Point, counterpoint: effect of Iran sanctions

May 31, 2011

Reading the tea leaves of the U.S. Senate, one senses an overall skepticism about the effectivness of the sanctions regime against Iran.   It sounds like one thing that Senate Republicans and the oil minister of Iran may agree on.  From the Iran’s perspective last month:

Minister Downplays Effects of Sanctions on Iran’s Oil Sector

Iranian Oil Minister Seyed Massoud Mir-Kazzemi stressed on Wednesday that the international and the West’s unilateral sanctions against Iran have left no negative impact on the country’s oil sector and merely strengthened the country’s independence and national resolve.

Mir-Kazzemi made the remarks in a message to the 16th International Oil, Gas, Refining and Petrochemical exhibition here in Tehran on Wednesday.

The minister stressed that presence of the different Iranian and specially foreign companies in the exhibit “is a true evidence for the inefficiency of the sanctions imposed by a few hegemonic powers against Iran.”

“It is also a clear evidence of interaction and companionship of the countries interested in the expansion of economic and industrial relations with the Islamic Iran and Iran’s oil industry,” he added.

Elsewhere, Mir-Kazzemi noted Iran’s status and position in the international energy market, and pointed out, “Owing to the strategic position of the Islamic Iran as a country with rich energy sources, the country is necessitated to play an active and constructive role in international circles and events.”

Iran, which sits on the world’s second largest reserves of both oil and gas, is facing US sanctions over its civilian nuclear program.

Iranian officials have dismissed US sanctions as inefficient, saying that they are finding Asian partners instead. Several Chinese and other Asian firms are negotiating or signing up to oil and gas deals.

Following US pressures on companies to stop business with Tehran, many western companies decided to do a balancing act. They tried to maintain their presence in Iran, which is rich in oil and gas, but not getting into big deals that could endanger their interests in the US.

Yet, after oil giants in the West witnessed that their absence in big deals has provided Chinese, Indian and Russian companies with excellent opportunities to sign up to an increasing number of energy projects and earn billions of dollars, they started showing increasing interest in investment or expansion of work in Iran…

More recently, the Tehran Times also contended that the sanctions against selling gasoline to Iran has produced a new wave of self-sufficiency in Iranian oil refining.

On the other hand, Parviz Mina from the Foundation for Iranian Studies recently concluded:

…contrary to the claims made by the leaders of the Islamic Republic, sanctions have had a devastating effect on Iran’s oil and gas industry. In a sense, oil and gas are the Islamic Republic’s Achilles heel. Iran is the biggest consumer of energy in the Middle East and one of the least efficient users of energy in the world. Oil and gas exports provide more than 80 percent of foreign exchange, 70 percent of public investment, and approximately 50 percent of the budget. Yet, the crude oil production capacity, which was 6 million barrels per day before the revolution, is about 4 million barrels today and according to a former minister of oil the productive capacity in mature oil fields is falling by 300 thousand barrels per day annually as a result of faulty or inadequate recovery policies, tools, and methods.

Greg Thielmann of the Arms Control Association takes a subtler view:

These various sanctions are clearly registering with Iran’s leaders.  We can see it clearly from the very active efforts Iran has mounted around the world to circumvent the sanctions.  While the high price of oil has at least temporarily cushioned Iran from some of the effects of sanctions, the sanctions are already taking a significant toll and the impact will only increase over time.

But while Iran’s leaders are feeling the pressure, the sanctions have not yet produced a change in Iran’s strategic thinking about its nuclear program.  So far, they seem only to have made a tactical adjustment.

This question comes to mind:  even if Treasury implemented and enforced sanctions law and regulations to the hilt, would it really make a difference in stopping Iran’s nuclear ambitions?

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