US Unilateral Iran Sanctions - Coalition Busting The Energy Editorial, December 2009

The US Congress is getting closer to making the same mistake it made in the US sanctions frenzy late last century. The Iran Refined Products Sanctions Act currently before the Congress has many of the same coalition busting characteristics of the Iran Libya Sanctions Act (ILSA) and the Helms Burton Act of the late 1990s. Europe has not forgotten the extraterritorial reach of ILSA or Helms Burton and is sure to have the same reaction to the new proposal with the consequence that Iran becomes a secondary issue compared to US allies" reactions to the US Congress seeking to subject their companies to US law.

There is every reason in the world for the US Congress to manifest its fatigue with Iran"s continuing defiance of world opinion. President Ahmadi-Nejad has a seemingly endless array of tactics to stall, divide, distract and otherwise frustrate world concern that his government cannot be trusted with nuclear arms. Empowering President Obama with Congressional Resolutions or a clear expression of the sense of the combined Chambers of the Congress could strengthen his diplomatic hand. But passing legislation that will unilaterally punish foreign companies supplying gasoline to Iran will only drive a wedge in the current (unprecedented) like-mindedness among allies and perm-five - just as ILSA did a decade ago. And the Act won"t work - it will just feel good.

Ask the US naval commanders who tried to contain Iraqi shipments of oil during the long embargo of the 1990s after the coalition pushed Saddam Hussein out of Kuwait. They will confirm that the Coastal waterways of the Gulf are impossible to police. There are plenty of individuals prepared to run blockades for the premium that will develop in Iranian markets for refined products. Over the past thirty years the Gulf area has developed many operators well trained in getting around sanctions and foreign naval presence. The fact that many of these activities will take place under the knowing noses of US friends in the Gulf will complicate diplomacy and co-operation there as well.

Current sanctions are biting in Iran and while the Security Council perm five is likely to remain divided on stronger sanctions, additional sanctions are available if the current like-mindedness can be preserved. Much can be done through specific impediments to non-Iranian bankers, insurance companies, traders, shippers and other market participants for whom the larger world market is more important that Iran. The world has a unique opportunity to ratchet up pressure on Iran - and doesn"t necessarily need a stronger Security Council decision to do it. It would be unfortunate indeed if the legislation under review in the US Congress would be passed into law, punishing foreign companies involved in refined product trade with Iran. Such a law is capable of shattering the considerable progress the rest of the world has reached in its conviction that it does not want Iran to have nuclear weapon.