US President George W Bush is calling for
multilateral sanctions on Iran. Sanctions won't
succeed in cowing Iran, but they will indeed have
ominous consequences for the United States and the
rest of the world.
Last Wednesday at the
International Atomic Energy Agency, the Bush
administration promoted a swift drafting of
punitive sanctions by the United Nations Security
Council against Iran this month. Economic
sanctions only achieve their goals in very special
circumstances, and Iran does not fit the bill.
Washington should
rethink its overall policy
toward the country.
The United States has
applied a varied mix of economic sanctions on Iran
since 1979, in a bid to reverse a host of Tehran's
policies and, ultimately, bring about regime
change. Clearly, the sanctions have not worked.
And while the US has been busy tightening its
screws, average Iranians have become more
nationalistic and supportive of the mullahs.
The only discernible result of US
sanctions on Iran has been to delay Iran's
development of its energy resources. Iran's oil
and natural-gas reserves equal those of Saudi
Arabia. The US has obstructed the development of
at least two known large oilfields in Iran
(Azadegan and Yadavaran), which together could
have proven reserves exceeding 35 billion barrels
and produce more than a million barrels per day of
crude at their expected peak; has hindered oil and
gas development in the Caspian Sea by playing the
countries of the region against one another; has
vetoed the construction of a Caspian pipeline
through Iran (even though it would cost only about
half the price of alternative pipelines); and has
opposed Iranian gas pipelines to Pakistan and
India, even offering India nuclear deals in
exchange for not buying Iranian gas. All these
US policies have delayed making Iranian oil and
gas supplies available and have increased energy
prices. Continued impediments to oil and gas
development in Iran could reduce Iranian exports
by the oil equivalent of more than 5 million
barrels per day over the next decade.
The
US policy is based on the premise that lowering
Iranian oil and gas exports would hurt Iranian
revenues. But US Middle East policy has in fact
buoyed oil prices, which may have increased
Iranian revenues, albeit at lower export levels.
Economic sanctions have come at a huge
cost to the United States. Economics 101 tells us
that lower supplies mean higher prices for
everyone. The oil market is in essence one global
market, although crude-oil types do differ;
cleaner fuels, natural gas and natural-gas liquids
increasingly compete with oil. Because of
sanctions, the US does not buy Iranian oil and
gas, but if Iranian energy supplies came to market
this would, in turn, afford the US more supplies
from other countries and lower prices globally.
Equally important, piped Iranian natural gas could
in time be destined for Europe, reducing Europe's
reliance on Russian gas and the potential for
blackmail by Russia. The increased availability of
Iranian energy supplies could make an increasing
difference to energy prices and security over the
next decade.
There have also been
political costs. US actions on Iran have made the
average Iranian feel more insecure. Iranians
haven't forgotten US support for Iraq during the
Iran-Iraq War, nor are they at ease with the US
military presence in Afghanistan, Iraq, Qatar,
Saudi Arabia and the Central Asian republics.
Ironically, sanctions, higher energy prices and
bellicose threats from the US have bought more
time for the mullahs in Tehran, who now have more
money and ample reason to fuel nationalistic
fervor.
At any rate, the UN Security
Council will not vote for even limited sanctions
on Iran. China, Russia or both will veto such a
move. Even if sanctions to freeze all Iranian
government assets (about US$70 billion) were
adopted by the UN, Iran could still get by. Iran
has had plenty of practice and time to prepare for
such situations and has placed assets in places
where they cannot be readily identified as
Iranian. All sanctions, even comprehensive
sanctions, are notoriously porous. In addition,
sanctions imposed by a "coalition of the willing"
will only become an international embarrassment
for the US, potentially placating a domestic
constituency but succeeding in further alienating
Iranians and making ongoing US interventions in
the region even more difficult and costly.
Finally, and most important, it is almost
certain that Iran would react to any UN or
coalition-of-the-willing sanctions by cutting oil
exports by at least 50%, driving oil prices above
$100 per barrel, with Americans paying close to $5
a gallon (about $1.30 per liter) for gasoline; a
total stoppage of Iranian oil exports (3.2 million
barrels per day) would drive oil prices above $150
per barrel, with Americans paying $6-$7 a gallon
($1.60-$1.85 a liter) for gasoline. There are
about a million barrels per day of global excess
capacity today (largely in the Persian Gulf
countries), but Saudi Arabia, the United Arab
Emirates and Kuwait will think "thrice" before
they try to make up any shortfall in Iranian oil
exports. And if there is another conflict in the
Middle East, Arab rulers could be driven by public
sentiment to join Iran in cutting oil exports.
Venezuelan President Hugo Chavez could lend them a
hand too, with even more ominous implications for
the global energy market and in turn for the world
economy.
There is a viable alternative to
imposing more sanctions: stop threatening Iran,
especially in public. And the United States should
try to understand (not necessarily agree with) the
Iranian perspective, minimize hubris and engage in
true dialogue. Iran would be instrumental in
allowing the US to solve most of the problems it
faces in the Middle East, including achieving
peace and stability in the region, saving US lives
and treasure, and enhancing global energy
supplies.
Hossein Askari is the
Iran professor of international business and
international affairs at George Washington
University.
