U.S. Congress Seen Hindering Cheap Fuel for Iran

Legislation to punish Tehran for its nuclear program by denying U.S. financial assistance to foreign companies that provide gasoline to Iran has a good chance of passing Congress.

Iran may find willing new suppliers if the move succeeds. But it would be costly for its government, which heavily subsidizes gasoline. Sanctions would be even more costly for Iran’s citizens, who would bear the added expense.

Under the legislation, which overwhelmingly cleared the House of Representatives last week, the U.S. Export-Import Bank would be barred from providing credit, insurance or loan repayment guarantees to companies that supply fuel to Iran or help expand the country’s domestic refining capacity.

The U.S. Senate still has to take up the measure.

“I think there are pretty good chances that it will pass,” said James Phillips, Middle East expert at The Heritage Foundation. “I don’t think there’s going to be a lot of trepidation for taking action against the (Iranian) regime.”

Andrew Grotto, senior national security analyst at the Centre for American Progress, said the measure had better than a 50-50 chance of making into law.

Iran has some of the world’s richest oil reserves, but it imports 40 percent of its gasoline to meet growing demand. Government subsidies help keep gasoline in Iran much cheaper than in other countries.

The U.S. move aims to pressure Iran to refrain from development of nuclear weapons. Iran insists its nuclear technology is for generating electricity.

U.S. oil companies are already prohibited from selling fuel to Iran, so lawmakers could find it easier to back legislation that keeps foreign suppliers from picking up that business.

PROTEST CRACKDOWN ADDS FUEL

Iran’s crackdown on protests after disputed June presidential elections may also boost support for the bill.

“There is probably very little disagreement on the fact that U.S. taxpayer money should not be supporting companies that are providing refined petroleum to Iran,” said Mark Dubowitz, executive director for the Foundation for Defence of Democracies.

Reliance Industries Ltd of India, one of Iran’s biggest gasoline suppliers, has benefited from $900 million (551 million pounds) in loan guarantees from the U.S. Export-Import Bank. Assistance includes over $500 million to help expand Reliance’s Jamnagar refinery, which provides nearly a third of Iran’s imports.

“In effect, the U.S. taxpayer is underwriting the increased supplies of gasoline to Iran,” said U.S. Rep. Mark Kirk, who co-sponsored the measure. “And we can all agree that the United States taxpayers should not be asked to help increase the supply of gasoline to Iran, especially now,” he said.

Other major fuel suppliers to Iran are Swiss-Dutch energy trading giants Vitol SA and Trafigura, the Swiss trader Glencore and the French energy firm Total.

If the measure becomes law, Iran would probably be able to obtain new suppliers, though at a higher cost, as there is a world market for gasoline.

“Iran can find too many ways to work around it for such legislation to have much impact until a wide range of countries are willing to actively work together to put pressure on Iran,” said Tony Cordesman, Middle East expert at the Centre for Strategic and International Studies.

U.S. lawmakers say they want to go after Tehran without hurting the Iranian people. But that goal could backfire, especially if European countries also stop gasoline exports to Iran, saddling consumers with the costs of an embargo.

“The risk is that this plays right into the hands of the hard-liners,” said Grotto.

But because so many Iranians now question the legitimacy of their government after the June vote, they probably will hold Tehran, not Washington, accountable for higher fuel prices.

“I think they would draw the correct conclusion that this is an additional burden imposed on them by the hostile actions of the un-elected regime,” Phillips said.

The legislation may not be the silver bullet that forces the Iranian government to alter its nuclear policy, but it could be the silver shrapnel, according to Dubowitz.

“Shrapnel can also wound,” he said. “This could really be effective in squeezing the Iranian regime, squeezing it economically and politically.” (Editing by Jeffrey Jones and David Gregorio)