News Post: EU and US Impose Further Sanctions on Iran

By: Kaitlin Fox

Iranian President Mahmoud Ahmadinejad

Mahmoud Ahmadinejad with nuclear scientists

The European Union (EU) and the United States took further action on Monday to curb Iran’s nuclear program.  The EU agreed to impose a phased ban on oil purchases from Iran while the United States expanded its sanctions on Iran to include the countries’ third largest bank, Bank Tajarat.  Iranian Government Officials reacted by reiterating their threat to close the Straight of Hormuz, in which twenty percent of the world’s oil passes.  It is unclear whether the EU and U.S. actions will prove effective.  Some speculate that Iran will simply turn to alternative markets while others sense that the sanctions will cause major damage to the Iranian economy.  Either way, recent events are certain to escalate tensions in the region.

The EU’s phased ban on oil purchases does not permit EU member states to enter into new contracts for Iranian oil.  However, countries that have existing contracts will have until July 1 to end those agreements.  The EU’s decision is meant to “force a shift in policy and avert the risk of military strikes against Tehran.”  The U.S.’s sanction against Bank Tejarat is poised to further restrict Iran’s access to the international financial market.  The Treasury, under the Secretary for Terrorism, David Cohen, stated that, “At a time when banks around the world are cutting off Iran and its currency is depreciating rapidly, today’s action against Bank Tejarat strikes at one of Iran’s few remaining access points to the international financial system.”   Thus far, Iran has had little regard for its international obligations, and both U.S. and EU officials hope that these moves will increase their cost of defiance.

The EU’s action represents a shift in policy, as the EU has been reluctant to impose an embargo on Iranian oil imports. The U.S. stopped importing oil from Iran years ago where as EU member states, including France, Italy, Greece and Spain, currently import approximately 600,000 barrels of oil per day from Iran..  The EU’s shift came after the International Atomic Energy Agency reported that Iran was moving toward nuclear capability this fall.  The EU’s timeline to enforce its embargo coincides with the U.S. six-month timeframe, during which President Obama will need to decide whether to pursue sanctions on countries that import Iranian oil.    The effectiveness of recent action is unclear. Jamie Webster, a Middle East oil analyst at PFC Energy stated that the sanction could merely cause Iran to shift its customers and deliver more to Eastern markets.  What is clear, however, is that a drop in oil revenue would have a significant negative impact on an already weak Iranian economy.

Iran’s reaction to the EU and U.S. sanctions was defiant and almost skeptical.  Officials in Tehran insisted that the EU needed Iranian oil more than Iran needed its business.  Intelligence Minister Heydar Moslehi stated that, “The West’s ineffective sanctions against the Islamic state are not a threat to us. They are opportunities and have already brought lots of benefits to the country.”  The particular benefits he refers to are undefined and other officials in the region fear grave consequences of Iran’s hard-line approach.  Saudi Arabia’s ambassador to Britian, Prince Mohammad Bin Nawaf, expressed his concern that Iran’s threat to block the Straight of Hormuz would have grave consequences on the region and would undoubtedly escalate the entire situation to the detriment of Iranian citizens.  http://www.reuters.com/article/2012/01/24/us-iran-idUSTRE80N0YB20120124  If Iran’s attitude remains unchanged, the situation will certainly escalate as evidenced by the United States sailing an aircraft carrier through the straight, accompanied by British and French warships on Sunday.  The United States has asserted that, “it would not tolerate the closure of the world’s most important oil shipping gateway.” http://www.reuters.com/article/2012/01/24/us-iran-idUSTRE80N0YB20120124

Amidst this turmoil, it remains in controversy: do sanctions actually work?  Sanctions are appealing to governments like the U.S. and the EU.  In theory, sanctions force policy by blocking money from flowing in and out of a country, and thus forcing the sanctioned government to give in to political pressure.  On the surface, this seems like a much better option than forcing the issue through military action whilst risking American lives.  However, it is arguable whether sanctions do more harm to the citizens of the sanctioned country than to the governments they attempt to influence.  In this case, Iranian citizens already suffer from a weak economy and an oppressive government and it is likely that these sanctions will enhance these problems by further devaluing the currency and increasing oil prices.  The goal of these sanctions is to persuade the Iranian government to halt its nuclear program; but with the imminent risk of further stirring tension in the region and without any guarantee of success, there is the possibility that sanctions may do more harm than good.

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