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Bill on Iran Gasoline Sanctions Nears Approval
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Peter Crail

Congress began the final steps in April to prepare new U.S. legislation sanctioning foreign companies that provide gasoline to Iran.

The House of Representatives appointed conferees April 22 to a committee that must reconcile the versions of the legislation adopted by the House in December and the Senate in January to create a final bill for President Barack Obama to sign. The Senate appointed its conferees March 11.

House Foreign Affairs Committee Chairman Howard Berman (D-Calif.) said following the vote on the House conferees, “Today marks a major step towards preventing Iran from acquiring the ability to produce nuclear weapons.” The House action urged the conference committee to complete its work by May 28.

The appointment came as members of Congress were expressing increasing concern with the pace of U.S. efforts to secure a fourth set of UN sanctions against Iran.

Senate Majority Leader Harry Reid (D-Nev.) told reporters April 22, “In my opinion, we have waited long enough for the diplomacy to work,” adding, “Iran is a festering sore in the world.” Administration officials have said they want to pursue multilateral sanctions before applying unilateral measures.

House and Senate members sent letters to Obama in April urging the administration to carry out sanctions under current U.S. law. “We urge you to move rapidly to implement your existing authority on Iran and the legislation we send you, and to galvanize the international community” for immediate steps against Iran, read the nearly identical letters signed by 363 representatives and 81 senators.

U.S. law adopted in 1996 imposes penalties on foreign firms that invest more than $20 million in Iran’s energy sector. The House and Senate versions of the pending legislation are intended to expand those penalties to firms that provide Iran with refined petroleum or assist in expanding its refining capacity. The Senate bill includes a number of additional measures to target Iran’s financial sector and enhance export controls in countries at risk of diverting sensitive materials and technologies to Iran. (See ACT, March 2010.)

Due to a lack of domestic refining capacity, Iran imports an estimated 30 to 40 percent of its gasoline. Berman has called Iran’s reliance on such imports its “Achilles’ heel.” (See ACT, January/February 2010.) Iran heavily subsidizes gasoline for domestic use.

In the face of the potential sanctions, a number of Iran’s primary suppliers of gasoline have declared an end to such sales over the past several months. The firms include Russia’s Lukoil, India’s Reliance, the United Kingdom’s Royal Dutch Shell, and Switzerland’s Vitol and Trafigura.

A January 2010 Department of Energy country analysis notes, however, that Iranian efforts to increase its refining capacity “could eliminate the need for imports by 2013.” It adds that Iran has discussed joint ventures with countries such as China, Indonesia, Malaysia, and Singapore to carry out such an expansion. Such ventures could be targeted if the pending sanctions bill becomes law.

Although the U.S. law targeting energy investment in Iran has been in effect since 1996, no firms have been sanctioned to date. Since the law’s passage, U.S. administrations have preferred to seek international cooperation to place pressure on Iran rather than risk alienating key U.S. allies.

In particular, Washington came to an agreement in 1998 with the European Union that it would not sanction European firms under the law in exchange for an EU commitment to take action against Tehran’s nonconventional weapons programs.

U.S. officials testifying before Congress in March reiterated this preference for multilateral action, arguing that such efforts would have a greater impact on Iran than unilateral sanctions.

“There are steps that we can take unilaterally, and we have taken unilaterally. But our judgment is that if we really want to impose pressure on Iran that actually affects their calculus, the only way to be effective is to do that multilaterally,” Undersecretary of Defense for Policy Michèle Flournoy told a Senate panel April 14.

During the same hearing, Undersecretary of State for Political Affairs William Burns added that U.S. allies in Europe have expressed a “very strong preference” to achieve a UN resolution first. The resolution could then serve as a legal basis for EU countries to adopt additional sanctions beyond those imposed by the UN Security Council, he said.

Burns said that “intensive negotiations on the text of that resolution have just begun,” adding that Russia and China are actively taking part in that effort. The two countries, along with France, the United Kingdom, and the United States, are veto-wielding members of the Security Council.

Moscow and Beijing have traditionally been wary of supporting sanctions, but Russian officials have expressed support for additional penalties on Tehran in recent months, so long as those penalties target Iran’s leadership and not its energy sector. Beijing agreed in April to begin discussions on new sanctions, moving the prospect of such a resolution forward.

Russian Deputy Foreign Minister Sergey Ryabkov told reporters April 8 that Moscow would seek “targeted” and “tailored” sanctions and rejected the gasoline embargo sought by the United States, claiming it would be “a huge shock for the whole [Iranian] society.”

China, on the other hand, has been far more reluctant to engage in discussions over any new sanctions, calling for negotiations with Iran to continue. Chinese Foreign Ministry spokeswoman Jiang Yu told reporters April 20, “We have always believed that dialogue and negotiations are the best channels for resolving the Iran nuclear issue.”

The United States and its allies have maintained that Tehran has rebuffed their diplomatic outreach because it continues to reject an International Atomic Energy Agency-brokered deal to swap much of Iran’s low-enriched uranium stockpile for research reactor fuel. (See ACT, September 2009.) Tehran claims that it is still open to negotiations on the proposal, but it continues to seek changes to any such agreement.

U.S. National Security Council Senior Director for Asian Affairs Jeffrey Bader told reporters following an April 12 meeting between Obama and Chinese Premier Hu Jintao that the two presidents “agreed to instruct their delegations to work with” the P5+1 and Security Council representatives on a sanctions resolution, signaling China’s willingness to engage in talks on new sanctions.

The P5+1 refers to the five permanent members of the Security Council—China, France, Russia, the United Kingdom, and the United States—plus Germany. The six-country group has been engaged in a diplomatic effort to address Iran’s nuclear program since 2006.

Once the five permanent members agree on a draft resolution, they have to negotiate with the council’s 10 rotating members. That group includes states such as Brazil and Turkey, which have continued to oppose new sanctions. Although only nine votes are needed to approve such a measure, resolution sponsors generally want support for the measure to be as broad as possible.

Despite the remaining hurdles, U.S. officials have indicated they expect the council to adopt sanctions in the coming weeks. Vice President Joe Biden told ABC’s The View April 22, “I believe you will see a sanction[s] regime coming out by the end of this month, beginning of next month.”


Posted: May 5, 2010