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How the Obama Administration Can Get Serious About Iran Sanctions

And stop Iran from getting nukes.

11:00 AM, Mar 31, 2011 • By MARK DUBOWITZ AND LAURA GROSSMAN
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The Obama administration made the correct decision earlier this week to impose sanctions on Belarusneft, a subsidiary of the Belarusian petrochemical company Belneftekhim, for doing business with Iran. But it’s small beer – Belarusneft is hardly a major player in Iran’s energy industry. And this latest announcement of sanctions suggests to some in Congress that the administration is not really that serious about enforcing sanctions on Iran after all.

Ahmadinejad

Last year, Congress passed the Comprehensive Iran Sanctions, Accountability and Divestment Act by overwhelming majorities in both houses, and President Obama signed the bill into law in July 2010. The sanctions bill was supposed to be a strengthening of the bill already on the books – the Iran Sanctions Act (ISA) of 1996. And Congress crafted last year’s bill to send a clear message to the White House, the Iranian leadership, and energy firms around the world: The U.S. government was finally getting serious about Iran.

Under the enhanced ISA, when provided with credible information that any entity might have invested $20 million or more in Iran’s energy sector, the administration is required to investigate them. The law also prohibits companies from supplying Iran with refined petroleum and any related technology, goods, or services.

In 2007, in clear violation of U.S. sanctions, Belarusneft struck a $500 million agreement with Naftiran Intertrade Company to develop Iran’s Jofeir oil field. And even more recently, the company has completed deals with other Iranian companies to develop the Band-e-Karkeh and Azagedan oil fields. In 2010, Naftiran, an Iranian company operating out of Switzerland, became the first company sanctioned under the Iran sanctions bill.

President Obama deserves credit for finally sanctioning some companies – a step neither Presidents Bill Clinton nor George W. Bush took in the 12 years between the passage of ISA and Obama’s inauguration in January 2009.

In both Belarus and Iran, energy wealth sustains brutal dictatorships. Belarusian president Alexander Lukashenko’s human rights violations are exceeded only by those of a few governments, including that of Iran’s supreme leader Ali Khamenei and president Mahmoud Ahmadinejad.

President Obama made sanctions on Iran’s energy sector a central part of his strategy in dealing with Tehran. With Iran continuing its march toward obtaining nuclear weapons, the selection of a single Iranian company and now a lone Belarusian one – among scores of companies that are now likely in violation of U.S. sanctions law – has not inspired congressional confidence. Nor are these sanctions likely to frighten major players in the international energy industry.

The decision from earlier this week appears only incrementally useful. The U.S. Department of the Treasury had already been watchful of Belarusneft’s parent company Belneftekhin, since it’s controlled by Lukashenko. Under executive order, President Bush designated the company and its representative offices worldwide – including its U.S. subsidiary Belneftekhin USA – in 2007 for undermining democratic processes or institutions in Belarus. The following year, Treasury designated three enterprises belonging to Belneftekhin: Lakokraska OAO, Polotsk Steklovolokno OAO, and the Belarusian Oil Trade House.  All of the companies were added to Treasury's list of Specially Designated Nationals and Blocked Persons, which freezes any assets held by these companies under U.S. jurisdiction and prohibits U.S. persons from transacting in any way with these companies. The decision to subject Belarusneft to restrictions is technically useful, but far from consequential.

In the administration’s defense, as the State Department has quietly put pressure on international energy companies, an increasing number of them have voluntarily terminated their trade with Iran.

In its press release announcing this sanctioning, the State Department echoed earlier announcements that praised firms who are committed to halting their activities in Iran, including Total, Statoil, ENI and Royal Dutch Shell. Scores of other energy companies, insurance firms, banks, and technology providers have also left the Iranian market. FDD’s Iran Energy Project has tracked several other firms, including the Dutch petrochemical firm LyondellBasell, Australian oil firm WorleyParsons, and the German industrial giant ThyssenKrupp.

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