Pressure Points

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Several German banks have already gotten the message. Commerzbank and Deutsche Bank — Germany's biggest bank — said in late October that they were cutting their Iranian business, which includes countless wire transfers of euros for Iranian citizens and businesses; a third, Dresdner Bank, said it would follow suit. That could force Iranians to pay cash for German imports, or to route them through third countries, which makes the goods more costly.

The goal of sanctions is to spare the Iranian public great economic pain, while applying enough pressure in the right places to nudge the government into rethinking its nuclear agenda. Carpet-bombing the economy with a raft of sanctions does not appear to be a winning strategy. It alienates Iran's moderate politicians and besides, the country has already weathered years of U.S. sanctions. With oil prices at close to $100 a barrel and several sympathetic trading partners, Tehran probably has sufficient means to muddle through even if the economic noose is tightened. Going after the incomes and assets of the country's élite, on the other hand, could prove easier to accomplish and more effective. "As time passes, and the pressure from sanctions increases, Khamenei will be under tremendous pressure from different factions to change course," says a source in Tehran who did not want to be identified. "Ahmadinejad wouldn't care,'' the source adds. "But Khamenei would."

The U.S. effort would get a boost by additional support from key European partners, but it's unclear how far those allies are willing to go. The French under Sarkozy have taken a harder line than the Germans, saying that pressing the U.N. for additional sanctions isn't necessary — the U.S. and Europe can go it alone. E.U.-wide economic strictures would put enough pressure on Tehran, Sarkozy has indicated, even without the backing of Russia and China, potential Security Council roadblocks.

But Merkel is apparently wary of the impact that curtailing trade with Iran might have on German jobs. After meeting Bush at his Crawford, Texas, ranch on Nov. 11, Merkel said she would urge German companies to consider "further possible reductions of those commercial ties" in Iran, but stressed that both she and Bush believed "that this issue can be solved through diplomatic means."

Merkel's reluctance to issue a full-throated endorsement of more sanctions is a reflection of sentiment that is widespread on the Continent. Thanks to the mess in Iraq, many Europeans are deeply skeptical of Washington's intentions toward Iran and are reluctant to follow Bush's lead. "The hesitation among some E.U. countries in moving ahead with stronger U.N. sanctions is not necessarily just because of their economic interests," says Bruno Tertrais, senior research fellow at the Foundation for Strategic Research in Paris. "There is also hesitancy in escalating the crisis."

Privately, some European politicians may be relieved that Moscow and Beijing have shown little stomach for tougher measures. Russian President Vladimir Putin, who made a high-profile visit to Tehran last month, seems animated more by an occasional, instinctive desire to push back against anything that smacks of a U.S.-led "unipolar world," says an East Asian diplomat just back from a stint in Moscow.

China has been more accommodating. Since the beginning of the nuclear standoff, Beijing has been willing to go along with relatively mild measures backed by the U.N., and has even quietly cooperated as part of an international financial task force that has sought to deter Iran from laundering money that might go to support terrorism or the spread of WMD. But anything that could conceivably disrupt the future flow of energy from Iran to China appears to be out of the question. Sinopec, a state-owned Chinese oil company, has a deal in the works in which it would help develop a major oilfield in Tehran in return for 150,000 barrels of crude a day.

China also dismisses any talk of imposing the one sanction that could cause immediate pain to both the Iranian people and the regime: a ban on gasoline exports to Iran. So decrepit is the country's refining capacity that the fourth largest oil producer in the world has to import gas so consumers can drive their cars. "More than anything, China wants some stability there," says a former U.S. Defense Department official who has dealt extensively with Beijing. "It is absolutely petrified about the possibility of political turmoil in the Middle East ... it doesn't want economic chaos."

The U.S. has just one obvious move: craft a set of stronger sanctions that China and Germany can live with, and that can pass muster with the U.N. Ratcheting up the economic pressure would show Iran that the world continues to stand together in seeking an end to its nuclear program. But even if the U.S. succeeds, Tehran may not blink. If Iran continues to add centrifuges, which are used to enrich uranium for atomic weapons, to its nuclear-research center in Natanz, the world would then confront the most uncomfortable question of all: What do we do now?