GAO Report Challenges Effect of Longtime U.S. Sanctions on Iran

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By Robin Wright
Washington Post Staff Writer
Thursday, January 17, 2008

A three-year international effort to pressure Iran is faltering, with a new report to Congress questioning the impact of 20 years of U.S. economic sanctions on Tehran and a long-sought U.N. resolution against Iran in trouble.

In a report released yesterday, the investigative arm of Congress challenged the impact of U.S. sanctions against Iran dating to 1987. Tehran has circumvented many economic sanctions, it concluded, noting Iran's ability to negotiate $20 billion in contracts with foreign firms since 2003 to develop its energy resources. With the country's oil wealth, Iranian banks also have funded their activities in currencies other than the dollar.

"Iran's global trade ties and leading role in energy production make it difficult for the United States to isolate Iran and pressure it to reduce proliferation and support for terrorism," the Government Accountability Office said. "Iran's overall trade with the world has grown since the U.S. imposed sanctions, although this trade has fluctuated."

The report also faults the Bush administration for not developing a system to assess sanctions and recommends that Congress require the National Security Council to do so and report results regularly to Congress.

The Treasury Department countered that Iran faces "increased economic, financial and political isolation" because of U.S. and U.N. sanctions, with about 25,000 transactions worth more than $5 billion rejected since 1997. Stuart A. Levey, undersecretary for terrorism and financial intelligence, said many financial institutions had stopped doing business with Iran.

The report comes as the Bush administration is struggling to salvage a new U.N. resolution on Iran. Secretary of State Condoleezza Rice is expected to meet with representatives of the world's major powers in Berlin on Tuesday to try to work out disputes that have significantly watered down new punitive measures on Iran, European and U.S. officials said.

"The substance is getting smaller and smaller," said a senior European official, who like others spoke on the condition of anonymity because of the sensitive diplomacy still underway. Some of the provisions in the latest draft call for "monitoring" financial transactions with Iran rather than freezing assets of institutions, banks and businesses suspected of ties to nuclear proliferation.

The United States, Russia, China, Britain, France and Germany backed two modest resolutions -- in December 2006 and March 2007 -- demanding Iran suspend its uranium enrichment, a process that can be used to produce energy and to develop a nuclear weapon. After Tehran failed to comply, the Bush administration called on the Security Council to impose tougher restrictions on Iranian banks, financial institutions and military.

"The whole strategy here is to use various kinds of diplomatic pressure at a gradually increasing rate to try to get a different set of decisions out of the Iranian leadership," State Department spokesman Sean McCormack said.

After a U.S. National Intelligence Estimate last month said Iran had halted its nuclear weapons program in 2003, the Bush administration has been under increasing pressure from across the Arab world not to consider military options against Tehran. The Arab News yesterday called President Bush's "saber rattling" against Iran during his Middle East tour "sad, even depressing."

Undersecretary of State R. Nicholas Burns has had almost daily conversations with allies over the past two weeks. "We still have some gas left in the tank," a senior administration official said.

But the main product of eight months of intense diplomacy may be just getting a resolution that still has limited practical impact on Iran, European officials said. "Even if there's not much substance in the end, at least we'll have a show of unity," one European official said.

Russia and China balked at earlier drafts. Both countries have significant financial ties to Iran, with Moscow building Iran's first nuclear reactor and China importing Iranian oil. The resolution is now not expected to be put up for a vote until next month, U.S. and European officials said.

The divisions among the world's major powers will make it increasingly difficult for the Bush administration to achieve its goal of getting Iran to suspend uranium enrichment before leaving office, diplomats said.


© 2008 The Washington Post Company

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