Silver Shrapnel: Congress Targets the Energy Lifeblood of the Iranian Regime

Few would dispute that getting strong bipartisan support for legislation that actually has teeth is as rare as a Sidney Crosby fan at the Verizon Center.

One exception to the bitter partisanship of Washington has been Congress's support for tough energy sanctions against the Iranian regime. Yesterday, conferees were named to iron out the differences between the House and Senate versions of energy sanctions legislation as the next step before a final Congressional vote and President Obama's signature.

If there are differences, they are likely to be found between the Congress and the Administration, not between the political parties.

Congress's patience with Iran is reaching an end as Iran continues to reject reasonable deals aimed at preventing its development of nuclear weapons. The Administration wants to buy more time to gain international support for sanctions, which many in Congress fear will only yield another toothless UN resolution.

Why even pass energy sanctions? Economics: Energy is the lifeblood of the men who rule Iran. Oil alone accounts for three-quarters of the Iranian government's revenues. The Islamic Republic also has an economic “Achilles' heel” — it imports up to 40 percent of its gasoline from a handful of foreign suppliers. Profits from the gasoline trade and the Iranian oil and natural gas sectors are the source of an enormous patronage system run by Iran's Islamic Revolutionary Guard Corps. In addition to its dominance over the Iranian economy, the Guard is increasingly the dominant political and security force; it is responsible for safeguarding the regime and using murder, torture, and rape to crush all dissent.

The Congressional sanctions moving through conference committee over the coming period have already had an impact. Numerous international energy firms are reducing their ties to Iran and some have cut or plan to cut their ties to Iran's energy sector completely. The political risk equation is changing for these companies as they fear the possibility of being cut off from doing business in the U.S. if they continue their trade with Iran.

To sort out who is still involved in the Iranian energy sector, the non-partisan Foundation for Defense of Democracies launched a new online resource this week. The website at www.IranEnergyProject.org contains documents, databases and analysis useful for government policymakers, reporters, the corporate world and the public.

FDD also has expanded its Iran Energy Project with the addition of two scholars. According to Dr. Emanuele Ottolenghi, a Brussels-based senior fellow with FDD's Iran Energy Project, “if sanctions are to remain the main tool to confront Iran, America and its allies need to rethink the overall goals of their policy and adopt suitable measures to increase the likelihood of its success. In this context, Europe must by necessity play a vital role, given its thriving and privileged business relations with Iran.”

Dr. Ottolenghi is the author of Under the Mushroom Cloud: Europe, Iran and the Bomb, a seminal book on ties between Europe and Iran that will soon be re-published in the United States.

Regarding sanctions, Dr. Ottolenghi wrote:

“The focus should be on imposing tough sanctions against those in charge of strategic decision-making in Iran and against those sectors from which regime stalwarts draw their wealth, power and influence. Sanctions must target activities and businesses directly linked to the Revolutionary Guards, to the oil sector, the petrochemical complex, free-trade zones, and the vast economic empires of the religious foundations. They must also target those areas where Iran's economy is dependent on imports and outside expertise, crippling vital services which the Islamic Republic cannot deliver to its population, and thereby further undermining the regime and further alienating an already restive public.”

Also new to the project is Berlin-based Benjamin Weinthal, who has published widely in the U.S. and Europe on commercial ties between Europe and Iran. Writing in the Wall Street Journal, Weinthal said,

“Because of the sheer volume of its trade with Iran, Germany, the economic engine of Europe, is uniquely positioned to pressure Tehran. Still, the obvious danger of a nuclear-armed Iran has not stopped Germany from rewarding the country with a roughly 4 billion Euro trade relationship in 2008, thereby remaining Iran's most important European trade partner. In the period of January to November 2008, German exports to Iran grew by 10.5% over the same period in 2007. That booming trade included 39 “dual-use” contracts with Iran, according to Germany's export-control office. Dual-use equipment and technology can be used for both military and civilian purposes.”

Energy sanctions are not a silver bullet, but could be silver shrapnel. And shrapnel could wound a regime suffering a severe economic and political crisis. Companies are more likely to end their ties to Iran on the basis of a calculation of business risk. Congress wants to put these companies to a simple business choice: do business with America or with Iran. The President should put teeth into his campaign pledge to “put the squeeze on Iran.” He should support a bill that does just that.