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Romney Mulls Energy, Financial Sanctions on Iran

By Diane Barnes

Global Security Newswire

Republican presidential candidate Mitt Romney, shown on Monday, could if elected pursue U.S. sanctions against every foreign firm carrying out transactions with Iranian financial or energy organizations, said a counterproliferation policy adviser to the former Massachusetts governor (AP Photo/Charles Dharapak). Republican presidential candidate Mitt Romney, shown on Monday, could if elected pursue U.S. sanctions against every foreign firm carrying out transactions with Iranian financial or energy organizations, said a counterproliferation policy adviser to the former Massachusetts governor (AP Photo/Charles Dharapak).

WASHINGTON -- Republican presidential nominee Mitt Romney could pursue comprehensive U.S. penalties against foreign firms that do business with Iran's financial and energy sectors if he is elected to office, according to a key adviser.

Romney might also target insurers of Iranian oil-transport and other enterprises to further nudge Tehran toward allaying international fears that its ostensibly peaceful atomic program masks a bid to establish a nuclear-weapon capacity, said former Assistant Secretary of State Stephen Rademaker, co-chairman of Romney’s counterproliferation working group.

“Under a Romney administration, the U.S. approach to sanctioning Iran will be resolute rather than half-hearted,” Rademaker said in a statement to Global Security Newswire. “Such actions, which the Obama administration continues to resist, would cripple [Iranian Revolutionary Guard] businesses, put an end to the never-ending cascade of energy front companies and vastly increase the pressure on the Iranian regime.”

Washington already bars Iranian financial enterprises from direct access to the U.S. financial system, and a 25-year-old embargo prohibits the import of unrefined petroleum and nearly all other products from Middle Eastern nation.

Following in the steps of his White House predecessor, Obama has aligned Washington’s Iran policy with efforts by several other powers to steadily ramp up the Middle Eastern nation’s economic isolation while simultaneously offering political and financial rewards for its potential atomic cooperation. Sanctions comprise a core element of the U.S. “dual-track” diplomatic strategy, which aims in part to achieve the suspension of Iranian uranium enrichment operations capable of generating fissile material for nuclear warheads.

Through four sanctions resolutions adopted since 2006, the U.N. Security Council has restricted weapon transfers across Iranian borders, as well as sales of “dual-use” items relevant to Tehran’s nuclear activities. The European Union in July implemented an embargo on purchasing Iranian oil, marking a significant addition to penalties previously imposed by the 27-nation bloc and numerous other countries.

Romney’s campaign platform advocates a fifth U.N. sanctions resolution aimed at staunching funds to the Revolutionary Guard and other Iranian government organizations, emphasizing measures against the country’s central bank as well as other financial entities. It does not explicitly advocate limiting the measures to Iranian enterprises.

Still, it “might prove impossible” to win support for such a measure from China and Russia, which each wield veto authority on the multilateral body, according to the position statement. “In the absence of a U.N. imprimatur, the United States should be ready to take action in conjunction with as many willing governments as possible,” it says.

In touting its own steps against Tehran, the Obama administration has emphasized application of a 2010 law targeting global firms that do business with select Iranian banks. Iranian institutions designated under the law are generally supporting Iranian atomic initiatives, according to the Treasury Department.

The mere possibility of coming under the 2010 sanctions, which bar any targets from the U.S. financial system, has served “to persuade foreign financial institutions to cut off designated Iranian banks where reputational risk wasn't persuasive enough,” David Cohen, Treasury undersecretary for terrorism and financial intelligence, said by e-mail.

The Treasury Department’s July actions against a Chinese and an Iraqi bank marked the administration's first direct use of the measure. Rademaker, though, said neither institution has financial ties to the United States.

“President Obama’s eventual embrace of sanctions came only reluctantly and half-heartedly,” following a period of nearly two years in which he pursued a “no-preconditions dialogue” with Tehran, Rademaker contended. Punitive economic measures went “disregarded as an element of U.S. policy for far too long,” the adviser asserted.

