By JAY SOLOMON and GLENN R. SIMPSON
WASHINGTON -- By imposing
a broad set of financial restrictions on Iran, the Bush administration has set
out to break down Tehran's elite military units and isolate its merchant class,
all with an eye toward inducing change in the country.
The administration also
appears to hope that, by striking such a tough stance, it will prod or even
alarm allies into following suit in isolating Tehran.
But the moves, combined
with heightened rhetoric against Tehran for its nuclear program and alleged
support of terrorism, are raising concerns at home and abroad that the
administration is laying the groundwork for military action. That has the
potential to backfire by pulling apart the fragile coalition of countries
working to cobble together international sanctions.
The White House's hawkish
stance contributed to further roiling in the global oil markets yesterday, with
crude oil spiking to a record close of $90.46 a barrel.
Iran
condemned the U.S. moves, saying they would bring further instability to the Middle East. "The hostile policies of America ... are against international
regulations and have no value," Foreign Ministry spokesman Mohammad Ali
Hosseini said in Iran's
state-owned media.
Yesterday's announcement
by the State Department and Treasury specifically targeted Iran's elite military unit, the Iranian
Revolutionary Guard Corps, as well as key state-owned banks, companies and
officials that U.S.
officials charge with supporting terrorist and proliferation activities. The
sanctions are the stiffest since 1979, when Iranian militants seized the U.S. Embassy in Tehran and held its staff hostage for more
than a year. They also mark the first time the U.S. has directly imposed sanctions
against the armed forces of a sovereign nation.
U.S. officials said they
expect the measures will force European, Asian and Middle Eastern nations to
curb business ties with Iran, fearing possible U.S. penalties.
Only American companies
are directly affected by the sanctions. Any assets found in the U.S. belonging
to the designated groups must be frozen. Americans are also forbidden to do
business with the designated organizations.
But foreign companies
could also potentially be blacklisted if they are found to be aiding Iranian
activists. The U.S.
has the world's largest economy and the most influential banking system, and
much of the world's business is done in dollars.
Firms aiding Iran's
oil-and-gas sector are seen as particularly exposed, as companies controlled by
the Revolutionary Guards, such as the engineering firm Khatam ol-Anbia, now
dominate the energy sector. Asian and European firms investing in Iran's gas
fields and oil pipelines include France's Total SA, Spain's Repsol
YPF SA, Royal Dutch Shell PLC and South Korea's Hyundai Group.
"The sanctions are a
shot across the bow of the entire energy sector," said one U.S. official
who worked on the sanctions.
Other Western companies
working in Iran -- such as France's auto companies, PSA Peugeot-Citroën and Renault SA, and Sweden's
telecommunications giant, Telefon AB L.M. Ericsson -- also could be vulnerable
because of their involvement in sectors controlled by the Revolutionary Guards,
said Western diplomats.
Administration officials
expressed optimism that the actions could work to freeze Tehran out of the global financial system, as
foreign businesses fear being tarnished by their association with Iranian
entities.
"As awareness of
Iran's deceptive behavior has grown, many banks around the world have decided
as a matter of prudence and integrity that Iran's business is simply not worth
the risk," Treasury Secretary Henry Paulson said. "It is plain and
simple: Reputable institutions do not want to be the bankers for this dangerous
regime."
Washington's strategy,
however, faces numerous obstacles, said diplomats and businessmen, and has
raised fears internationally about possible military action. Many European,
Asian and Arab states have indicated an unwillingness to risk their business
and diplomatic ties with Iran
at a time when its energy assets are in increasing demand. A number of
diplomats also said Washington's aggressive
action risked ripping apart the countries working for a third round of international
sanctions against Iran
through the United Nations. Russia and China, which hold veto power at the U.N.
Security Council, are allies or business partners of Iran and have resisted the drive
for new U.N. sanctions.
"I think running
around like a lunatic -- with a razor and waving a red banner -- isn't the best
way to solve this kind of problem," Russian President Vladimir Putin said
in response to the announcement. Questioned by reporters in Portugal, where
he is attending a summit of Russian and European Union leaders, he added that
sanctions "worsen the situation, leading it to a dead end."
Key Gulf
states are also voicing wariness about challenging an Iran that is
increasingly aggressive and cash-rich. The United
Arab Emirates' city of Dubai
serves as Iran's
principal overseas financial center, according to businessmen and diplomats.
And the six member states of the Gulf Cooperation Council (GCC) recently
started negotiations on a free-trade agreement with Iran,
even as these countries have taken some steps to crack down on military sales
to Iran and Syria, said U.S. officials.
"We cannot ignore
the importance of Iran in
terms of the GCC economy," Abdulla bin Ahmed al Saleh, the United Arab Emirates'
undersecretary for economics, said in a recent interview, before the sanctions
were announced. "We have a long history of trade relations with
them."
The U.S. sanctions announced yesterday hit Iran's
Revolutionary Guard Corps along with eight affiliated companies and five Guard
officials and the Guard's elite Quds Force unit. The Revolutionary Guard Corps
and its officials were designated as proliferators of sophisticated
ballistic-missile technology, while the Quds Force was accused of backing the
Taliban in Afghanistan
and other terrorist groups. Also targeted are Iran's defense-ministry logistics
unit, three officials in its ballistic-missile program and state-run banks.
State-owned banks Bank
Melli and Bank Mellat were named as facilitators for Tehran's
weapons programs, while Bank Saderat was designated as a supporter of global
terrorist groups for its activities in Afghanistan,
Iraq and the Middle East. The Treasury Department also accuses Bank
Melli, which has branches all over the world, of covertly conducting transactions
for the previously blacklisted Bank Sepah, a major cog in the country's weapons
programs.
Stuart Levey, the U.S.
Treasury's undersecretary for terrorism and financial intelligence, alleged
that Bank Melli engaged in deceptive practices, such as removing Bank Sepah's
name from wire-transfer records. He also said that Bank Melli delivered more
than $100 million to the Quds Force between 2002 and 2006.
Bank Melli officials in
the United Kingdom
weren't available for comment yesterday. Bank Saderat officials have denied
wrongdoing in prior statements responding to U.S. allegations. Their offices
were closed for the day at the time of the latest allegations, as were those of
Bank Mellat.
The new designations
could prove particularly troublesome for Iranian businesses because of their
role in facilitating trade after the other big state-run banks were sanctioned
by the U.S. and most banks
in Western Europe either curtailed ties or cut
them off altogether.
The latest moves
"will make it much more difficult for [Iranian businesses] to engage in
international commerce financed by their state-owned banks," Mr. Levey
said.
The sanctions come amid a
general hardening of the White House's stance on Iran. This week, Ambassador David
Satterfield, the State Department's top Iraq adviser, told reporters that U.S.
officials had "no question in our minds whatsoever" that "the
most senior levels of the Iranian government" were actively involved in
the funneling of advanced Iranian weaponry to Iraq.
But administration critics,
pointing to past intelligence failures on Iraq,
say administration hawks may be distorting the evidence in an attempt to make
the case for a military attack on Iran. The military has presented
confiscated weapons that it claims were manufactured in Iran, but
neither the administration nor the military has ever presented conclusive
evidence of Iranian government involvement in any weapons shipments. Iran has long denied funneling any of its
armaments into Iraq.