UN sanctions on Iran's oil section, central bank 'unlikely'

Efforts to impose sanctions on Iran’s oil sector are unlikely despite a report by the International Atomic Energy Agency that said the Islamic Republic has worked to develop an atomic bomb design and may still be conducting relevant research.

“This report, I think will demonstrate to some of the skeptics, and I am talking of Russia and China, that clearly Iran was involved in a nuclear weapons program up to 2003 and probably is still continuing work in that area,” a US official told Reuters under condition of anonymity.

However, the official acknowledged that Russia and China, which hold Security Council vetoes, were unlikely to back additional multilateral sanctions and said it may even be hard to persuade them to support a new IAEA board of governors resolution.

“Hopefully, they will move toward supporting a resolution in the (IAEA) board but for them to do so it would have to be very anodyne,” he said. “But the reality is getting further sanctions at the UN is probably not doable.”

The official also played down the chances of sanctioning Iran’s central bank, which is the clearinghouse for much of its petroleum trade.

“That is off the table” for now, he said. “That could change, depending on what other players (think). I don't want to rule that out but it is not really currently on the table.”

The official said there were limits to how much pressure the US, acting on its own, could place on Iran without targeting the petroleum industry or the central bank.

“The reality is that without being able to put additional sanctions into these key areas, we are not going to have much more of an impact than we are already having,” he said.

“From our side, we are really looking to close loopholes wherever they may exist,” the official said. US sanctions are so comprehensive that “there is not a whole lot out there other than the oil and gas market—and you know how sensitive that is. I don't think we are there yet.”

The US Treasury Department is drafting new sanctions aimed at commercial banks or front companies that may be imposed this month, while the European Union is considering financial sanctions of its own.

“Iran has sought, and most likely still seeks, to equip itself with atomic weapons, under cover of a program that it pretends is civil and peaceful,” said French Foreign Minister Alain Juppe. France and its allies are ready to impose “unprecedented sanctions.”

Iran’s work toward an atomic weapon may prompt further EU sanctions, said German Foreign Minister Guido Westerwelle, who added that his country opposes military action against Iran’s atomic program and favors increased diplomatic and economic pressure instead.

However, US and EU officials said that their efforts would stop short of the penalties that would hit Iran’s leadership hardest—sanctions on the country’s central bank, its imports of refined gasoline or its oil exports.

In particular, officials in the Obama administration said that blacklisting the central bank could significantly drive up international oil prices and hurt the US economy.

Meanwhile, Washington is coming under increasing pressure to act more aggressively toward Iran—from Capitol Hill, as well as from its closest allies in the Middle East, Israel in particular.

Last week, the House Committee on Foreign Affairs passed legislation to toughen penalties by denying US visas to people who do business with Iran’s energy sector.

The committee also approved legislation requiring sanctions on Iran’s central bank if President Barack Obama finds it is enabling terrorism or the development of nuclear arms or supporting Iran’s Islamic Revolutionary Guard Corps.

In Israel, Knesset Foreign Affairs and Defense Committee chairman Shaul Mofaz said the IAEA report “constitutes an opportunity for the free world to take action” and that “the time has come to intensify sanctions to paralyze the Iranian economy.”

Mofaz said, “We are approaching a reality of a balance of terror in the Middle East, and Iran's missile range covers most European capitals. Anyone who thinks he's immune [to the danger] is making a mistake.”

Mofaz said that “military action of any kind, particularly from Israel, is the last and worst action at this time, but all options must be on the table and ready. We will not accept a nuclear Iran.”

Earlier this week, it was reported that oil prices could spike by as much as $175/bbl according to a new analysis of the impact on oil markets of an Israeli attack on Iran and subsequent closure of the Strait of Hormuz.

“Concern is rising among officials in Washington and Jerusalem that Israeli leaders increasingly favor unilateral military action to slow Iran's pursuit of a nuclear weapon,” said Robert McNally, head of the Washington DC based Rapidan Group (OGJ, Nov. 4, 2011).

Iran is the second-largest oil producer in the Organization of the Petroleum Exporting Countries, and the US Department of Energy says that 15.5 million b/d of oil flows through the Strait of Hormuz, the narrow waterway between Iran and Oman at the entrance of the Persian Gulf.

Contact Eric Watkins at hippalus@yahoo.com.

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