New U.S. sanctions hit Iran's gasoline imports

McClatchy NewspapersMay 24, 2011 

WASHINGTON — The United States for the first time Tuesday implemented sanctions to strangle Iran's gasoline imports in a major tightening of punitive measures that's aimed at cutting off money for Tehran's nuclear program but could intensify ordinary Iranians' economic hardships.

The sanctions were imposed on Venezuela's state-owned oil company, two firms owned by Israel's richest family and four other foreign companies that the State Department said were doing business with Iran's energy sector. The Venezuelan company's American subsidiaries and oil exports to the United States were exempt.

"All of these companies have engaged in activities related to the supply of refined petroleum products to Iran, including the direct supply of gasoline and related products," Deputy Secretary of State James Steinberg said in announcing the measures.

It's the first time the U.S. has imposed sanctions to curtail Iran's imports of gasoline and other refined petroleum products, although it's won voluntary agreements from major petroleum suppliers to stop doing business with Tehran. Iran is the world's fourth largest oil producer, but it lacks refinery capacity and must import an estimated 40 percent of its gasoline.

U.S. officials contend that Iran's energy sector, which generates more than half the government's budget revenues, is a key source of funding for its ballistic missile program and a uranium enrichment program that Western governments charge is a cover for a secret nuclear-weapons development effort.

The U.N. International Atomic Energy Agency said in a report Tuesday that it "remains concerned about the possible existence in Iran of past or current undisclosed nuclear-related activities of military organizations, including activities related to the development of a nuclear payload for a missile."

Iran denies that it's developing a nuclear arsenal, asserting that it's enriching uranium for use in nuclear power plants.

The U.N. Security Council has imposed four rounds of economic sanctions on Iran since 2006 for defying repeated demands to stop enriching uranium and to re-engage in long-stalled negotiations with the United States, China, Russia, Britain, France and Germany to resolve concerns over the program.

The U.S. and the European Union have slapped tougher unilateral measures on Tehran. Just before the latest U.S. steps were announced, the EU sharply expanded its sanctions, approving travel bans and asset freezes for more than 100 Iranian firms.

U.S. and European officials say the sanctions are seriously affecting Iran's economy. But experts say that Tehran's hard-line regime remains steadfast in its refusal to negotiate an accord on halting uranium enrichment.

The sanctions "haven't changed the political calculus of Iran's leadership about its nuclear program, but they have made it harder to" obtain equipment for the program, said David Albright, a former U.N. nuclear inspector who heads the Institute for Science and International Security in Washington.

The U.S. previously refrained from going after Iran's gasoline imports under a "targeted sanctions" strategy that slapped asset freezes and travel bans on Iranian officials, state-owned banks, government entities and firms allegedly involved in missile development, support for terrorism or the nuclear program.

The U.S. also has persuaded some governments and companies to stop doing business with Iran, especially in the energy sector.

The strategy had avoided steps that directly intensified the economic hardships afflicting ordinary Iranians, which U.S. officials feared could pump up anti-American sentiment or allow President Mahmoud Ahmadinejad's regime to escape blame for massive unemployment and soaring inflation in the country of some 73 million people.

President Barack Obama, however, has been under pressure from Congress to implement the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010, which he signed nearly a year ago and which authorizes measures to restrict Iran's gasoline imports. He signed an executive order Monday that implements the act.

Three companies that were hit with sanctions — Petrochemical Commercial Co. International of Jersey and Iran, the Royal Oyster Group of the United Arab Emirates and Speedy Ship of the UAE and Iran — allegedly are among the "largest current suppliers" of refined petroleum products, including gasoline, to Iran, the State Department said.

The sanctions prohibit them from engaging in transactions that involve U.S. currency, banks and property.

Petroleos de Venezuela, the state-run Venezuelan oil company, was hit for delivering to Iran two cargoes of reformate, a substance that improves gasoline quality, since last December, the State Department said.

PDVSA is banned from competing for U.S. government procurement contracts, securing financing from the U.S. Export-Import Bank or obtaining U.S. export licenses.

The firm's American subsidiaries, including Citgo Inc., were exempted from the measures, as were oil exports to the United States, the largest buyer of Venezuelan oil, officials said.

Tanker Pacific of Singapore, Ofer Brothers Group of Israel and Associated Shipbroking of Monaco were sanctioned for a deal last September that supplied an $8.65 million oil tanker to an Iranian government-owned shipping line that the U.S. and the European Union accuse of involvement in Iranian weapons-proliferation activities, the department said.

Tanker Pacific and Ofer Brothers Group are owned by Israel's richest family, headed by Yehuda and Sammy Ofer. The Ofer Brothers Group denied the allegations in a statement reported by Reuters.

During the past year, the State Department has persuaded European and Asian nations and companies to stop selling gasoline and other refined products to Iran. These include Turkey's refiner Tupras, France's Total, the Netherlands' Royal Dutch Shell, India's Reliance and Malaysia's Petronas.

Secret documents shared with McClatchy and other news organizations — part of the large cache of State Department cables obtained by WikiLeaks — show how U.S. embassies across the globe pressed these companies to sever ties with Iran beginning in 2005. The companies sanctioned Tuesday presumably stepped in to fill the void left by big-name suppliers.

One secret cable from Nov. 4, 2009, details how the United Arab Emirates was being used to store fuel smuggled not into, but rather out of, Iran. The U.S. ambassador to the UAE, Richard Olson, told Washington that Iranian diesel, heavily subsidized, was being smuggled out to the UAE, where it fetches a big profit.

Ironically, the UAE petroleum storage operation, operated by Star Energy, that allegedly takes in smuggled diesel also is used by the U.S. Navy to store refined petroleum products, the U.S. Embassy in Abu Dhabi noted.

(Kevin G. Hall contributed to this report.)

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