Nuclear Dispute EU Plans Massive Sanctions Against Iran

The EU is preparing tough sanctions against Iran's energy and financial sectors, according to a confidental list of proposals drawn up for EU foreign ministers and obtained by SPIEGEL ONLINE. The measures, aimed at forcing Iran to back down in the nuclear dispute, would have a dramatic impact on the economy.
Iranian President Mahmoud Ahmadinejad visiting the Natanz uranium enrichment plant.

Iranian President Mahmoud Ahmadinejad visiting the Natanz uranium enrichment plant.

Foto: Anonymous/ AP

The statement by the EU foreign ministers after their meeting in Brussels on Monday sounded harmless: the EU would stick to its "dual track" approach of threatening economic sanctions  and offering negotiations to stop Tehran developing nuclear weapons.

So far, however, that strategy hasn't worked. Iranian President Mahmoud Ahmadinejad announced plans on Monday to build two new uranium enrichment plants despite warnings issued by the UN Security Council, the US and Europe. "The world powers should not be worried as all our nuclear activities are strictly supervised by the inspectors of the International Atomic Energy Agency (IAEA)," Foreign Ministry spokesman Ramin Mehmanparast said in a press briefing in Tehran on Tuesday.

But such assurances don't wash with the Europeans anymore. The EU wants to massively ratchet up the pressure on Tehran -- and the instruments have already been prepared. Behind the scenes, EU finance and trade experts have worked out a confidential catalogue of possible sanctions. SPIEGEL ONLINE has obtained that catalogue, a 13-page "non-paper on political and economic context of sanctions against Iran."

Energy and Finance Sectors to be Targeted

The proposals aren't just aimed at expanding existing sanctions such as trade embargos for military and nuclear products and travel bans for Tehran's bomb builders. For the first time, the EU is envisaging a program that targets the entire Iranian economy. In order to maximize the impact, the experts are recommending measures to hit the energy and financial sectors, where the regime is particularly vulnerable, the document says.

Iran is the second-biggest oil producer in the OPEC cartel and is well endowed with gas reserves. Some 80 percent of its exports come from oil and gas. But the country can't stay in business for long without international help. It needs foreign investments for the urgently needed development of new fields as a replacement for expiring reserves. If that investment isn't forthcoming, output will fall rapidly.

And, possibly worse, the oil-rich country is largely dependent on the import of oil products such as gasoline and diesel. Without fuel imports, its transport system would quickly collapse. The regime is trying to build refineries, but it needs foreign know-how and capital for that too.

Financial Sanctions to Choke off Imports

The EU planners regard financial sanctions as even more effective, and have come up with an array of options. The EU could, for example, obstruct Tehran's access to Iranian currency reserves located abroad. And one could banish the Iranian central bank from the international circulation of money and credit. Cross-border money transfers would be made virtually impossible and Iran would have huge problems paying for imports -- that would hurt the supply of products needed for its nuclear program.

A further proposal: if Western insurance companies stop guaranteeing investments in Iran, many investors will prefer to withdraw. If Europe blocks export credit guarantees that are a routine part of interrnational trade, deliveries to Iran would be more risky or at least significantly more expensive. The EU plan also suggests limiting diplomatic and other official contacts with Iran, a move that would be primarily symbolic but significant just the same, it says.

The 27 EU members haven't decided on sanctions yet. But European governments are more determined than ever to raise the pressure on Iran, especially after the IAEA said in a report last week that Iran may now be working to develop a nuclear-armed missile.

The Europeans needs a decision by the UN Security Council as a stable legal foundation for their new sanctions. That will only happen with the support of the veto powers Russia and China. But the West also wants to secure the backing of countries such as Brazil, Turkey and the Gulf states for sanctions. That would make it harder for Iran's leadership to argue that it's being victimized by a "Western conspiracy" or the "vassals of Israel."

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