NBU: Iran: The Fly in the Ointment by Jim Kouri , 7/10/08

With the recent testing of missiles by the Iranian military, the world has been put on notice that the Islamofascist nation will continue to be the fly in the ointment for world peace. The United States National Security Strategy recently acknowledged that this nation faces challenges from Iran, including Iran’s proliferation efforts and involvement in international terrorism.

To address these concerns, the United States employs a range of tools, including diplomatic pressure, a military presence in the Gulf, and economic sanctions. A U.S. sanction is a unilateral restriction or condition on economic activity imposed by the United States for reasons of foreign policy or national security.

The US Congress requested that analysts from the Government Accountability Office review sanctions targeting Iran and their implementation, sanction impacts, and factors limiting sanctions. To conduct the review, the GAO analysts assessed trade and sanction data, information on Iran’s economy and energy sector, and US and international reports on Iran. These GAO investigators also discussed sanctions with US officials and Iran experts.

Since 1987, US agencies have implemented numerous sanctions against Iran. First, Treasury oversees a ban on trade and investment with Iran and filed over 94 civil penalty cases between 2003 and 2007 against companies violating the prohibition. This ban may be circumvented by shipping US goods to Iran through other countries.

Second, the State Department administers laws that sanction foreign parties engaging in proliferation or terrorism-related activities with Iran. Under one law, State has imposed sanctions in 111 instances against Chinese, North Korean, Syrian, and Russian entities.

Third, the Treasury and State Departments can use financial sanctions to freeze the assets of targeted parties and reduce their access to the US financial system. US government officials report that so far the sanctions have slowed foreign investment in Iran’s petroleum sector, denied parties involved in Iran’s proliferation and terrorism activities access to the US financial system, and provided a clear statement of US concerns to the rest of the world.

However, other evidence raises questions about the extent of impact on Iran. Since 2003, the Iranian government has signed contracts reported at about $20 billion with foreign firms to develop its energy resources. Further, sanctioned Iranian banks may fund their activities in currencies other than the dollar.

While Iran halted its nuclear weapons program in 2003, according to the November 2007 National Intelligence Estimate, it continues to enrich uranium, acquire advanced weapons technology, and support terrorism.

According to the GAO report, US agencies do not systematically collect or analyze data demonstrating the overall impact and results of their sanctioning and enforcement actions. 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.

For example, Iran’s overall trade with the world has grown since the US imposed sanctions, although this trade has fluctuated. Imports rose sharply following the Iran-Iraq war in 1988 and then declined until 1995; most export growth followed the rise in oil prices beginning in 2002. This trade included imports of weapons and nuclear technology, especially from Russia and China.