Six nonmilitary ways to influence Iran.

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June 26 2009 11:54 AM

What Can Obama Do?

Six nonmilitary ways the president can influence Iran.

Read more from Slate's coverage of the Iranian election and its aftermath.

Iran protest. Click image to expand.
Mir Hossein Mousavi 

Before Iran's June 12 presidential election, President Barack Obama relied on carrots rather than sticks to encourage the Iranian regime to halt its nuclear-enrichment program. But since the violent crackdown against protesters disputing the election results began, the mix of incentives (carrots) and disincentives (sticks) has changed.

What nonmilitary levers of power can the Obama administration use to exert pressure on an increasingly recalcitrant regime?

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The central paradox of the Iranian economy is that while the country has the second-largest gas and oil reserves in the world and is ranked as the fourth-largest global oil exporter, Iran's feeble infrastructure does not allow it to refine enough petroleum, forcing the regime to import up to 40 percent of its gasoline. Iran's gas sector is enormously vulnerable to external pressure. That helps to explain the Iran Refined Petroleum Sanction Act, which has the support of more than 200 members of the House and 61 senators.

IRPSA would allow the U.S. government to disrupt the operations of foreign businesses that supply refined petroleum to Iran or insure the transportation of gas. Companies such as Norway's Aker Kvaerner Powergas, which refines Iran's petroleum, would expose themselves to sanctions, as would German insurance giant Munich Re, which insures ships en route to Iran.

In short, the robust set of sanctions contained in IRPSA would prevent these foreign companies from accessing U.S. markets and capital. IRSPA is, without question, the most paralyzing form of sanctions-based pressure.

A second pressure point is the Iran Sanctions Act of 1996, which prohibits foreign companies from investing more than $20 million per year in Iran's energy sector. The problem is that the ISA has never been fully applied to foreign entities. It has served as a chilling effect to discourage energy giants like Royal Dutch Shell, France's Total, Austria's OMV, and Italy's Eni from establishing major oil-production operations in Iran. While the Iran Sanctions Act has cowed Total and Eni, in 2008 Royal Dutch Shell exceeded the $20 million cap for the first time in several years.

Royal Dutch Shell's increased activity in Iran prompted the Dutch Iran Committee, a recently formed nonpartisan NGO that works to stop Tehran's nuclear-weapons program, to pepper Royal Dutch Shell CEO Jeroen van der Veer with uncomfortable questions about the company's human rights record in Iran and its possible violations of U.S. sanctions law at May's annual stockholder meeting. "The Iran Committee finds it incomprehensible that Shell refuses to account for its role in perpetuating Iran's criminal regime. Furthermore, Shell is disregarding the interests of its shareholders by its short-sighted refusal to acknowledge the risks of investing in Iran, in view of America's existing sanction policy and further sanctions to come," declared Frank van Dalen, deputy chairman of the DIC and a former chairman of the Dutch Federation of Homosexuals.

The next round of hard-hitting legislation is the Iran Sanctions Enabling Act, which enjoys bipartisan support in the House and Senate. The legislation, which President Obama sponsored as a senator, permits state and local governments to divest from international companies who invest in Iran's energy sector. According to the legislation, pension and other fund managers would be insulated from potential legal action.

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