The Alternative to War Are Sanctions Working on Iran?

The international community is hoping that new sanctions on Iran will turn the country away from its nuclear program. An economic embargo is, perhaps, the last chance for peace. But can it work?

By SPIEGEL Staff


On the one hand, formulaic diplomacy is being strictly adhered to. His Excellency, the High Representative for the Common Foreign and Security Policy of the European Union, Dr. Javier Solana, recently presented to his Iranian counterpart, Manucher Mottaki, the latest offer from the so-called group of six nations, consisting of the three European powers Great Britain, France and Germany, as well as China, Russia and the United States. The goal is international cooperation in determining the true purpose of Iran's nuclear program.

Iranian Air Force pilots shouting anti-Israel and anti-US slogans on Friday.
REUTERS

Iranian Air Force pilots shouting anti-Israel and anti-US slogans on Friday.

In the letter accompanying the offer, the alliance expressed its deepest respect for Iran as "one of the oldest civilizations in the world." The last of the signatures on the third page belonged to US Secretary of State Condoleezza Rice. Mottaki wanted to know whether it is her original signature, and not from a signature machine or a photocopy. Of course Ms. Rice personally signed the document, Solana assured him.

Mottaki gathered together his papers, called the assembled journalists and photographers into the room and began the transfer ceremony with apparent pride, as if to say: Here it is, mail from the Great Satan, and signed in person, no less.

On the other hand, the threats are growing increasingly frequent. Just 10 days ago, 100 Israeli planes flew 1,400 kilometers (870 miles) out over the Mediterranean as part of a military exercise. In the flight, they covered exactly the same distance they would have to cover in an attack on the Iranian uranium enrichment plant in Natanz.

Not long later, Israeli experts in the know began commenting publicly on potential links between the secretive nuclear programs of Iran, Syria and North Korea. The facility the Israelis bombed in Syria last September, they said, was believed to have been producing plutonium and passing the weapons-grade material on to Tehran. They further said there is a discrepancy between the amount of plutonium North Korea claims to have produced and the amount the country was in fact capable of producing -- and that the difference could suggest that some of the plutonium was going to Iran. The conclusion? Iran could very well be capable of making a bomb by 2010.

The message these experts have sought to convey is that unless this development is stopped, it won't be long before the next war breaks out in the Middle East.

But what is the alternative? Is there any chance that the talks Solana plans to conduct on behalf of the group of six will result in a breakthrough? Will international sanctions produce the desired effect? The government in Tehran is already paying a high price for its refusal to stop enriching uranium and negotiate.

Iran's new friends.
DER SPIEGEL

Iran's new friends.

The United States has maintained a trade embargo on Iran since 1979, and the United Nations Security Council, at the instigation of the group of six, has imposed further economic sanctions three times. Only last week, the Europeans froze Iranian assets and imposed travel prohibitions on Iranian politicians, scientists and military officials.

All of this amounts to a significant burden of sanctions. The question remains open, however, whether it will be enough to convince Iran -- which continues to claim its reactors are purely for civilian purposes -- to turn its back on its nuclear program.

Trade and financial embargos have rarely been successful, especially in the Middle East. After the first US war against Iraq in 1991, the United Nations imposed sanctions on the country for 13 years, and yet the regime of then dictator Saddam Hussein refused to yield. Nevertheless, the sanctions did significantly weaken Saddam.

According to former US National Security Advisor Brent Scowcraft, Saddam never managed to rebuild his army into a serious military threat after 1991 -- thanks to the trade embargo. Foreign policy experts from the administration of former US President Bill Clinton still believe that the sanctions kept Saddam sufficiently in check to prevent him from becoming a threat even to his neighbors. Saddam's Iraq had the same ambitions as Iran does today: to be the region's dominant power.

The best reason to tighten sanctions is the lack of any other realistic alternative. Even as the collateral damage from such trade embargos is immense, including harming those countries that impose them, the only other choice is war.

Still, the complaints have already begun pouring in. German Economics Minister Michael Glos has already received angry letters written in response to the EU's recent freezing of the assets of Iran's Bank Melli. "I was appalled," wrote Eginhard Vietz, the head of a company that produces equipment to build pipelines, "to find that the assets of Bank Melli Iran were frozen as a result of the EU sanctions imposed on Iran. This puts an end to our business dealings with Iran."

Contracts in Iran represent a very significant part of Vietz's business, partly because of the Nabucco pipeline, which is being built to supply Iranian natural gas to Europe beginning in 2013 and make the continent less dependent on Russian gas. "The restriction imposed on Bank Melli forces us to create jobs in Dubai or Kuwait, and then deliver our products to Iran through those countries," Vietz writes in his letter to Glos.

Bank Melli Iran, which is fully owned by the Iranian government, is the country's largest commercial bank, with about 45,000 employees and 3,000 branches worldwide, and total assets of €38 billion ($59 billion).

The bank handles transactions for much of the overall German trade with Iran. Despite the restrictions in Germany, however, the bank is not yet completely out of the picture. Bank Melli's Moscow branch continues to process transactions, including, as is rumored, those originating in Germany. Melli also has seven branches in the United Arab Emirates, the most popular alternative gateway for international business with Iran.

As recently as 2006 Germany, with exports worth $5.2 billion (€3.35 billion), was one of Iran's key trading partners. But the pressure exerted by the United States had already begun to take effect in recent years. In 2007, German exports to Iran declined to $5.0 billion ($3.23 billion).

CEOs of German banks were often forced -- sometimes in the context of one-on-one conversations with Deputy US Treasury Secretary Robert Kimmit -- to completely terminate their business dealings with Iran. If they refused, so went the threat, they would find themselves running into significant problems in the United States, especially with the Securities and Exchange Commission (SEC). Thus, for example, Deutsche Bank's name appeared on the SEC's list, published on the Internet, of companies doing business in states that sponsor terrorism.

The bankers were in a predicament. Either they violated German laws that forbid companies from observing sanctions imposed by another country, or they could look forward to heavy losses and restrictions in their US business. For Deutsche Bank and insurance giant Allianz, together with its subsidiary Dresdner Bank, the decision was quickly made in favor of the United States and against Iran. Commerzbank, another major German bank, also yielded to Washington's demands.

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