Rademaker said the administration had yet to punish any firm under what he called the “most effective U.S. sanctions” now in place: a provision of the fiscal 2012 National Defense Authorization Act enabling the Treasury Department to place the U.S. financial system off-limits to foreign firms doing any business with the Iranian central bank, a key institution for processing the nation’s oil payments.

If every financial institution in the world faced possible U.S. penalties for doing business with Iran’s central bank, other governments would be “more likely to resent our actions and resist following our lead,” Treasury Secretary Timothy Geithner said in a statement of opposition to sanctions measures proposed for the defense authorization law prior to its passage late last year.

Rather than directly applying the law’s penalties, the administration has granted half-year exemptions to any entities in 20 nations deemed by the State Department to have significantly curbed their imports of Iranian petroleum. Officials in Foggy Bottom declined to be interviewed for this article.

“One of the great strengths of the existing sanctions effort is the [international] “buy-in” we’ve got,” said Patrick Clawson, who heads the Iran Security Initiative at the Washington Institute for Near East Policy.

It would be possible for a Romney administration to rally global support around the proposed blanket measures, but doing so “would be a diplomatic challenge,” Clawson said.

Cohen defended the Obama administration’s application of penalties against Iran.

“We make full use of all the tools at our disposal,” the Treasury undersecretary said. “What makes our Iran sanctions so effective is our unrelenting and unyielding international engagement, the effective use of all information available to the U.S. government, and the willingness to take action, as demonstrated by our recent action against banks in China and Iraq.”

Obama signed an executive order in July to target two key oil companies -- National Iranian Oil and Naftiran Intertrade -- as well as various Iranian operations linked to petroleum and derivative substances, Cohen wrote. The measure extends the defense authorization law’s penalties for petroleum dealings with the Iranian central bank to also cover international financial institutions dealing with the newly designated companies.

A law enacted last month calls on the president to impose sanctions on insurers and reinsurers working with two specific Iranian petroleum companies: National Iranian Oil and National Iranian Tanker. It also lays groundwork for asset freezes and other punitive steps against insurers, owners and operators of vessels used to transport Iranian petroleum, or “goods that materially contribute to Iran's proliferation of WMD program or its terrorism-related activities,” the Congressional Research Service said in a summary of the legislation.

The sanctions law “extends the prohibition on dealings between the U.S. and Iran to foreign subsidiaries owned or controlled by U.S. companies,” Cohen added.

Some observers have credited U.S. and international sanctions with prompting Tehran to resume atomic discussions with the six world powers. More than a year passed between Iran’s first 2012 meeting with the powers and their prior gathering in January 2011; in the intervening period, Tehran indicated it would refuse to discuss its nuclear program in any future meeting.

“We’re not home free and we certainly haven’t gotten them to make concessions at the bargaining table, but I think the pressure is pretty substantial and it’s growing,” said Leonard Spector, deputy director of the James Martin Center for Nonproliferation Studies.

If multilateral discussions fail to resume after pausing over the summer, the Obama administration “is going to find new means to turn up the [economic] pressure” on Iran, Clawson said. He added that future U.S. moves are likely to include new insurance and reinsurance measures, as well as additional pressure on other countries not to allow the transportation of Iranian oil under their flags.

Iran’s top nuclear negotiator and a representative for six negotiating powers -- China, France, Germany, Russia and the United Kingdom -- were set last week to assess by telephone whether their sides had established sufficient common ground for what could be their fourth high-level diplomatic gathering in 2012, according to an Iranian state media report.

Romney on Sunday accused Obama of pursuing an ineffective “policy of engagement” with Iranian President Mahmoud Ahmadinejad.

“That policy has not worked, and we’re closer to a nuclear weapon as a result of that,” the Los Angeles Times quoted him as saying on NBC’s “Meet the Press.”

“I will have a very different approach with regards to Iran. And it’s an approach which, by the way, the president’s finally getting closer to. It begins with crippling sanctions. That should have been put in place long ago.”

To help establish a “credible military option” against Iran, Romney has advocated routinely deploying aircraft carrier task forces to the Mediterranean Sea and Persian Gulf; stepping up military and intelligence collaboration with Israel; bolstering activities with the armed forces of partnered Arab countries; and carrying out additional naval practice maneuvers.

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