Finding Iran's Pressure Points

Just how unsettled the world is by the possibility that the U.S. might make a preemptive strike on Iran's nuclear facilities can be measured by how frequently the Bush Administration trots a senior official out to insist that there are no plans to launch such an attack. On Nov. 12, it was Admiral William Fallon's turn. The head of the Pentagon's Central Command, which would execute a strike should the day ever come, dismissed the idea in an interview with the Financial Times. "It astounds me that so many pundits and others are spending so much time yakking about this topic," Fallon said.

The timing of the latest attempt to soothe jangled nerves was not surprising. What may be the decisive phase of the West's diplomatic efforts to resolve the crisis over Iran's nuclear program has arrived. This week, Mohammed ElBaradei, head of the International Atomic Energy Agency, is due to report to the United Nations whether Iran has complied with the IAEA's demands for more information about a program that Tehran insists is for peaceful purposes only. Expecting continued intransigence from Iran, the U.S. and Europe are poised to go to the U.N. Security Council for yet another round of sanctions before the end of the year, says the spokeswoman for Javier Solana, the European Union's foreign-policy chief.

To come up with a concerted, effective strategy for punishing Tehran over its suspected nuclear-weapons program, U.S. President George W. Bush huddled with two of his closest allies earlier this month. First, Nicolas Sarkozy, the new President of France — someone who, at times, has sounded more hawkish on Iran than Bush — and then German Chancellor Angela Merkel repeated that economic sanctions were a crucial part of diplomatic efforts to get Tehran to halt its development of facilities capable of producing weapons-grade uranium. But if ever there was a case where the devil is in the details, it's in the practical application of sanctions as a coercive instrument against Iran. The U.S. and the Europeans have so far been successful in getting two rounds of sanctions passed by the Security Council. That's no mean feat, given that China and Russia, two permanent Security Council members, have extensive economic ties with Iran and are often at loggerheads with the U.S.

But the ease with which the Iranian regime has shrugged off those sanctions bodes ill for future success, at least so long as hard-liner Mahmoud Ahmadinejad is President. If anything, Iran seemed to ratchet up its defiance a month ago, when Ali Larijani, a diplomat whom European negotiators viewed as a relative moderate, was replaced as chief nuclear negotiator by a close political ally of Ahmadinejad. Sources in Tehran say that switch could not have been made without the approval of Supreme Leader Ayatullah Ali Khamenei — a discouraging fact for those in the West who had hoped Khamenei might be tiring of Ahmadinejad's chest-pounding belligerence.

Since the beginning of the diplomatic face-off with Iran, the Bush Administration has been acutely aware that there are limits to the willingness of the international community to enforce sanctions. The E.U., composed of 27 member states, is Iran's biggest trading partner, accounting for 27.8% of the country's trade in 2006. Russia has a range of commercial contracts with Iran, among them an agreement to help construct Iran's first nuclear power plant at Bushehr. And energy-hungry China has not hesitated throughout the nuclear standoff to sign new oil and gas deals with Iran. Such economic realities have "more or less defined our range of motion" in imposing sanctions, concedes one former U.S. diplomat.

Those realities will continue to hamper any push for fresh sanctions. The current plan calls for additional pressure on several fronts. Last month, the U.S. unveiled new financial sanctions against Iran that take a page from the playbook Washington used — successfully, in its view — to force North Korea to shut down its nuclear-weapons program. Specifically, the Treasury Department barred U.S. companies from dealings with three Iranian banks, as well as several companies the U.S. claims are in the WMD-proliferation business. According to intelligence reports, these companies are controlled by, or linked to, high-ranking officials in Tehran, including members of the Iran Revolutionary Guard's business arm, which has commercial interests ranging from oil and gas to manufacturing to real estate. The impact of this unilateral ban is indirect — Iranian companies haven't been allowed to do business in the U.S. for decades. But a similar gambit appeared to work against North Korea. In that case, the U.S. blacklisted Banco Delta Asia, a Macau bank where North Korean government and military officials had, according to some accounts, stashed millions of dollars. By targeting Banco Delta Asia, the U.S. effectively isolated it from the international financial community (banks in other countries did not want to jeopardize their U.S. business by trading with Banco Delta Asia), thus severely restricting the North Koreans' access to their accounts. Meting out similar treatment to Iran "is going after them with a stiletto rather than a blunderbuss," says one Western diplomat.