Illegal US Sanctions on Iran?

The United States has threatened to impose punishing sanctions on countries importing oil from Iran and – only at the last minute on Thursday – granted China a waiver from the penalties. But these third-party sanctions are likely illegal under trade laws, write Flynt and Hillary Mann Leverett at RaceForIran.com.

By Flynt Leverett and Hillary Mann Leverett

America’s policy on Iran-related secondary sanctions is on a collision course with itself as well as China. Secondary sanctions violate the United States’ obligations under the World Trade Organization and are, thus, illegal.

(While a WTO signatory may decide, on national security grounds, to restrict its trade with another country, there is no legal basis for one state to impose sanctions against another over business that the second state conducts with a third country.)

Tiananmen Square in Beijing, China

If Washington actually imposed secondary sanctions on another state for, say, buying Iranian oil and the sanctioned country took the United States to the WTO’s Dispute Resolution Mechanism, the United States would almost certainly lose the case.

Given this reality, the whole edifice of Iran-related secondary sanctions is in reality a house of cards. It rests on an assumption that no state will ever really challenge the legitimacy of America’s Iran-related extraterritorial sanctions — and this means that the United States cannot ever really impose them.

Instead, successive U.S. administrations have used the threat of such sanctions to elicit modifications of other countries’ commercial relations with the Islamic Republic; when these administrations finally reach the limit of their capacity to leverage other countries’ decision-making regarding Iran, the United States backs off.

The Obama Administration is bringing this glaring contradiction increasingly to the fore, by supinely collaborating with the Congress to enact secondary sanctions into laws that give the Executive Branch less and less discretion over their actual application. This dynamic is now coming to a head in the Administration’s dealings with China.

We are currently in China, as Visiting Scholars at Peking University’s School of International Studies. And that means we are here during the run-up to formal implementation of the United States’ newest round of Iran-related secondary sanctions that were scheduled to go into effect on June 28.

These new sanctions, at least as legislated, threaten to punish financial and corporate entities in countries that continue to purchase Iranian oil at their historic levels of consumption. So far, the Obama Administration has issued sanctions waivers to all of the major buyers of Iranian oil, see here and here—all the major buyers, that is, except the People’s Republic of China. [This article was written before the Obama administration granted the waiver to China.]

Trade data indicate that China’s imports of Iranian oil declined significantly in the first quarter of this year. It is unclear to what extent this reduction was intended as an accommodation to the United States and to what extent it was the product of a payment dispute with Tehran.

But, whatever the reason, the reduction prompted Secretary of State Hillary Clinton to note last week that “we’ve seen China slowly but surely take actions.” [See here.] Clinton even seemed to hint that the Administration might be looking for an opening to waive the imposition of sanctions against China:

“I have to certify under American laws whether or not countries are reducing their purchases of crude oil from Iran and I was able to certify that India was, Japan was, South Korea was. … And we think, based on the latest data, that China is also moving in that direction.”

Since the resolution of the payments dispute between China and Iran, however, China’s imports of Iranian oil have picked up once again. [See here and here.] And the Chinese government continues to insist that the country’s purchases of oil from the Islamic Republic are “fully reasonable and legitimate.” [See here.]

The White House and State Department will be under enormous pressure from the Congress (Hill Democrats will provide the President no cover on the issue), the Romney campaign, and various domestic interest groups to sanction China over its continued oil buys from Iran.

The Administration’s alliance with Congress and the pro-Israel lobby on Iran sanctions, combined with its misguided assessment that the United States can somehow compel Iran’s “surrender” on the nuclear issue, have put the President and his team in a “damned if you do, damned if you don’t” position.

This is very much a problem of the Administration’s own making.

[At the deadline, on June 28, the Obama administration exempted China and Singapore from the sanctions and praised the two countries for reducing their import of Iranian oil. U.S. officials cited Chinese data showing that China’s imports of Iranian oil had dropped 25 percent from January to May, compared to the previous year.]

Flynt Leverett served as a Middle East expert on George W. Bush’s National Security Council staff until the Iraq War and worked previously at the State Department and at the Central Intelligence Agency. Hillary Mann Leverett was the NSC expert on Iran and – from 2001 to 2003 – was one of only a few U.S. diplomats authorized to negotiate with the Iranians over Afghanistan, al-Qaeda and Iraq. [This article was originally published at RaceforIran.com. Direct link: http://www.raceforiran.com/u-s-sanctions-policy-on-a-collision-course-against-iran-increasing-tensions-with-china]

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8 comments on “Illegal US Sanctions on Iran?

  1. Hillary Clinton has proven to be a professional liar, once again. She has claimed that China has been exempted from US sanctions because China has “significantly reduced” its import from Iran. However, the BBC reported on June 22, 2012 that China imported 524,000 barrels per day in May, a 35% jump on the previous month.

    America’s powerful pro-Israel think tank, RAND Research and Analysis Corporation, in its report ahead of the P5+1 and Iran meeting in Moscow – claimed that the US and EU sanctions against Iran are harming the EU more than Iranian regime which the USrael desire to topple.

