Earlier this week, I posted about the Foundation for the Defense of Democracies’ Iran Energy Report calling for the United States to target nearly a dozen Chinese oil and energy firms for doing business with Iran. Accompanying that report, Reuel Gerecht and Mark Dubowitz of FDD penned an op-ed for the Wall Street Journal putting the challenge in starker terms: they want a direct showdown with China and Russia over Iran.
Gerecht and Dubowitz noted that the Iran sanctions imposed by the United States in 1996 fizzled out, but that lately both Europe and Japan have started to cut back commercial ties with Iran, especially in the energy field. “But,” the authors assert, “China and Russia have filled the void.”
That’s not strictly true. Neither China nor Russia have the financial and technological ability to replace US and Western investment in Iran’s lagging energy sector. Iran is suffering enormously from a collapsing energy infrastructure, although that crisis has been gathering for three decades, thanks to bungling and economic mismanagement by Iran’s mullah regime. Both the Chinese and the Russians would dearly love to exploit the West’s abandonment of Iran, and to make money there and to secure oil and gas contracts, but they’re not exactly “filling the void.” Indeed, if Iraq has any hope of breaking away from Iran’s gravitational pull in the next five or ten years, it’s because Iran can’t provide Iraq what it needs, namely, hundreds of billions of dollars in oil and gas investment to rebuilt Iraq’s shattered industry—sums that can only come from the West and from the Arab Gulf states.
Yet, as Gerecht and Dubowitz correctly point out in some detail, key Chinese firms such as CNPC and CNOOC, along with Russia’s Lukoil, have intensified their involvement in Iran. That’s too much for the authors, who want the United States to slam both countries with economic sanctions, even though it was “surely infuriate Moscow and Beijing, as well those in Washington who have worked to ‘reset’ our relations with both countries.” Soon, they note, the State Department will issue its much-anticipated “blacklist” of foreign firms doing business with Iran, and the authors hope and pray that CNPC, CNOOC and Lukoil will be on it. Helpfully, they suggest tough measures that could be mobilized against the holdings of all three companies in the United States and, possibly, Canada. They conclude, ominously:
“We were always going to have a test of wills with Russia and China over Iran. That day has arrived. Connoisseurs of power politics—Vladimir Putin, Hu Jintao, and Ali Khamenei—are watching. So is Israeli Prime Minister Benjamin Netanyahu, who will decide one of these days whether a nuclear-armed Iran is acceptable, or not.”
But, writing in their essential blog, The Race for Iran, Flynt Leverett and Hilary Mann Leverett throw cold water on the idea that, despite legislation enacted earlier this year, the United States can or should target foreign firms dealing with Iran. They write that such sanctions are “blatantly illegal”:
“We have long been critical of congressional infatuation with Iran-related secondary sanctions bills—and successive US administrations’ supine acquiescence to such measures. We think, first of all, that secondary sanctions are bad Iran policy: they do not generate anything approaching strategic leverage over Iranian decision-making, but help to undercut whatever credibility Tehran might still be willing to ascribe to American professions of interest in ‘engagement.’
“But, beyond this, secondary sanctions are lousy foreign policy: they potentially antagonize some of America’s most important international partners, for no constructive purpose. One of the more antagonistic qualities of secondary sanctions is that, as a lawyer would put it, they represent an extraterritorial application of national law—in other words, they are blatantly illegal. America’s closest allies—including Britain along with the rest of the European Union—have made clear that, if Washington were ever so foolish as to apply Iran-related secondary sanctions to an “EU” company, the EU would file a complaint against the United States in the World Trade Organization.”
And, they point out, because of all this, secondary sanctions have never been used: “Not once.” That, among other considerations, explains why the post-1996 sanctions mentioned by Gerecht and Dubowitz didn’t work.