| Global Times | 2012-8-9 23:05:03
By Sharon Squassoni
Chinese officials have been protesting US penalties against China's Bank of Kunlun for Iran-related activities.
According to the US Department of the Treasury, the bank has conducted significant financial transactions for sanctioned banks in Iran as well as making payments for an affiliate of Iran's Islamic Revolutionary Guard Corps.
The penalties, which affect the bank's ability to conduct business in the US, were imposed under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010.
The handwriting is on the wall. China is Iran's largest remaining trading partner. And China National Petroleum Corporation, which owns the bank, and other Chinese entities have invested billions of dollars in Iran's petroleum sector, now the focus of international pressure.
This latest round of penalties follows sanctions earlier this year against Zhuhai Zhenrong Company, China's largest importer of Iranian crude oil. The company allegedly exported gasoline to Iran in 2010 and 2011. Given Iran's heavy reliance on oil revenue, there is finally evidence of real economic pressure mounting.
Historically, the US has been reluctant to impose sanctions on third parties. There have been few good levers, such as government contracts or military or foreign assistance, all of which are controversial to use, and US allies have complained bitterly about extraterritoriality.
Yet since 1997, US law has required imposing penalties on foreign entities for related activities. Under the Iran-Libya Sanctions Act passed that year, the US president had the authority to bar foreign entities from US government contracts if they invested more than $20 million in the Iranian petroleum sector.
Neither former US president Bill Clinton nor his successor George W. Bush ever chose to impose such penalties.
What has changed? To begin with, the resistance of US allies with respect to Iran sanctions largely has faded after a decade of Iranian intransigence.
US President Barack Obama entered office with the clear intent to negotiate a solution with Iran if Iran seemed serious about finding a solution.
Four years later, talks have yielded little progress.
The US has also developed some new tools for nonproliferation, such as restricting access to the US financial sector, that are relatively effective and low-key, and that provide leverage on entities that might not otherwise be affected by the usual penalties.
Financial restrictions have proven to be useful roadblocks in changing behavior in a limited way, as in the case of North Korea.
China has been reluctant all along on the issue of sanctions, so it is not surprising it should protest these latest penalties.
At the heart of the broader dispute about sanctions is a deeply seated doubt that they can diminish Iran's will to defy the international community over its nuclear program as it has for the last 10 years.
It is easier to justify targeted sanctions, such as those specifically designed to slow down acquisition of sensitive equipment and technology.
After all, it's one thing to try to slow down transfers of equipment related to weapons of mass destruction, and another thing to starve the economic cash cow that might support various elements of the Iranian nuclear program.
Efforts to widen sanctions are often criticized for their overall impact on the population at large.
What often lies underneath, however, is an unwillingness to sacrifice lucrative business opportunities.
In time, Iran may find alternative ways of facilitating investments and trade. In the meantime, sanctions may help diminish Iran's will to defy the international community.
Shaping a balance that reflects the best outcome for all may require some short-term sacrifices of many countries.
China supports nuclear nonproliferation. It should support all efforts to bring Iran back to the negotiating table.
The author is director and senior fellow of the Proliferation Prevention Program at the Washington-based Center for Strategic & International Studies. firstname.lastname@example.org
By leaving a comment, you agree to abide by all terms and conditions (See the Comment section).