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Thursday, May 20, 2010

Sanctions Effort May Open Door to Press Iran Central Bank

May 19, 2010
The New york Times

UNITED NATIONS — Buried in the sanctions resolution now being debated in the United Nations Security Council lies the possibility of a new effort to press Iran over its nuclear program: a call for countries to “exercise vigilance” in dealing with Iran’s central bank.

American and European officials said Wednesday that the reference, passing though it is, could give them a legal basis in the future for choking off financial transactions between Iran and banking centers in Europe and elsewhere. Previous sanctions have taken aim at specific banks suspected of financing proscribed nuclear activity, but never anything as pivotal as dealings with the central bank itself.
What is notably absent from the draft resolution, however, is any binding restriction on transactions with Iran’s central bank. Among the many compromises that the United States accepted to get China and Russia to back new sanctions against Iran was an agreement to limit any reference to the bank — or Iran’s entire energy sector, for that matter — to the introductory paragraphs, rather than including it in the sanctions themselves, according to American officials and other diplomats, yielding a weaker resolution than the United States would have liked.
The haggling over the central bank illustrates both the opportunities and the frustrations that American and European officials see in the resolution. On the one hand, it provides an opportunity to expand the range of financial activity that the West can try to impede. On the other, it provides a loophole for any nation that wants to continue relations with Iran, allowing it to argue that a cutoff is not mandatory.
The standoff between Washington and Beijing over what economic measures to include in the final resolution consumed the last 10 days of the negotiations, diplomats said. China expressed concern that if the central bank was singled out for sanctions, the entire Iranian economy would be paralyzed, they said. Even so, both Obama administration officials and diplomats underscored the mention of the central bank as an important tool to try to limit any trade with Iran that contributes to nuclear proliferation.
Security Council diplomats expressed confidence that they had at least 10 votes on the 15-member Council, and maybe more depending on how negotiations unroll. Turkey and Brazil, both current members, have said they will not engage in talks on the draft, and Lebanon is also expected to sit out the vote. The positions of other members, especially Nigeria and Uganda, remain unclear.
Iran reacted with outrage on Wednesday to the proposed new sanctions, particularly since the agreement was announced just a day after the Islamic republic had been trumpeting a compromise agreement, worked out with Brazil and Turkey, on nuclear enrichment for an experimental reactor in Tehran.
Iran’s foreign minister, Manouchehr Mottaki, said, “There was no chance that the resolution would be approved,” given that Tehran had agreed to ship a chunk of its enriched uranium to Turkey, the Fars news agency reported.
Mojtaba Samareh-Hashemi, an adviser to President Mahmoud Ahmadinejad, dismissed the draft as having “no legitimacy,” the news agency reported. All of the new sanctions come under the umbrella of limiting activity linked to nuclear proliferation. Iran maintains that its program is peaceful, but it is suspected of trying to develop a nuclear bomb.
The carefully worded compromise emerged after the United States said it would not support the passage of any resolution that did not at least mention the central bank and Iran’s lucrative energy sector, while the Chinese were equally adamant that no economic targets be singled out.
In the end, both the energy sector and the central bank were mentioned with somewhat tortured wording in the preamble, with the draft noting the “potential connection between Iran’s revenues derived from its energy sector” and possible financing for its nuclear program.
That is enough to pursue companies dealing with either the banks or the energy sector, American officials said. Susan E. Rice, the American ambassador to the United Nations, warned the Chinese that any measures passed by Congress in the absence of a United Nations resolution would probably have much greater consequences for Chinese banks and China’s trade relations with the United States, one United Nations diplomat said.
Russia generally supported the Chinese position, although Moscow focused on the arms embargo. The United States and its European allies in the talks —Britain, France and Germany — had proposed a total arms embargo, which Russia rejected.
The final compromise required a telephone call from President Obama to President Dmitri A. Medvedev of Russia to break the deadlock, one United Nations diplomat said. Russia then accepted the wording in the resolution, which bans the sale of all heavy combat equipment to Iran, namely battle tanks, armored combat vehicles, large-caliber artillery systems, combat aircraft, attack helicopters, missiles or missile systems.
That would seem to include the S-300 surface-to-air missiles that Russia sold to the Islamic republic in 2005 but has repeatedly delayed delivering.
Among the hardest remaining issues is the list of Iranian companies and individuals to be subject to an asset freeze and travel ban. A Western list that runs to about 10 pages has been circulating for months, one diplomat noted. But many of the listings refer to multiple names of a single organization, switching names being a favorite tactic in avoiding sanctions.
By NEIL MacFARQUHAR & DAVID E. SANGER
Source: http://www.nytimes.com/2010/05/20/world/middleeast/20nuke.html

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