Sanctions on Iran are working but will they be effective in time to stop the Iranian Bomb?

President Obama has just signed the Iran Freedom and Counter-Proliferation Act and Australia has increased our autonomous sanctions on Iran’s Central Bank (see below). A decade ago, suspicions hardened that Iran was in breach of its obligations under the Non-Proliferation Treaty (NPT).  Under that treaty, non-nuclear-weapon states cannot manufacture or acquire nuclear weapons, must enter into safeguards agreements with the International Atomic Energy Agency (IAEA) allowing monitoring and verification of the use of nuclear materials, and must not divert nuclear material used for peaceful activities to weapons purposes.

On 14 August 2002, the dissident National Council of Resistance of Iran publicly revealed the existence of two secret nuclear sites under construction in Iran: the uranium enrichment facility at Natanz and the heavy water reactor at Arak.  The mere threat of sanctions was enough to convince the then reformist Khatami government to suspend its nuclear program and permit freer inspections by the IAEA.  In 2004 Iran signed an agreement in Paris agreeing to suspend enrichment.

However, in 2005 the election of the hardliner Mahmoud Ahmadinejad saw Iran resume enrichment activities.  This breached the Paris Agreement, and moves were made by the US and Europe to have Iran referred by the IAEA to the United Nations Security Council (UNSC).

The UN Security Council re-engaged when Tehran repudiated the Paris agreement and the IAEA reported that Iran’s many failures and breaches of its NPT Safeguards Agreement constituted “non-compliance”. In July 2006 after Iran’s April announcement that it had successfully enriched uranium, the Security Council ‘demanded’, in Resolution 1696 (2006), that Iran cease uranium enrichment.  Sanctions would eventually be applied on Iran under Resolution 1737 (2006), passed on 26 December 2006.

The UNSC has applied three more rounds of sanctions on the Iranian nuclear program since December 2006.   These sanctions were adopted under UNSC Resolutions 1747 (2007), 1803 (2008) and 1929 (2010).

In September 2009, President’s Obama, Sarkozy and Prime Minister Brown publically revealed that Iran began constructing the Fordow uranium enrichment facility in secret, some 200-300 feet under rock, as early as 2006.

November 2009 saw the IAEA censure Iran for developing the plant in secret, and demanded that Iran cease production at the site.

Broadly, the UNSC sanctions against Iran, together with additional autonomous sanctions imposed by Australia, cover five main areas (summarising from the Department of Foreign Affairs and Trade  http://www.dfat.gov.au/un/unsc_sanctions/iran.html):
(1) Prohibitions relating to supplying or procuring certain goods and technology, e.g. - material, equipment, software and technology relating to nuclear use or enrichment or processing or weapons delivery, ballistic missiles and conventional arms and weaponry;
(2) Prohibitions relating to supplying certain services, e.g. - technical assistance, financial assistance or investment, relating to any goods or technology referred to above, and ‘bunkering services’ such as provision of fuel or supplies to Iranian vessels;
(3) Prohibitions relating to certain investment and business dealings with Iran or Iranian persons or entities, e.g. – involving uranium mining or the production or use of nuclear materials and technology or nuclear delivery systems;
(4) Targeted financial sanctions, e.g. – the use or dealing with funds or assets of, or providing funds or assets to, certain Iranian entities and individuals;
(5) Travel restrictions on listed individuals.

The sanctions also apply to Iran’s ballistic missile program.  Iran currently possesses the largest ballistic missile inventory in the Middle East, which it developed using Russian, North Korean, and Chinese technology.

The Australian government recently announced further sanctions on Iran which will affect the financial, trade, energy and transport sectors. These additional measures build on our already strong suite of sanctions.  They include additional action against the Central Bank of Iran – banning all transactions and freezing any assets it might have in Australia.  We already had a ban on most transactions with the Central Bank of Iran.  This latest action closes the loop on some small exceptions and they also include:

• 40 additional entities and 6 individuals in the oil and gas industry and financial sector or related to Iran’s WMD program - subject to autonomous sanctions;
• Export of materials relevant to nuclear and ballistic missile programs and to industries controlled by the Iranian Revolutionary Guard Corps (eg graphite, raw or semi-finished metals such as aluminium and steel, and software for integrating industrial processes) – and related technical or financial assistance;
• Import, financing and insurance of natural gas from Iran into Australia, and a broadening or the existing import ban on key equipment for the Iranian oil/gas/petrochemical sector;
• Use of Australian vessels for the transport/storage of Iranian oil/petrochemical products; involvement of Australian industry in the construction/supply of equipment for Iranian vessels; flagging of Iranian oil tankers/cargo vessels.

