Debate on Sanctions After Brazil and Turkey’s Offer

The nuclear accord reached by Iran, Brazil and Turkey last week has not slowed consideration of a new round of sanctions against Tehran by the UN Security Council. Nor has it answered any of the thorny questions that continue to plague the Iranian nuclear debate: Will the proposed sanctions work? Will even tougher sanctions be needed? Will a military attack be required to stop Iran’s nuclear drive?

Many analysts – and Iran itself – say that the sanctions under consideration by the Security Council will have limited impact on Iran. Still others say that an American or Israeli attack on Iran will also do nothing but set the timetable of the Iranian nuclear programme back a few years, entrench Iran’s drive for nuclear weapons and rally Muslims around the world behind Iran.

Indeed, many European leaders find a nuclear Iran so likely that they are going so far as to prepare for communications channel between Iran and Israel to prevent war should Iran develop – or come close to developing – nuclear weapons.

So if the proposed sanctions or even a military strike are unlikely to work, what about imposing even tougher sanctions? The sanctions that are currently on the table pertain mainly to military equipment and nuclear technology, as well as to bank transfers related to these activities and the overseas banking activities of some Iranians.

For legitimacy, any sterner penalties would have to be embraced by the international community and endorsed by the UN Security Council. To be effective, they would have to be more painful than those sanctions currently under consideration.

In theory, the greatest potential impact on Iran would be in the area of fuel exports, which make up more than 85 per cent of the value of Iran’s exports. Clearly, strong sanctions against Iranian exports will have a dramatic impact on Iran’s ability to earn foreign currency and thus import key goods.

Indeed, Iran’s top five imports are nuclear reactors and other machinery, which make up 19 per cent of the trade; metals, 10 per cent; vehicles, 10 per cent; electronics, eight per cent; and cereals, seven per cent. While it is hard to imagine an international consensus that would penalise food exports to Iran, all of these products could be targets for sanctions. Of course, there is also the vulnerable banking sector, against which the United States has already levied unilateral sanctions.

The countries that would be most adversely affected by tougher sanctions against Iran are the same countries that Tehran has been buying from, as well as the same countries whose support of stiffer sanctions would be vital.

Of Iran’s overall imports, a considerable amount comes from four permanent members of the Security Council: China (14 per cent); Russia (six per cent); and the UK and France (five per cent). It also imports goods from non-permanent Council members, including Brazil, Turkey and Japan (three per cent each). Key U.S. friends make up some of the remainder, including the UAE (10 per cent), South Korea (six per cent) and India (four per cent).

The list of countries receiving Iranian exports is similarly formidable, as well as strategic, including the European Union and China (19 per cent each), Japan (16 per cent) and Turkey (seven per cent).

Any UN-backed sanctions will require the backing of South Korea, India and Japan and Iran’s other key trading partners. Brazil and Turkey will also have to endorse them, which is a questionable proposition at best, given their membership on the Council and their recent nuclear deal with Tehran.

There is one country in particular that stands to lose a great deal from joining a sanctions regime against Iran: the UAE. Its trade with Iran has reportedly tripled in the past years, and in comparison to other countries, the portion of the UAE’s economy linked to Iran is quite large. While Dubai has addressed many of the debt problems that came to fruition last year, the UAE could be the country most at risk and most in need of compensation should it join an international sanctions regime against Iran

So what is the likely scenario? It is hard to tell. As Iran itself says, the current sanctions may not have much of an impact. For further sanctions to have any chance of persuading Iran to abandon its nuclear programme, the Obama administration will have to build an international moral consensus coupled with sanctions authorised by the Security Council. Only then will countries as diverse as Iran’s trading partners – China, Russia, the European Union, the UAE, India, Brazil, Turkey and Japan – feel obliged to join in. And only then might Israel wait it out to see if sanctions work instead of going it alone in an attack on Iran.