U.S. not backing off as Iran sanctions bite (REUTERS) By Rachelle Younglai and Timot WASHINGTON 04/06/12 7:40am EDT)
Reuters News Service
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(Reuters) - The Obama administration´s man in charge of squeezing
Tehran over its nuclear program is unapologetic for the difficulties
faced by banks in their dealings with Iran since the U.S. tightened
sanctions against the country.
Companies that trade with Iran are struggling to get paid and the
biggest Asian countries are scrambling to work around U.S. sanctions
that aim to deprive Tehran of revenue needed to develop its nuclear
program. "I don´t feel apologetic about it because that is the
consequence of these banks in Iran willingly facilitating
transactions for Iran´s nuclear programs," said David Cohen,
undersecretary for terrorism and financial intelligence at the U.S.
"If they are going to do that, they shouldn´t be accessible to the
international financial system. They shouldn´t be financial
institutions that any reputable bank wants to deal with," Cohen said
in an interview.
The pressure has forced Iran to listen to U.S. demands, he said. "Do
we think we have the attention of the leadership on their end? We
have it like never before," he added.
Cohen´s comments were a strong display of administration confidence
in the measures against Iran, even as their effects have rippled
through the marketplace faster than many had expected.
J.P. Morgan warned on Thursday of an acceleration of Iranian oil
cutbacks, predicting Iranian supplies could be slashed by one million
barrels a day in the first of the year. Since January, the price of
oil has shot up nearly 15 percent.
The White House has not yet stated its position on proposed new
bipartisan Iran sanctions legislation in the United States that would
target Iran´s main oil and tanker companies, as well as tighten up
other loopholes. Mindful of the potential to cause more uncertainty
over supply and push world oil prices higher, some senators are
seeking amendments to the new sanctions package to assure insurers of
allowed oil shipments that they will not be stung by sanctions. But
Senate Majority Leader Harry Reid so far has said he does not want to
allow the package to be amended.
NOT A HERMETIC SEAL
U.S. entities have been prohibited from working with Iran for years.
But what Washington and its allies see as signs that Iran is closer
to getting atomic weapons and unleashing a nuclear arms race in the
Middle East have triggered Washington to increase the heat on the
country. Tehran says its nuclear activities are peaceful.
Over the past three months, Cohen and other top Obama administration
officials convinced Europe to impose similar sanctions on Iran´s main
recipient of oil payments, the Central Bank of Iran. The
administration, as well, has been twisting arms trying to get Iran´s
biggest oil buyers, China, India, Japan and South Korea, to stop
relying on Iranian crude.
The current U.S. sanctions allow President Barack Obama to block
foreign financial firms from U.S. markets if they continue to deal
with Iran´s central bank starting June 28. However, if countries
manage to reduce their Iranian oil imports, they can win exemptions
from the U.S. law so that their banks are not barred from the U.S.
Despite the looming sanction deadlines, countries and companies have
managed to do some business with Iran - a provision that the Obama
"I don´t think the measure of an effective sanctions program is that
it creates a hermetic seal through which nothing permeates," said
Cohen. "The fact that they are still selling some oil, I would not
chalk that up to a failure of the sanctions program," he said.
Cohen said the question should be whether Iran was able to make use
of the revenue that it earns from its oil sales rather than whether
it was profiting from crude exports.
"It is increasingly difficult for Iran to make use of, or to get
access to the funds that it is earning from its oil sales," he said.
Currently the exemptions, which the State Department granted late
last month to Japan and 10 countries in the European Union, apply
only to banks.
Fearing an oil crisis, where supply disruptions spark prices sharply
higher, some of the most ardent supporters of Iran sanctions, who
include a number of Republicans and some Democrats, are urging the
administration to give energy companies similar relief.
A bipartisan bill introduced last month in the House of
Representatives would extend those exemptions to oil traders,
insurers and re-insurers and others in the energy business. The
legislation would encourage companies not to shy away from deals that
are allowed under U.S. law.
"If the administration did that it would provide more clarity and
more comfort to companies engaged in trade with Iran that is
permissible under U.S. law," said Mark Dubowitz, head of the
Foundation for Defense of Democracies, which is well known for its
forceful lobbying on tougher Iran sanctions.
Insurers of oil shipments, some lawmakers say, need assurance that
they will not be stung by sanctions. Already, it is clear that some
contracted shipments of Iranian crude are faltering because of the
concerns over insurance. An EU embargo on Iranian crude begins on
A major Chinese shipper insurer will halt cover for tankers carrying
Iranian crude from July, according to Reuters sources, in a sign the
Iran will have trouble selling it oil to its largest customer.
The House measure is one of many bills that are in limbo in Congress
as Democratic and Republican senators argue over how to move forward
on broader legislation that would give the U.S. Treasury more tools
to crack down on Iran.
BETTER TO PAY THE PRICE NOW
However, a common theme in Washington is that any price spike seen
now as a result of the sanctions is better than what would happen to
prices if Israel moved to strike Iran or if Iran obtained a nuclear
U.S. consumers have felt the heat as average price at pump has gone
to nearly $4 gallon, a new record for this time of the year.
"You talk about high-priced oil now, but if there were loose nukes in
that part of the world it would be a disaster for American and
Western interests," said Dennis Blair, former director of national
intelligence for the Obama administration until 2010.
"You´re not talking $4 a gallon gasoline at that point, you´re
talking about the entire supply being disrupted there and not a heck
of a lot that even America´s tremendous conventional military
capability could do," he said.
(Additional reporting by Roberta Rampton; Editing by Russell Blinch,
Frances Kerry and Jackie Frank) (© Thomson Reuters 2012. 04/06/12)
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