These additional measures mean Australia joins Europe and the US, in having the strongest sanctions against Iran.

On 8 November 2011 the International Atomic Energy Agency reported on Iran’s nuclear program.  It stated that Iran ‘may have planned and undertaken preparatory experimentation which would be useful were Iran to carry out a test of a nuclear explosive device’.

Another crucial stage was reached when the IAEA reported in August 2012 that Iran had amassed in deep underground mountain facilities near the holy city of Qum (the Fordow facility) three quarters of the centrifuges necessary for the production of nuclear fuel.

Many analysts claim that the progressively stricter sanctions that have been applied to Iran have taken a severe toll on the Iranian economy, and that this is pushing the Iranian Government towards a nuclear compromise.   These observers generally focus on two main impacts of the sanctions regime:

• Oil and gas - Iranian oil exports have reportedly declined to about 1.25 million barrels a day as of December 2012, down from an average of 2.5 million barrels per day in 2011.  Considering that oil exports have historically provided about 70 per cent of government revenue, the impact of sanctions in this regard should not be understated.  Tellingly, Iran’s oil exports declined to 940,000 barrels per day in July 2012, the month the EU’s oil embargo came into effect.  It has been estimated that such a reduction in oil sales could result in the loss of US$50 billion in hard currency revenue per year (at current oil prices).
• The collapse of Iran’s currency, the rial - As a result from both the loss of oil and gas revenue as well as restrictions placed on the country’s financial sector, the Iranian rial has collapsed.  This allowed US President Barack Obama to say during the US presidential election campaign that the rial had recently dropped in value by 80 per cent and that Iran’s economy ‘is in a shambles’ .

Conclusion

It is now clear that international efforts to peacefully restrain Iran became far more effective last June when Europe announced it would be joining financial, oil and gas sanctions.  As the figures show this has halved Iranian oil exports in a year and this in turn has cut the Teheran regime’s budget by more than 30%.

One can’t judge whether the international community’s efforts to prevent Iran from gaining nuclear weapons will succeed in time.  Despite Iran playing a cat and mouse game in the disclosure and monitoring of its nuclear program, the sanctions have been effective in squeezing Iran’s capability.  They also put pressure on Iran’s leaders to consider the need for a nuclear compromise. The question is whether the severe impact they are having will be sufficient to change the nuclear drive of an ideological/theocratic regime.

The importance of preventing Iran from gaining nuclear weapons goes beyond just averting the direct use of such weapons.  The mere fact of Iran possessing them will dramatically alter the power balance in the Middle East.  If that were to occur, then current groups and regimes supported by Iran (such as Hezbollah, Hamas and Assad’s Syria) will be considerably strengthened and other key players such as Saudi Arabia, Turkey and Egypt will be under pressure to develop their own nuclear weapons programs.

As I write, the tenuous presence of the IAEA in Iran still gives us some hope for avoiding military conflict.  Iran will have stockpiled 200kgs of uranium enriched to 20% by the middle of 2013.  The last dash to weapons grade of 90% is thought to take only a further 6-9 weeks.  At the moment Teheran is accumulating larger and larger stockpiles of 20% grade uranium.  But the moment when the IAEA sniffs further enrichment or is more likely expelled from Iran, will be the point where it will become unarguable that sanctions have failed to crack Teheran’s determination.

According to the Washington Post, just before Christmas the French Ambassador to the US Jean David Levitte told IFRI, a leading French think-tank that the international community must now go to Iran’s supreme leader, Ayatollah Ali Khamenei, with a choice: Iran finally agrees to restrict nuclear enrichment to 5% or less and exports its stockpile of higher grade enriched uranium.  Or as the US French Ambassador argued, having made its high profile final effort, will gain broader international acceptance of an American-led military strike to destroy Iran’s nuclear capability at some point in 2013.
Although sanctions are working, if, as seems likely, the Iranians acquire the 200kg of 20% enriched uranium the international community will be forced to consider military air strikes.

Michael Danby MP
Federal Member for Melbourne Ports

From a paper delivered to the Australia, UK, Israel Parliamentary Dialogue, Palace of Westminster, on 19 December 2012.