Iran: Sanctions Set to Increase

Wednesday, 27 June 2012

Background

The Moscow talks failed to produce any satisfactory outcome for either side.  Instead, pressure on Iran is set to rise markedly with the 27-nation European Union stopping the import of Iranian oil from 1 July.

Comment

Despite commentary suggesting a possible breakthrough, the only slightly positive outcome was an agreement to a meeting by experts in early July.  No further meeting between Iranian officials and representatives of the P5+1 has been considered.

The P5+1 repeated its previous three demands: stop uranium enrichment at 20 percent; close the heavily fortified facility near Qom; and export the stockpiles of 20 percent plus enriched uranium.  Referred as the “stop, shut and shift” process, these steps –provided they were properly monitored – would make practically impossible for Iran to go ahead with its development of a nuclear weapons’ capability.

Tehran, citing the Non-Proliferation Treaty, believes it has “absolute right” to enrich uranium, particularly as it does not intend to develop nuclear weapons.  It also demands a lifting of sanctions.

The P5+1 now appears determined that Iran must make the first conciliatory move.

In July, the EU will cease importing Iranian oil.  European insurance companies will not cover tankers carrying Iranian oil.  Other major importers – India, Japan and South Korea – have also agreed to buy less.  Even China, which buys about 20 percent of Iran’s oil, is also buying less.

The impact of reduced oil exports is already being felt.  Oil exports have dropped by more than a third since the end of 201.  The Iranian economy is suffering and unemployment is rising.  The government, however, has made no conciliatory moves to change this situation.

Neither side appears ready to change its attitude and it may require several months for the full impact of increased sanctions to be felt.

In the meantime, the threat of Israeli airstrikes remains and the challenges of the US electoral calendar will need to be considered.

Major General John Hartley AO (Retd)

Institute Director and CEO