Don’t Let Iran Benefit From EU Financial Crisis

Ironically, France and the U.K., which for years resisted strong U.S. efforts to impose crippling sanctions on Iran, are now leading the EU charge. Of course, neither France nor Britain imports significant amounts of Iranian oil, so the economic impact on them will not be major. However, the potential consequences for financially troubled EU countries are grave. Greece, for example, imports about a third of its oil from Iran, and would be badly harmed if its energy costs rose. So would many southern EU members. Italy imports about 12 percent of its oil from Iran, and Spain about 15 percent.
It is, therefore, no surprise that the EU’s sanctions negotiations have been tough, even brutal. Continuing pressure for delays and exceptions, combined with the absence of meaningful enforcement provisions, leaves each EU country to police its own compliance.

The EU’s Iran deliberations have been under way at a time when many EU leaders seem to have concluded that the euro crisis is over, or at least postponed. In reality, however, continued EU economic weakness means that mere fiscal restraint by troubled EU governments will never be sufficient to overcome the euro zone’s inherent structural deficiencies.

Sunny Propaganda
- Simultaneously, sunny propaganda about the impact of economic sanctions on Iran is emanating from the Obama administration. Last year, Congress enacted significant new sanctions against financial institutions dealing with Iran’s central bank -- an alternative way to strike against its principal source of earnings: oil exports.

President Barack Obama, however, worried about his re- election prospects, opposed the sanctions legislation, fearing it might significantly increase global oil prices and abort the weak American economic recovery. In exchange for Obama endorsing the legislation, its congressional sponsors agreed to allow Obama some discretion to grant exceptions to the restrictions.

But the waiver provisions simply increase the likelihood that the new sanctions will have little effect. If Obama grants even a limited waiver to Turkey, for example, Japan and South Korea will surely ask for similar treatment. And India has already said it will restrict oil imports from Iran only in response to United Nations Security Council sanctions, which, of course, neither China nor Russia will permit. So the net effect of the new legislation is likely to be very limited.

Interestingly, China is behaving in the most capitalist fashion of any of the major players. First, officials in Beijing (and in Moscow) continue to make it clear that they oppose significant new sanctions, especially if such measures might limit China’s importation of Iranian oil. Second, China publicly opposes Iran’s having nuclear weapons, thus allowing Obama to proclaim -- misleadingly -- a world united against Iran. In fact, while China may not want a nuclear Iran, it doesn’t plan to do much to prevent it. Third, Chinese Premier Wen Jiabao has toured the Arab oil-producing countries, lining up alternative oil sources in case Iran is cut off. Capitalists call this hedging.

Iran, moreover, diplomatically savvier than its adversaries, is moving to accept new negotiations with the Security Council’s five permanent members plus Germany. Russia and Turkey have already welcomed this latest Iranian ploy.

These discussions, on and off for 10 years, have produced no meaningful limits on Iran’s continuing quest for nuclear weapons. If anything, the talks have simply bought Iran time to make progress on its nuclear-weapons program, and given the country some political cover.

Israel Stands Alone - Israel alone seems to understand how perilous the situation is, as Iran rapidly approaches its longstanding objective of possessing nuclear weapons. To prevent any pre-emptive military action, Obama has applied unrelenting pressure on Israel. So far, this effort has succeeded, but how much longer Israel will stand by idly is purely a matter of conjecture.

You can bet on one thing: As long as any new negotiations are under way, Western diplomats will try to avoid further sanctions for fear of endangering their precious negotiation “process.” All the while, of course, Iran will continue to progress toward nuclear weapons, and find new and better ways to evade the supposedly tough new sanctions. Moreover, the European financial crisis will continue to percolate, with uncertainty in international oil prices making things more difficult.

John R. Bolton, the former U.S. ambassador to the UN, is a senior fellow at the American Enterprise Institute and the author of “Surrender Is Not an Option.”

The above article was published in bloomberg.com on January 26th, 2012 (11:00 p.m. GMT).

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