb Iran's nuclear ambitions and support for terrorism.

A report by the Government Accountability Office says that high oil prices and growing international trade have insulated Iran's leaders from the effect of sanctions. Iranian corporations and banks have switched to currencies other than the dollar and used other "workarounds" to bypass the sanctions, it says.

Iran's government has signed contracts with foreign firms worth roughly $20 billion since 2003 to develop its oil and gas deposits, the report says.

"Iran's global trade ties and leading role in energy production make it difficult for the United States to isolate Iran and pressure it to reduce proliferation and support for terrorism," it says.

Overall, it says, the effect of sanctions is unclear.

Over the past two and a half years, the Bush administration has escalated its financial war on Iran. It's cut off Iranian groups and individuals from the U.S. financial system, lobbied hard for United Nations sanctions and quietly pressured foreign banks and companies to stop business with Iran.

The new GAO report was made public as Secretary of State Condoleezza Rice prepares to meet in Germany next week with her counterparts from five nations to discuss a much-delayed third U.N. security resolution imposing sanctions on Tehran.

A draft of the document would impose international sanctions against the al Qods Force, the paramilitary arm of Iran's Islamic Revolutionary Guard Corps, according to published reports.

The GAO report says it's too early to assess the effect of United Nations sanctions, as opposed to unilateral U.S. sanctions, because U.N. restrictions have been in place little more than a year.

Rice and other officials have said the sanctions aren't meant to wreck Iran's economy but to isolate the country and force its leaders to rethink their refusal to halt the enrichment of uranium, which could be used for nuclear weapons.

A U.S. National Intelligence Estimate issued in November said Iran had halted its nuclear weapons program in the fall of 2003 in the face of international pressure, but that the country continued to enrich uranium.

Senior Bush administration officials contend that the economic and financial sanctions are having an effect, albeit slowly.

Iran "is experiencing increasing economic, financial and political isolation from the global community," Treasury Undersecretary Stuart Levey says in written comments appended to the GAO report.

As a result of Treasury's sharing of information with international firms on Iran's deceptive financial practices, "financial institutions across the globe are refusing to deal with Iran in any currency, determining the business as too risky," Levey wrote.

State Department spokesman Sean McCormack said the report didn't say sanctions were ineffective. "It just raises the question: How do we know if they are effective?" McCormack said.

The report recommends that the U.S. government, led by the White House, systematically gather data on the impact of U.S. sanctions. Only the Treasury Department currently compiles data, and it isn't made public.

To make their case for sanctions' success, U.S. officials point to major European banks that have curbed lending to Iran and European governments that have reduced export credits that encourage their companies to export to Iran.

But the report says that trade with Asia, particularly with China, has begun replacing Iran's trade with the European Union. Iran's trade with Asia has doubled since 1994, and now accounts for 30 percent of Iran's exports.

It notes that Iran's total trade has grown dramatically in the last 20 years, especially since 2002 because of high energy prices.

McClatchy Newspapers 2008

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