Nuclear Negotiations and Sanctions on Iranian Oil (Dispatch)
Video Transcript:
Video Transcript
Nuclear negotiations in Moscow between Iran and the P-5+1 group came to a close June 19 with little sign of progress. It's unclear whether another round of talks will be scheduled, but with more sanctions looming, Iran does not seem to be reacting at the level of urgency that the Americans and Europeans had hoped. This deserves a much closer look at the weaknesses of the sanctions campaign overall.
By the beginning of July, a series of sanctions are supposed to take effect. Preparations have been made to tighten U.S. financial sanctions on Iran while the EU is supposed to impose a so-called embargo on Iranian crude imports. The EU is also expected to deny insurance to vessels carrying Iranian crude from July 1, meaning that Iran's biggest crude buyers would theoretically lose access to the London-based insurance market.
Of course, there are a number of loopholes, both overt and covert, embedded in any sanctions regime. The United States has already exempted India, Malaysia, South Korea, South Africa, Sri Lanka, Turkey, Taiwan, Japan and 10 European countries from the upcoming sanctions after concluding that these countries have taken sufficient steps to at least reduce the total amount of crude that they buy from Iran.
China, Iran's largest crude buyer, and Singapore, a major transshipment point for Iranian crude to reach Asian states, have so far not made the list of exemptions. What's notable is that the list of exempted countries by and large includes countries that are existing or developing strategic allies of the United States.
At the same time, a number of states are now looking for alternatives to European insurance to continue to buy cheap Iranian crude. Japan, for example, is making arrangements for the state to insure Iranian shipments. Iran is also offering 39 vessels of its own fleet to ship and insure its crude. This would be a fleet with the capacity to theoretically carry more than Iran currently exports if Iran can free up enough crude that it's holding in storage.
But then there's the less-talked-about aspect of the sanctions campaign. What of the large number of Iranian front companies and false flag carriers that have had years to prepare for these sanctions? Transshipment points like Bermuda, Seychelles, Singapore and Hong Kong are critical to Iran's ability to reflag tankers and circumvent sanctions.
Unless the U.S. and Europe are prepared to physically track down and blockade these tankers -- and there's no indication so far that this is the case -- then this sanctions regime will continue to allow Iran to get by through a number of creative, albeit costly, mechanisms.
It's therefore problematic to go simply by industry reports and Western reporting to understand the impact of sanctions on Iranian behavior, especially when Iran has imposed a blackout of information at its main crude export hub at Kharg Island to prevent agencies from tracking the movement of tankers to and from Iran.
Simply examining Iran's behavior in the negotiations is perhaps a more telling indicator of how much pressure Iran is actually experiencing. In the past, Iran has conceded more readily to plans of shipping out higher enriched uranium to third parties and opening select facilities to inspections.
So far, Iran has not made any such concessions, even on a cosmetic level. Iran's focus has instead been on keeping the dialogue going and insisting on a freeze to further sanctions while these talks are in progress.
We'll have to see how the P-5+1 responds to this tactic, and whether Iran can manage to get another meeting on the books to buy time, but the West will continue to face a difficult time in trying to demonstrate these sanctions are having the desired effect.