    “The EU is at its worst possible conditions to harm Iran. Countries are able to bypass economic sanctions,” says professor Keith Crane, Director of the Environment, Energy, and Economic Development program at the RAND. Dr. Crane also mentioned that big and numerous problems facing major banks have endangered the world monetary system, and thus the system cannot tolerate any more risks and pressures to be created by sanctioning one of the most important world oil producers.

    http://rehmat1.com/2012/06/09/rand-corp-sanctions-against-iran-are-doomed/

  2. incontinent reader on said:

    Depending upon what one reads, the data is inconsistent, and some of that is probably spin. However, it does appear that Iran and its trading partners have been finding creative ways to sidestep the sanctions, and in some areas, such as tanker insurance, it could end up biting the West and Britain, particularly, since it is providing an occasion to others to start breaking Western/British control over the shipping insurance industry. How those countries react if there is an incident where a ship is sabotaged or torpedoed (e.g., by an Israeli nuclear submarine), will tell us more.
    Unfortunately, the U.S. has put itself (with undue Israeli, neocon and military contractor/Pentagon influence) into a strait jacket with its policies with Iran.

  3. incontinent reader on said:

    Why in heaven’s name should China, which needs to import energy to feed 1.4 billion people, go along with sanctions when we have already disrupted or tried to disrupt its energy deals in Iraq, Libya, Sudan and Nigeria? Moreover, Iran is an important nation in Central and South Asia that can contribute greatly to its economic development and political stability- something both Russia and China desire- while, at the same time, we have more and more become the “odd man out”, sowing dissension and fomenting war in the region. Just like China, the same goes for India, despite the expansion of its commercial nuclear program (which, ironically, Iran is being prevented from developing)- and also for Pakistan that may yet build its leg of the IPI pipeline with the help and protection of the Chinese and Russians.

    In the end, sanctions alone will not work because they are too threatening to the economic interests of many of the countries that we want and need to enforce them. Instead, these waivers are face-saving for Clinton because, otherwise, the U.S. for all its destructive might would look like a paper tiger each time the sanctions were violated. The real fear is that the Administration will follow the venal course urged on it by Netanyahu, AIPAC, and their friends in Congress- like the “bombsy twins” Mr.Lieberman and his crazy brother who lives in the attic, John Sidney McCain, III (who with all his suppressed anger is still fighting the Vietnam War), and will mount- or facilitate and support- a military attack on Iran. If it does, it is not difficult to contemplate the many ways Iran could justifiably retaliate, and disaster could strike- with or without loss of life- and it would be the people, not their governments, that would bear the full brunt and cost of it.

  4. Mohsen on said:

    who cares anyway?America keeps squeezing the balls of Iran and it’s not the government who would would be crushed it’s the poor people of Iran and i donnow what would be the reaction of people.would they hate the government more or start hating USA?and i tell you one thing America and Americans don’t give a shit about Iranian People unlike what every body think that America is the salvation for IRAN no America is after its own benefits and i mean taking over the Iran oil so Russia and China don’t have it!

    • TheAZCowBoy on said:

      Hey, the United Snakes (US/Israel) may play that ‘toughest SOB in the neighborhood’ all they want, but a bankrupt Great Satan isn’t going to be able to hang around and roar for very long and that leaves the arrogant incorrigibles of that 1/2 acre of Zionist hell (((Holloring and screaming))) for the US to come get their (up to their kesiters in Muslims) enemies off their back. I mean, you have to understand that if all those 200m+ Muslims collectively spit at Israel, the whole damned place will wash out to sea!”

  5. Hussain Almousawi on said:

    I think the US sanctions against Iran are counter productive. This can bring quiet different results to the US itself and Europe then what the US and Europe are expecting. This will push Iran to use all its oil to manufactured products then turn Iran not as oil exporter but importer (for the time being -it’s own oil). This will create some additional industries in Iran that can harm the Japanies+Europe textile and plastic production and too many products that are derived from oil and which can be sold locally, regionally and Internationally. Its price will be cheaper ans will be competing with the Japanies and European products. This will add more trouble to the Japanies and the European struggling economies (S. Korea will be in the same line). Locally it will increase the benefits to Iran, ( that will consume its own products and which is going to create a healthy local economic cycle on high medium and low level & V. V.), will develop further its industry and will increase the job market, will develop their training institutions and will increase the operation capacity of the local capital yet the profits. There will no way but to go to this direction. In addition that 20% of oil that exported to Europe can be simply purchased by China. This will make Iran more valuable partner in Shanghai Org. Iran which is going to grow as major regional power in West Asia will drift so far from Europe and the US. So in short Iran may loose something but in the long term US and Europe will be a very god looser s.

  6. TheAZCowBoy on said:

    The bad thing is that O’Bubba and his two senior hens Hillary and Rice will (((cackle))) any sorts of threats to the Chinese and Russians. The good thing is that Russia has already flexed its muscles in the missile downing of Turkey’s ‘snooping’ F-4E ‘recon’ bomber and China has loaded up its ‘silk worm II 88cm anti-ship missiles and sent three of its ‘Song’ subs for Middle Eastern duty…. the sad thing is that they didn’t bring in any Taliban warriors that seem to have their sights well tuned to killing US/NATO aggressors with vigor.

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