Barack Obama applies carrot and stick to Iran

Bushehr nuclear power plant - 21 August 2010 Iran says its nuclear programme is for peaceful purposes, not to develop weapons

Economic sanctions against Iran are working.

That, at least, is the judgement of their chief architect, Stuart Levey.

Mr Levey - under-secretary for terrorism and financial intelligence at the US Treasury - believes the latest round of UN and US sanctions caught the Iranian regime off guard.

He is at pains to stress that the Obama administration has not withdrawn its offer of engagement with Tehran.

The sanctions adopted by the US and its allies are, he says, creating "crucial leverage for our diplomacy".

The carrot and the stick are not contradictory, but complementary.

New coalition

Mr Levey, a Harvard-trained lawyer, began his efforts to put pressure on Iran under President George W Bush and was kept on by President Barack Obama, in a sign of the new administration's determination not to let Iran off the hook.

Speaking on Monday to a packed audience at the Center for Strategic and International Studies, a Washington think-tank, Mr Levey set out three reasons why he believed sanctions were working:

  • The US had secured the co-operation of a broader coalition of governments and private-sector organisations than ever before.
  • This coalition now had, as Mr Levey put it, "the tools it needs to impose pressure on Iran" - through new UN (multilateral) sanctions and additional US (unilateral) sanctions.
  • The new pressures were being applied at a time when Iran was especially vulnerable because of "its government's economic mismanagement and narrowed political flexibility".

Mr Levey set out in detail how the administration had targeted Iranian entities it believes are engaged in illicit activities designed to further the country's nuclear programme.

These included Iran's banks. Iran, said Mr Levey, "is effectively unable to access financial services from reputable [foreign] banks and is increasingly unable to conduct major transactions in dollars or euros".

In addition, dozens of foreign companies - he cited Toyota, Kia, Lukoil, Allianz, Lloyds and Royal Dutch Shell - had "curtailed or eliminated their business ties to Iran".

Another target of sanctions was Iran's powerful Revolutionary Guard, regarded as a key player in its nuclear programme as well as in funding and arming militant groups in the Middle East.

Questioned about reports that Iran was having trouble selling its oil, Mr Levey denied that this was a goal of US policy - but acknowledged that depriving its oil and gas sector of foreign investment would weaken it in the longer run.

Least-bad option

Even as he spoke, Iran's combative President, Mahmoud Ahmadinejad, was on American soil breathing defiance.

Sanctions were "futile", he declared in an interview with the Associated Press news agency.

Composite image of Mahmoud Ahmadinejad (L) and Barack Obama (R) Mr Obama has said his offer of dialogue with Iran remains open

Mr Ahmadinejad is in the US for this week's meeting of the UN General Assembly.

He said Iran's course was set, and the rest of the world needed to accept it.

So will the Obama administration's carrot-and-stick approach produce the desired effect?

Whether or not it does is likely to come down, in the end, to politics rather than economics.

Wasn't this, I asked Mr Levey, a regime that was ready to absorb pain - and that almost relished being under siege?

"We believe we can affect their calculations, their cost-benefit analysis," he replied.

He gave no evidence to back this up.

The fact is that - despairing of successful negotiations with Iran, and fearful of the consequences of military action against it - the administration has settled on sanctions as the least-bad option.

Officially, as President Obama confirmed at a briefing for journalists in August, the offer of dialogue remains open. Privately, there is not much optimism that a defiant Iran is in any mood to compromise.

Mr Levey is a respected figure in Washington.

Even Iranian officials - by complaining bitterly of the efforts of someone they describe as one of America's "Zionist deputies" - have paid him a back-handed compliment.

But while his tireless campaign of pressure is undoubtedly hurting the Iranian economy, there is reason to doubt whether it will force the Iranian regime to change its mind.

The carrot may not be attractive enough, nor the stick strong enough, to deflect a determined and defiant Iranian leadership from its chosen course.

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