Fooling around with fuel sanctions on Iran

Reuel Marc Gerecht and Mark Dubowitz:

Are gasoline sanctions against Iran a bad idea? President Barack Obama appears to think so, despite endorsing the idea twice during his election campaign. Although the administration wants to use tougher sanctions to make Tehran stop its uranium enrichment, the White House hasn't pushed refined-petroleum sanctions. The Islamic Republic imports around 40% of its gasoline. Without plentiful petrol, Iranians might grow angry, so the administration worries, and rally around the regime.

Sanctions hitting the energy sector could also be viewed by Tehran as outright war. Supreme Leader Ayatollah Ali Khamenei could counter in Iraq and Afghanistan. And to make these sanctions effective, Washington might need to coerce our European allies, whose companies have the lion's share of the gasoline import and import-related insurance business. (Without insurance, tankers never leave harbor.)

For the administration, targeted financial sanctions against the holdings of the Revolutionary Guard Corps, which the U.S. has already designated a terrorist organization, are a more appealing way to push Iran's rulers to the negotiating table. And it's certainly true that Treasury Undersecretary Stuart Levey's intensifying assault on the ability of Iran's banks and Guards-owned enterprises to access foreign banks and credit markets has scared off foreign companies.

But let's be honest: Gasoline and insurance sanctions are just about all we've really got left in the quiver. The Guard Corps elite, who oversee Iran's nuclear program, are too well protected to be seriously hurt by financial and industrial sanctions. Targeted sanctions have increased the cost of Iranians doing business, but there is little evidence to suggest that sanctions so far have ever moderated the behavior of Iran's rulers.

The administration's "smart-sanctions" approach perpetuates a myth about Iran's politics that has crippled our analysis for years. Mr. Khamenei isn't an economic rationalist. He wasn't waiting for George W. Bush to depart to make peace with the United States. Men who talk about crushing the "enemies of God" won't give up their enriched uranium because transaction costs have increased. The acquisition of the bomb is now probably inseparable from the ruling elite's religious identity.

For sanctions to be a game changer, they have to be crushing. Mr. Khamenei's commitment to developing nukes is probably as strong as was Ayatollah Ruhollah Khomeini's determination to destroy Saddam Hussein in the Iran-Iraq War. The shock that stopped Khomeini—the realization that the conflict was threatening his regime's survival—ought to tell us what kind of shock we need now. Sanctions must complement the only thing that has so far rattled the regime: the pro-democracy Green Movement.

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The problem with the current sanctions regime is that it is not as smart as advertised. It is easy enough to create nominee transactions by creating front companies. To persaude the religious bigots who think they are on a mission from God to change their policy, we have to show them that their current policy objectives are hopeless. That we have utterly failed to do. It is unlikely that China and possible Russia will agree to sanctions that make the Iran regime thing their situation is hopeless. In fact they keep giving them hope. What would persuade the Chinese and Russians that it was in their interest to go along with crippling sanctions is a realistic alternative such as the credible threat of military annihilation of the regime in Iran. Obama has no credibility on that issue.