The United Nations Security Council imposed the third set of economic and trade sanctions against Iran on March 3, 2008 for refusing to halt its nuclear programme. Resolution 1803, sponsored by Britain, France and Germany, was backed by 14 of the Council’s 15 members; Indonesia abstained. The sanctions were targeted against 13 individuals and 12 companies with links to Iran’s nuclear and missile programmes. One of the 13 individuals targeted is Brig. Gen. Mohammad Reza Naqdi, who is a prominent functionary in Iran’s Revolutionary Guard Corps and alleged to have links to Iran’s nuclear programme. The new measures include a ban on all trade and supply in dual use items, an outright travel ban on officials associated with the nuclear and missile programmes, ban on two of Iran’s largest banks (Melli and Saderat), as well as inspection of cargo to and from Iran in aircraft and vessels owned or operated by Iran Air Cargo and Iran Shipping Line. The resolution gave Iran 90 days to comply with UN and IAEA demands for the suspension of uranium enrichment and reprocessing, so as to restore international confidence.
In a statement issued on behalf of the five permanent members and Germany, British Ambassador to the UN John Sawers called for new talks between EU foreign policy chief Javier Solana and Iran’s Supreme National Council chief Dr. Saeed Jalili to resolve the nuclear impasse. Sawers was quoted saying: “we reconfirm the proposals presented to Iran in June 2006 and are prepared to further develop them.” He also added: “our proposals will offer substantial opportunities for political, security and economic benefits to Iran and to the region.”
But the fact remains that the latest report issued by the IAEA on Iran’s nuclear programme on February 22, 2008 indicated that Iran’s cooperation with the Agency was satisfactory and that all five major issues, including those relating to P-1 and P-2 centrifuges, were resolved last year. Indonesian Ambassador Marty Natalegawa explained his country’s decision to abstain by pointing out that “Iran is cooperating with the IAEA and at this juncture additional sanctions are not the best course.”
Iranian officials have termed the latest and previous resolutions as violations of international law. They have underlined the fact that the sanctions will not help resolve the nuclear issue, and that this will eventually undermine the integrity and credibility of the Security Council.
Analysts believe that the new Security Council sanctions are unlikely to compel Iran to suspend its nuclear programme. Despite sanctions, the European Union remains Iran’s biggest trading partner. EU exports to Iran grew sharply by 8 per cent in 2006 while its imports from Iran grew by a massive 26 per cent.
There is a general consensus that the sanctions are also unlikely to adversely impact upon Iran’s energy sector, be it in terms of production of oil and gas or of international companies collaborating with their Iranian counterparts as well as operating in Iran. As a former Deputy Director of the UN nuclear watchdog Pierre Goldschmidt stated, sanctions would not change Iran and their utility is limited to sending a message that “the international community cannot tolerate Iran’s non-compliance.”
In any event, to minimise the effect of sanctions, Tehran has already switched to receiving 70 per cent of its oil revenues in currencies other than the US dollar. In addition, Iranian banks have stopped issuing letters of credit in dollars, while the country’s central bank is reducing the dollar share of its foreign exchange holdings.
And despite the recent UN Sanctions, Iranian oil and gas companies signed a number of deals with other Asian and European countries in the second week of March 2008. NIORDC of Iran, Petramina of Indonesia, and Malaysia’s Petrofield Refining Company signed a joint venture shareholder agreement to build a US$6 billion oil refinery plant in Banten province of Indonesia. PetroVietnam Exploration Production Corporation (PVET) and National Iranian oil company (NIOC) inked a $115 million contract for exploration and the development of Dana oil field in the Ilam province of Iran. And a Swiss company, Elektrizitaetsgesellschaft Laufenburg (EGL), signed a deal with the National Iranian Gas Export Company for the delivery of 5.5 billion cubic metres of gas per year.
At the same time, one cannot, however, ignore the fact that sanctions have succeeded in generating an internal debate among the Iranian elite over the country’s nuclear policy. Because of Ahmadinejad’s determination to pursue the current confrontationist policy, conservatives have become divided into two groups – moderate conservatives and neo-conservatives. Moderate conservatives are headed by Ali Larijani and Mohammad Baqer Qalibaf (the Mayor of Tehran). They have been critical of Ahmadinejad’s confrontational approach and the resulting deterioration in Iran’s ties with the international community and the West in particular. Similar criticism has also been directed at Ahmadinejad by a coalition of centrists and reformists headed by former President Mohammad Khatami, Akbar Hashemi Rafsanjani and ex-Speaker of Majlis, Mehdi Karroubi.
It must be noted here that there is unanimity among the country’s political elite that Iran should continue to pursue its nuclear programme for peaceful purposes. The divisions are over the approach to be taken in dealing with the international community. While the neo-conservatives led by Ahmadinejad seem to favour confrontation, the moderate conservatives, centrists and reformists wish to pursue a non-confrontational stance and may be even accept some limits on the programme. In last month’s parliamentary elections, the moderates performed better and they are expected to give a tough fight to the conservative factions in the next presidential elections scheduled for 2009. But it is to be seen whether they have the capacity to oust the neo-conservatives from power.