New US Sanctions Target Iran's Refined Petroleum Imports for First Time

Fuel pipes are seen in Acajutla, El Salvador, May 19. PDVSA, which runs the plant, will be affected by an Obama administration decision to impose US sanctions on Iran, and thus companies supplying Iran with oil., a photo by Pan-African News Wire File Photos on Flickr.

New US sanctions target Iran's refined petroleum imports for first time

Analysts say the new US sanctions – seen as a move to weaken Iran's economy – are the Obama administration's response to critics in Congress who say the US has been slow to get tough

By Howard LaFranchi, Staff writer
posted May 24, 2011 at 9:03 pm EDT
Washington

The United States is for the first time imposing sanctions designed to hit Iranian imports of refined petroleum products including gasoline.

The measures announced Tuesday against seven companies supplying Iran – including the Venezuelan giant PDVSA and an Israeli shipping firm – are seen by some foreign-policy analysts as the Obama administration’s response to Capitol Hill critics who say the US has been slow to get tough on Iran in a meaningful way.

The US action was announced the same day the United Nations’ nuclear watchdog agency, the International Atomic Energy Agency, circulated a report claiming continued progress in Iran’s nuclear enrichment program. The report, to be reviewed at an IAEA meeting next month, also cites evidence that Iran diverted elements of its nuclear program to research in military applications as recently as last year.

The US has imposed a series of sanctions on Iran in the past – the most recent following the UN Security Council’s passage of a fourth sanctions resolution against Iran last June. But the focus of those measures has been Iranian companies, banks, and individuals found to be associated with the country’s nuclear program.

The measures announced Tuesday by Deputy Secretary of State James Steinberg target seven foreign entities selling products such as gasoline to Iran.

“All of these companies have engaged in activities related to the supply of refined petroleum products to Iran, including the direct supply of gasoline,” Deputy Secretary Steinberg said.

Other firms cited, in some cases joint ventures with Iranian companies, were from the United Arab Emirates, Monaco, Singapore, and Jersey, a British crown dependency off the coast of France.

Efforts to weaken Iran's economy

The new measures suggest a shift toward efforts to weaken the Iranian economy as a means of pressuring Iran to halt its uranium enrichment program. The US and other Western powers accuse Iran of pursuing its nuclear program, including enrichment, with the goal of developing a nuclear weapon. Iran insists its objectives are purely peaceful and aimed at developing civilian nuclear power.

Iran is a major producer of oil, but is weak on petroleum refinery capacity and must import about 40 percent of its gasoline.

The measures announced Tuesday constitute the first substantial action by the Obama administration under legislation passed in Congress about a year ago.

The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 sought among other things to target Iran’s importing of gasoline, which is seen as the Iranian economy’s Achilles’ Heel.

Earlier this month, in what was interpreted as congressional frustration with the administration, new legislation was introduced to “close loopholes” and speed up the imposing of sanctions on Iran.

“US policy toward Iran has offered a lot of bark, but not enough bite,” said Rep. Ileana Ros-Lehtinen (R) of Florida, who chairs the House Foreign Affairs Committee, in a statement announcing the new bill.

Legislation announced in Senate
On Tuesday, similar legislation to strengthen existing sanctions was introduced on the Senate side. The Iran, North Korea, and Syria Sanctions Consolidation Act of 2011 was introduced by Sens. Robert Menendez (D) of New Jersey, Joseph Lieberman (I) of Connecticut, and Jon Kyl (R) of Arizona.

US officials concede that the new sanctions targeting petroleum imports are unlikely to have any immediate and severe impact on the firms cited, mainly because they largely are absent from the US economy. The sanctions bar the named companies from engaging in transactions in US currency or with US banks, or from receiving US government import-export financing.

But the State Department’s Steinberg said the measures put companies on notice about the repercussions of doing business with Iran. “By imposing these sanctions we’re sending a clear message to companies around the world,” he said. “Those who continue to irresponsibly support Iran’s energy sector or help facilitate Iran’s efforts to evade US sanctions will face significant consequences.”

In the case of Venezuela’s state-owned PDVSA, however, the measures do not affect the company’s US-based subsidiary, CITGO.

Venezuela supplies about 10 percent of US oil imports, while the US consumes more than 40 percent of Venezuela oil exports.