April 9 (Bloomberg) -- A group of U.S. lawmakers is proposing to intensify the economic pressure on Iran over its disputed nuclear program by drafting the harshest penalties to date on a nation whose income from oil exports has been cut in half by sanctions since 2011.
A draft Senate bill, a copy of which was obtained by Bloomberg News from a congressional office, would penalize foreign countries that do business with any Iranian entity controlled by the government. It also would bar Iran from using earnings from oil exports to purchase anything other than food and medicine.
The draft measure, which is expected to be finalized and introduced this month, also would require the Islamic Republic to release political prisoners, respect the rights of women and minorities and move toward “a free and democratically elected government” before Iranian government-controlled entities could be removed from the U.S. sanctions list.
“Congress is running out of patience,” Mark Dubowitz of the Foundation for Defense of Democracies in Washington, who’s advised lawmakers and the administration on Iran sanctions, said in a telephone interview yesterday. “New measures under consideration will massively intensify the economic pressure on Iran and move the sanctions regime closer to a de facto commercial and financial embargo on Iran.”
The draft Senate legislation, which would have to pass both houses of Congress and be signed by President Barack Obama, would target Iran’s foreign exchange holdings by cutting off its access to hard currencies, including the euro, and restricting its use of money exchange houses.
In an effort to stop Iran from evading existing sanctions on oil exports, the bill also would penalize companies that provide ship insurance and reinsurance for Iran and punish entities involved in vessel-to-vessel transfers of Iranian oil.
The draft bill would require the president to report every 60 days on how long it would take Iran to produce enough weapons-grade uranium for a single implosion-type nuclear weapon. The president also would be required to report on the efficacy of U.S. sanctions in depleting Iran’s foreign exchange reserves and an estimated date by which Iran would face a balance-of-payments crisis “that prevents it from maintaining a functioning economy.”
The draft legislation also would impose a de facto arms embargo on Iran, North Korea, Syria, Sudan and armed Islamic extremist groups such as Hezbollah and Hamas that the U.S. says are proxies for Iran.
While Iranian officials say their country’s nuclear program is for energy and medical research, Israel and the U.S. believe Iran may be secretly trying to develop a nuclear weapons capability and have threatened military strikes and further economic isolation to prevent that.
The draft bill may be the first volley in an effort to punish Iran for failing to accept a deal proposed six weeks ago in the initial round of nuclear talks between Iran and six other nations in Almaty, Kazakhstan.
The U.S., Britain, France, Germany, Russia and China offered to ease sanctions on the petrochemical, gold and precious metals trades and on civilian aircraft parts and to offer technical cooperation on nuclear energy if Iran were to halt production of 20 percent-enriched uranium and shipped much of its stockpile out of the country, according to diplomats involved.
After a second round of negotiations last week in Almaty, though, Iran and world powers remain “far apart in substance,” according to European Union foreign policy chief Catherine Ashton.
“We are open to negotiation but it is not open-ended, endless negotiation,” U.S. Secretary of State John Kerry said in Jerusalem before a meeting with Israeli Prime Minister Benjamin Netanyahu. “It cannot be used as an excuse for other efforts to try to break out with respect to a nuclear weapon.”
Iran, with the world’s fourth-largest proven oil reserves, has threatened to stop crude shipments through the Strait of Hormuz if attacked.
Commodity markets so far haven’t reacted to the stalemate in negotiations. Oil rose to a nine-month high of $119.17 a barrel on Feb. 8 on concern that tension with Iran would disrupt Middle East oil exports. Prices have since declined as signs of a wider conflict eased. Brent crude for May settlement gained 54 cents to $104.66 a barrel yesterday on the London-based ICE Futures Europe exchange.
Western nations “couldn’t stop us from developing the technology,” Iran’s President Mahmoud Ahmadinejad said in comments aired live on state television today during the country’s National Nuclear Technology Day. “Nobody will be able to put the brakes on Iran’s nuclear progress.”
An Iranian official, Alaeddin Boroujerdi, who heads parliament’s national security and foreign policy committee, said in an interview with the Arabic-language Al Alam news channel this week that that his country has the option to withdraw from the Nuclear Non-Proliferation Treaty, which requires safeguards that include allowing United Nations inspectors access to Iran’s nuclear sites.
Some policy specialists warn that making the election of a new Iranian regime the objective of some of the sanctions might backfire.
In an article in Foreign Affairs last October, Rolf Ekeus, a Swedish diplomat who was chief of the United Nations’ weapons inspectors in Iraq in the 1990s, said a statement by U.S. President Bill Clinton’s administration that regime change was an aim of sanctions on Saddam Hussein’s regime prompted Iraq to stop cooperating with UN inspectors.
Trita Parsi, who has advised the UN Security Council and the U.S. Congress on sanctions, said the penalties so far have “induced Iranian escalation rather than flexibility” because Iran’s leaders don’t think halting nuclear research would bring sanctions relief.
Senators involved in drafting or consulting on the legislation include Republicans Mark Kirk of Illinois, Susan Collins of Maine and John Cornyn of Texas; and Democrats Joe Manchin of West Virginia and Bob Menendez of New Jersey. The Senate Banking and Foreign Relations committees also have been consulted, according to Senate aides.
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