Pressure builds on Iran as EU targets Tehran’s economic jugular

The EU’s proposed embargo on Iranian oil exports represents a significant development in the effort to curb Tehran’s nuclear intentions. This is a high-risk strategy, but the right one

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Mahmoud Ahmadinejad inspects centrifuges at a uranium enrichment plant
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George Grant
On 6 January 2012 09:55

For years, European and other Western leaders have been applying economic sanctions on Iran in an hitherto forlorn effort to compel the regime to desist in its efforts to develop a nuclear-weapons capability.

Although the Iranian regime has always maintained that it is developing a nuclear programme for purely civilian purposes, this is a claim that is now believed by the sum total of almost nobody within the international community who has assessed the situation in any detail.

Most recently, in November 2011, the International Atomic Energy Agency (IAEA) released a report which cited procurement of “nuclear related and dual use equipment and materials by military related individuals and entities”; the development of “undeclared pathways for the production of nuclear material”; the acquisition of “nuclear weapons development information and documentation from clandestine nuclear supply network”; and “the development of an indigenous design of a nuclear weapon including the testing of components”.

To my mind, however, the most compelling argument against the Iranian regime’s protestations of good faith is the economic incomprehensibility of an Iranian civil nuclear energy programme: The US State Department has estimated that if Iran built six reactors for domestic production, their uranium reserves would be sufficient to run those reactors for just 12 years. You don’t build a whole industry if all you’re going to get is 12 years out of it.

Nonetheless, international efforts to halt the regime’s nuclear ambitions have consistently faltered. Why is that?

For starters, we can rightly blame the intransigence of Russia and China, two permanent and veto-wielding members of the UN Security Council who appear to view the Iranian nuclear issue as less of a threat to international peace and security with which they themselves should be concerned, and more of a useful diplomatic stick with which to beat Western governments round the head. Getting meaningful UN sanctions past them is somewhat akin to getting a camel through the eye of a needle.

However, the Russians and Chinese are not solely to blame. The elephant in the room has always been Western reluctance to target the one area that could really put the pressure on the regime: its oil industry. Oil revenues account for 60 percent of the Iranian economy, and fuel and other mining products constitute 82.4 percent of Iranian exports. One of the primary destinations for these exports is in fact the European Union, which purchases some 450,000 barrels of Iranian oil every day, out of a total 2.6 million bpd of exports.

News that EU leaders have agreed in principle to an embargo of Iranian oil exports is therefore highly significant. If the regime faces significant cuts in oil revenues, its capacity to operate as a viable government and to pursue its nuclear ambitions will be correspondingly affected.

Of course, there is always the possibility that in the event of such a scenario, the regime will divert funds away from vital services to maintain its nuclear ambitions, but this would constitute a high-risk strategy for the government, risking further alienation from its already disenchanted and disenfranchised citizens. Iran’s leadership will not forget the enormous tensions that followed its decision to slash fuel and food subsidies in December 2010.

The regime’s other option would be to retaliate by escalating the situation in a bid to force the Europeans into retreat. Since the end of December, the Iranians have been threatening to close the strategically vital Strait of Hormuz, through which some 40 percent of the world’s tanker-borne oil currently passes.

“The enemies will only drop their plots when we put them back in their place,” Iran’s Vice-President Mohammad Reza Rahimi was quoted as saying on 28th December, adding that blocking the strait would be “easier than drinking a glass of water”. Consistent with this rhetoric, the Iranian military has been conducting a series of exercises over the past few weeks, including test-firing long-range shore-to-sea and surface-to-surface missiles.

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