December 6, 2011 | Quote

The Thirty-Year War

The more immediate concern is that sanctions driving up oil costs might create a windfall for Iran. The question, says Mark Dubowitz, executive director of the Foundation for Defense of Democracies (FDD), “is how do you design a package that targets the price of oil but leaves the physical supply alone? Otherwise Ali Khamenei will enjoy an astonishing windfall by selling his oil at sharply higher prices.” The answer is to wean your allies off of Iranian oil as quickly as possible and leave Tehran with only those customers who will ignore sanctions anyway, namely China. If Beijing is Iran’s only buyer, it will have leverage to extract discounts from Tehran, which might cost the regime tens of billions of dollars in revenue.

Significant discounts are also possible even if India keeps buying Iranian oil along with Turkey, South Africa, Pakistan, and Sri Lanka, Iran’s other major buyers. FDD’s confidential report on the “Oil Market Impact of Sanctions Against the Central Bank of Iran” provided a detailed economic model that informed the Kirk-Menendez sanctions amendment, which won unanimous Senate consent for consideration on the new Defense authorization bill. Senators Mark Kirk (R-Ill.) and Robert Menendez (D-NJ) wrote separate amendments, with Kirk’s the more draconian of the two, levying secondary sanctions on anyone who did business with the Central Bank of Iran. …

The point of sanctions like the Kirk-Menendez amendment, says Dubowitz, “is to bring your allies on board as quickly as possible without spooking oil markets and to give the administration flexibility to manage two of the most sensitive elements of the global financial system​—​oil markets and central banks.”


Iran Iran Sanctions