U.S. Sanctions Target Iran's Central Bank

The new measure signed into law by President Obama imposes sanctions on financial institutions that deal with Iran's central bank. That's in addition to existing international sanctions. Karim Sadjadpour, an Iran specialist at the Carnegie Endowment for International Peace, tells Steve Inskeep that the new sanctions could put tremendous pressure on Iran's economy.

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LINDA WERTHEIMER, HOST:

This is MORNING EDITION from NPR News. I'm Linda Wertheimer.

STEVE INSKEEP, HOST:

And I'm Steve Inskeep. Good morning.

For this new year, Congress gave President Obama the power to impose new sanctions on Iran.

WERTHEIMER: The sanctions would target Iran's central bank. Though the president has some flexibility on the timing, the mere threat escalated tensions. Iranians have spoken of stopping oil tankers passing through the vital straits of Hormuz.

INSKEEP: And when a U.S. aircraft carrier steamed out of the Persian Gulf through those straits, Iran warned the carrier not to come back. Karim Sadjadpour of the Carnegie Endowment for International Peace says the sanctions would be a lot of pressure on Iran.

KARIM SADJADPOUR: The sanctions against Iran's central bank will be the most draconian sanctions passed against Iran since the 1979 revolution. It's essentially going to make it a lot more difficult to do business with Iran, whether that's to import Iranian oil and gas, which is the main source of Iran's income, or continue to export products to Iran.

INSKEEP: How much flexibility does President Obama have under the law to impose or withhold the sanctions?

SADJADPOUR: There's a good deal of flexibility. I think it's probably unlikely that we're going to penalize every single company and country which continues to do business with Iran. But again, the calculations are that if Iran loses its European market and it loses its Japanese and South Korean market, we're talking about 40-45 percent of Iran's petroleum export market. And it's unclear whether China, India, African countries, will be able to pick up the slack.

INSKEEP: If the United States were to impose the sanctions, if enough other countries and companies around the world were to go along if the sanctions would really take effect, would the United States do more damage to itself than it would to Iran? You'd be cutting off oil that's a big part of the world oil supply.

SADJADPOUR: And especially at a time when the state of the global economy, the state of the American and European economies, are so precarious. The hope is that Libyan oil will be back on the market come spring time or be back to status quo activity.

Saudi Arabia has already committed to increasing their output of oil. And Iraq also has a role, if an unwitting role, and that is to increase their oil output as well.

So Iran currently exports about 2.5 million barrels per day. The hope is that between Saudi Arabia, Libya, and Iraq, a decrease of Iranian oil from the global market isn't going to have a major ramification for the global economy.

INSKEEP: Now, we certainly get the impression that Iran is taking this seriously, given some of the noises that they've made in the last several days.

SADJADPOUR: The big question is whether this type of pressure that's being exacted now is the type of existential angst-inducing pressure on the Iranian regime to force it to make meaningful compromises on its nuclear program. The regime is probably more isolated than it's been since the 1979 revolution, facing incredibly disgruntled population at home. Their currency, right now, is in a downward spiral.

So a lot of things are going wrong for the Iranian regime. The question is whether they will see it in their interests to compromise in order to alleviate the pressure or they will see it in their interests to go for the nuclear finish line and obtain a bomb, thinking that if they actually get a bomb that's going to be a shield against outside pressure.

INSKEEP: Do you think that the issues are so great, the interests are so great for each country, that their governments really are willing to go to war if it comes to that?

SADJADPOUR: My concern is that for the hardliners in Tehran, a war, U.S. or Israeli military attack on Iran, could actually be expedient for them in the domestic political context. An outside attack on Iran could prolong the shelf life of the Iranian regime.

So, I don't see it in the interests of the Obama administration to attack Iran, because this is an election year and an attack on Iran is going to skyrocket oil prices, which will be bad for the U.S. economy.

But I do see it in the interests of some of the hardliners who are currently ruling Iran to invite some type of attack in order to quell popular agitations and repair internal fractures.

INSKEEP: Karim Sadjadpour, thanks very much.

SADJADPOUR: Thank you, Steve.

INSKEEP: He's an Iran specialist at the Carnegie Endowment for International Peace.

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