An expensive exercise.

Author:Kiernan, Peter
Position:Costs of US sanctions against Iran

Discussions on US sanctions against Iran continue but, in the meantime US business is counting the cost.

United States economic sanctions against Iran are likely to continue into the near future, despite strengthened opposition from American business and lack of support from US allies, particularly in Europe. Although the unilateral nature of the sanctions has rendered them largely ineffective, Washington wants to see changes in Iran's policies before they are revoked.

As a result, the thaw in US-Iranian relations will be painstakingly slow as Washington steadfastly holds to its position that Iran is pursuing capability in weapons of mass destruction, supports terrorism and violently opposes the Israeli-Palestinian peace process.

There have been US sanctions against Iran since the 1979 revolution. However, the most comprehensive range of measures has been in force since 1995. In that year President Clinton signed two executive orders, the first banning US investment in Iran's energy sector and the second banning all trade and investments in other sectors.

Then in 1996 congress passed the Iran Libya Sanctions Act (ILSA), which penalises non-US energy firms if they invest over $20 million in Iran's oil and gas industries. Penalties include restricting imports from those firms and preventing them borrowing funds from US banks. Despite Iran's international isolation over the last two decades, there have never been any UN-mandated multilateral sanctions placed against that country.

While the prospect for immediate change in US policy is unlikely, this has not stopped the issue from becoming a hot topic in Middle East policy circles or business lobby groups. Gary Sick, scholar at Columbia University's Gulf 2000 project wrote in The Washington Post that "sanctions are increasingly irrelevant and blind us to the truth about how much Iran has changed", and that "US policy continues to be driven by inertia and old political habits". His thoughts echo the views of Lee Hamilton, a Democrat representative on the congressional International Relations Committee, who believes that efforts to isolate Iran have been counterproductive because they have caused strains between the US and its European and Arab allies.

US energy companies have also stepped up the pressure to reassess the sanctions policy against Iran. They have been increasingly frustrated at being sidelined while European firms are taking advantage of Iran's biggest effort in over 20 years to...

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