January 12, 2012 | Quote

Can EU Oil Sanctions Create a Turning Point in Iran?

The strategy of inflicting laser-like oil sanctions on Iran without disrupting global energy markets, and thereby reducing Iran's oil profits, was first developed by Mark Dubowitz, executive director of the Foundation for Defense of Democracies (FDD) and Reuel Marc Gerecht, a former CIA officer and senior fellow at FDD.

In a series of articles in The Wall Street Journal and The New York Times last year, Dubowitz and Gerecht outlined their approach.

Writing in the Times in November, the FDD experts argued “effective energy sanctions don't have to raise oil prices; they can actually do the opposite. Washington just has to learn how to leverage greed.”

They continued that “With fewer buyers to compete with, the Chinese companies would have significant negotiating leverage with which to extract discounts from Tehran. The government could lose out on tens of billions of dollars in oil revenue, loosening its hold on power. This approach may seem distasteful to some, because it does, in a sense, reward bad Chinese behavior. But the objective of sanctions is to cause real economic pain in Tehran, not to make Americans feel moral.” A telling result of the Dubowitz and Gerecht smart sanctions approach was cited in last week's International Herald Tribune.

According to the paper, “China, which imports about 11 percent of its oil from Iran, has actually reduced its daily purchases of Iranian crude, although estimates of the cutback range from as little as 15,000 barrels a day, or 3% of Chinese imports from Iran, to considerably more than that. It was hard to know whether Beijing was making a political statement or merely trying to buy the oil on better terms.” Dubowitz told the Post on Wednesday that “the EU oil embargo, even if it contains waivers and a slower than desirable implementation schedule, will be a critical first step. It is already setting off a cascade of oil market behavior as Japan and South Korea decrease their purchase of Iranian oil in order to be in compliance with US central bank sanctions, and China forces the Iranians to offer price discounts to compensate their refineries for the added political and legal risk of continuing their purchases of Iranian oil.” 

Read the full article here.


Iran Iran Sanctions