Disrupt Iran’s Oil Trade, Aid the Green Movement

Conventional wisdom has it that imposing harsher energy sanctions on the Iranian regime will have little effect on President Mahmoud Ahmadinejad and the Islamic Revolutionary Guard Corps, the entity largely responsible for Iran's illicit nuclear program and for the brutal crackdown on Iran's pro-democracy green movement last June.

Yet European political elites, as well as energy and engineering companies, are callously—and conveniently—ignoring divestment pleas from those Iranian democracy advocates. A growing number of key opinion-makers and activists in the green movement support biting sanctions on the Iranian energy sector. They believe sanctions would strengthen Iran's struggling democratic movement and exert greater pressure on the Iranian regime's unlawful nuclear-enrichment program.

While prominent green leaders like Mir Hossein Mousavi have publicly opposed sanctions for what appear to be tactical reasons—to allow them to condemn the regime for the decisions that led to sanctions—other Iranian dissidents and activists now welcome robust penalties against the energy sector.

Mohsen Makhmalbaf, a distinguished Iranian film director who serves as a sort of spokesman for the green movement, neatly captured the urgent need to increase global economic pressure on Iran. “The revolutionary guards are terrorists. They are in Iraq, Afghanistan and Lebanon. They tortured people in Iran. They rape people in prisons. If you explain to the Iranian people that you are sanctioning their enemies, they will support you,” he told the Guardian.

Makhmalbaf is not a voice in the wilderness. Iranian experts and analysts confirm that, in private conversations, green movement activists implore the international community to take greater pains to influence the regime's behavior. In view of the potential consequences, these activists are understandably reticent—they know the regime would blame them for any additional sanctions.

(The green movement may also have a decision-making mechanism that requires key decisions to be made unanimously, to preserve unity in the face of overwhelming pressure from the regime. Sanctions are not without controversy, so it is not surprising that there are internal disagreements on their utility.)

Yet, such a debate over the legitimacy and efficacy of sanctions is not without precedent. In the 1980s, Archbishop Desmond Tutu and other activists initially opposed sanctions against the apartheid regime for fear that they would harm black South Africans. They reversed their position when they saw that sanctions would marginalize and undermine the government that was oppressing them.

The Iranian regime is now ripe for a similar sort of campaign, having reached a point where the harder it cracks down on democratic activists, the less support it enjoys, even among conservative elites. In May, the mullahs led a wave of imprisonments and executions of labor union activists and dissidents, killing Farzad Kamangar, a 35-year-old teacher and member of the Teachers' Trade Association of Kurdistan, for the transgression of “enmity against God.” The crackdown has increased support for the pro-democracy movement.

The clerics' bloody suppression of widespread demonstrations in the wake of the fraudulent June 2009 presidential election has created the preconditions for a transformation of Iranian life, encouraging steely resolve among disenfranchised groups from labor unionists to Iranian women, who are increasingly rejecting the regime's efforts to police their appearance. The Iranian regime has less political legitimacy than ever. What else can Western politicians and corporations do to advance the cause of democracy in Iran?

One answer is to deny the regime the resources it needs to run the massive energy sector that provides the regime with its lifeblood.

Iran is an energy superpower. It is the world's fourth-largest producer of crude oil. Oil-export revenues constitute more than 24 percent of Iran's gross domestic product, according to Government Accountability Office estimates, and provide between 50 percent and 76 percent of government revenues. Iran's natural gas reserves, some 981 trillion cubic feet, are the world's second-largest after Russia's. The country already enjoys substantial international leverage thanks to oil. Once it becomes a major exporter of natural gas, it will have exponentially more wealth and power.

Yet one of Iran's most serious vulnerabilities is its dependence on foreign energy sources. As a result of its limited refining capabilities—a consequence of U.S. sanctions—the Islamic republic must import approximately 30 percent of its annual domestic oil consumption from foreign suppliers. For the United States and its allies, this heavy dependence represents a significant opportunity to ratchet up the pressure on the regime.

