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Iran Sanctions: How the West Can Stop the Iranian Bomb

JANUARY 2011

  • Iran’s continued support for terrorist groups and pursuit of nuclear weapons pose a profound threat to regional stability and global security.
  • Since 2002, the world has known that Iran was secretly pursuing a nuclear weapons program through nuclear enrichment and research activities at its facilities in Natanz and Arak. The disclosure of Iran’s previously secret enrichment facilities at Qom in 2009 further illustrated the regime’s intent to develop nuclear weapons and blatantly flout the requirements of the Non-Proliferation Treaty of which Iran remains a signatory.
  • In an effort to curtail the Iranian regime’s illicit and dangerous behavior, the United States and the international community has adopted energy sanctions to exploit Iran’s most important vulnerability – its decaying energy infrastructure and its dependence on foreign sources for up to 30 percent of its gasoline needs. Iran’s energy sector provides about 75 percent of total government revenues and 80 percent of export earnings. Applying energy sanctions to Iran puts pressure on its economy and therefore on its leaders.
  • United Nations Security Council Resolution 1929, adopted June 9, 2010, expands the previous arms embargo against Iran, tightens financial restraints on Iran, and expresses alarm at the role of the IRGC in Iran’s nuclear program.
  • The June UN Security Council Resolution recognized in its preamble “the potential connection between Iran’s revenues derived from its energy-sector and the funding of Iran’s proliferation-sensitive nuclear activities.” Additionally, the resolution gave states political cover to pass their own more stringent sanctions.
  • The Comprehensive Iran Sanctions, Accountability and Divestment Act (CISADA), signed into law on July 1, 2010, sanctions the sale of refined petroleum products, and refining equipment to Iran, and the insurance, reinsurance, and shipping companies that participate in this trade. It also contains provisions that prohibit the sale of technology, goods and services for Iran's petroleum sector and denies lucrative U.S. government contracts to companies that do business with Iran.
  • CISADA enhances the President’s ability to sanction various entities associated with the IRGC, which controls a large swath of Iran’s energy trade. The comprehensive bill also authorizes the President to apply sanctions against human rights abusers connected to the IRGC.
  • On July 26, 2010, the E.U. approved sanctions against Iran that banned new investment, technical assistance and technology transfers in connection with Iran’s natural gas and oil industry. As of February 2011, 34 countries, the U.S., the 27-member E.U. Australia, Japan, Canada, South Korea, Switzerland and Norway, have adopted sanctions against Iran.
  • After Congress passed CISADA, gasoline deliveries to Iran plummeted, decreasing from 162,500 barrels per day in 2009 to about 60,000 barrels per day in mid-2010. As a result of sanctions, Iran is paying a gasoline price premium of at least 25%.
  • At least ten of Iran’s top gasoline suppliers have ceased selling to Iran since the beginning of 2010. Four major insurance companies that underwrite gasoline shipments have also exited the market.
  • According to the U.S. State Department, international corporations have frozen or terminated as much as $60 billion in upstream energy investments in Iran.
  • Iran has sought to mitigate the impact of sanctions against its energy sector by signing bilateral energy agreements with China, Russia, Turkey, and Venezuela. Tehran has also cut back on plans to develop its enormous natural gas reserves because of difficulties accessing critical Western technologies and capital.
  • While the latest sanctions regime is a key move to pressure Iran, the U.S. and its allies must be several moves ahead in order for the international community to successfully and peacefully deter Iran from continuing its support of terrorism and development of nuclear weapons.
  • As part of this effort, the United States should expand its targeting of Iran’s energy sector by making it more difficult to purchase Iran’s crude oil, the lifeblood of the Iranian regime.
  • The United States must also highlight the nefarious role of Iran’s Islamic Revolutionary Guards Corps (IRGC), its connections to terrorist groups, Iran’s energy sector and other critical industries that have attracted foreign investment, and its control over the regime’s nuclear program.
  • The IRGC and several of its subsidiaries and affiliates have been designated by the United States. However, the group’s continued ability to operate through front companies requires that we continue to be vigilant in uncovering its network and connections.