U.S. efforts to ban foreign energy investment in Iran began with the passage of the Iran-Libya Sanctions Act of 1996, which authorized sanctions against foreign firms that invest more than $20 million in Iran's energy sector in any single year. To date, however, no U.S. president has sanctioned even one of the scores of companies that are in violation of the legislation for fear of provoking an anti-American backlash from countries like China, Russia, Germany, France, Austria, India, Japan, or South Korea, which are major players in the Iranian oil and gas sector.

But the legislation has still had an impact. The mere threat of sanctions has hung over the energy industry like the sword of Damocles and, as a Congressional Research Service report put it, “constrained Iran's energy sector significantly.”

During Ahmadinejad's first four years in office, foreign investment in the Iranian energy sector plummeted by 64 percent, from $4.2 billion to $1.5 billion. The threat of sanctions poisoned the air, and Ahmadinejad replaced a number of competent energy technocrats with regime loyalists, including Republican Guard officials who had no prior experience in the energy industry. Iranian officials now say that without an annual investment of at least $25 billion, Iran could become a net importer of oil.

More recently, Congress has set its sights on Iran's vulnerability to interruptions in its gasoline supply. The Iran Refined Petroleum Sanctions Act, which passed the House in December 2009 and the Senate this January and is now being finalized in conference committee, is expected to pass in late June. The bill would authorize sanctions on any entity that provides, or helps Iran to obtain, refined petroleum. The conference committee may also add more teeth to the bill by establishing punitive measures against firms that provide critical technology and support for Iran's oil and natural gas sectors and by banning Iranian involvement in foreign energy projects.

Some characterize energy sanctions as a silver bullet that would cripple Iran's economy, driving an angry Iranian public to rally around the flag. Others call sanctions a pinprick that would do little to Iranian leaders and merely enrich Chinese and Russian energy firms at the expense of European and American ones.

Both views are wrong: Energy sanctions are an extension of a comprehensive strategy to weaken the Iranian regime and fan the flames of domestic discontent. Whether by denying the regime much-needed capital and technology or by curtailing its access to the financing it needs to develop its energy sector, the strategy has already shown some success. An increasing number of international energy and energy-related firms have left Iran or announced their intention to do so. Still, without indications of the Obama administration's commitment to enforce sanctions, many of these companies may decide to resume their Iranian business activities.

Many Iranians despise the regime not only for its human-rights abuses but also for its incompetence in managing the national economy, where inflation and unemployment are running in the double digits. They are furious that the regime has squandered Iran's dwindling energy wealth and allowed the Revolutionary Guards and their Chinese and Russian enablers to steal what remains.

Despite the regime's attempts to blame these economic problems on the sanctions policies of the United States, many, if not most, Iranians blame their leaders. In November 2008, a group of 60 Iranian economists publicly criticized Ahmadinejad for his “tension-inducing” foreign policy, which had “scared off foreign investment and inflicted heavy damage on the economy.”

A recent Iranian government decision to end gasoline subsidies in order to reduce the country's vulnerability to refined-petroleum sanctions may also drive up already high inflation rates. In late May, as Iran continued to suffer an economic crisis, Iranians disrupted a typically choreographed pro-Ahmadinejad speech with heckles of “We are unemployed!”

As Iranians take to the streets to mark the first anniversary of the June 12 democracy uprising, they will once again face off against the Revolutionary Guards and their Basij paramilitary thugs.

Iranians who yearn for democracy would be heartened if additional sanctions proved unnecessary and the country's energy partners were more mindful of their own best interests. By conducting business with the current Iranian regime, these companies are taking considerable risks with their stockholders' money. And, fairly or not, Iranians may come to believe that these companies are fueling the regime that represses them.

It may seem counterintuitive for citizens to support sanctions against their own country, but as Desmond Tutu and his compatriots showed, sometimes they are a people's best hope for a more just and democratic government.