Bill seeks near-zero oil exports for Iran Economic strangulation: Russia

WASHINGTON, Aug 1, (Agencies): The House of Representatives easily passed a bill on Wednesday to tighten sanctions on Iran, showing a strong message to Tehran over its disputed nuclear program days before President-elect Hassan Rowhani is sworn in.
The vote also highlighted a growing divide between Congress and the Obama administration on Iran policy ahead of international talks on the nuclear program in coming months. Iran insists the nuclear program is purely for civilian purposes.
The bill, which passed 400 to 20, would cut Iran’s oil exports by another one million barrels per day over a year to near zero, in an attempt to reduce the flow of funds to the nuclear program. It is the first sanctions bill to put a number on exactly how much Iran’s oil exports would be cut.
The legislation provides for heavy penalties for buyers who do not find alternative supplies, limits Iran’s access to funds in overseas accounts and penalizes countries trading with Iran in other industrial sectors.
Existing US and EU measures have already reduced Iran’s oil exports by more than half from pre-sanction levels of about 2.2 million barrels per day (bpd), costing Tehran billions of dollars in lost revenue a month.

Most of the OPEC member’s exports head to Asia, where the United States has worked with Iran’s top four customers China, India, Japan and South Korea to push them towards alternative suppliers. The four have cut purchases from Iran by more than a fifth in the first half of this year, over and above the reductions made last year.
The success of any toughening of the sanctions will depend on China, Iran’s top customer, which has repeatedly said it opposes unilateral sanctions outside the purview of the United Nations, such as those imposed by the United States.
The country reduced oil purchases from the Middle Eastern nation by 21 percent last year, but that was partly on account of differences in the first quarter over the renewal terms of annual contracts and shipping delays.

Chinese officials have said refiners are likely to cut shipments 5-10 percent this year from last. They cut imports 2 percent in the first six months of the year.
“I don’t think the Chinese government will give in to this kind of pressure,” said an official with a Chinese refinery that processes Iranian crude. “There is no chance that Iranian supplies would come to a halt.”
For now, relatively steady oil prices have allowed the efforts to continue, but analysts say further sanctions risk pushing up prices and damaging the economies of US allies.
“This is almost like an embargo on Iranian oil imports. It is like giving Iran an ultimatum,” a Seoul-based refining source said, after the vote. “I think we can find alternatives but we prefer Iranian crude as the economics are better. If very little Iranian crude is available, overall oil prices would rise.”

The bill still has to be passed in the Senate and signed by President Barack Obama before becoming law. The Senate Banking Committee is expected to introduce a similar measure in September, though it is uncertain whether the language to cut exports by 1 million barrels a day will survive.
Critics of the bill said it shows an aggressive signal to Iran that last month voted in Rowhani, a cleric many see as more moderate. He will be sworn in on Sunday.
Rep Ed Royce, a California Republican and Chairman of the House Foreign Affairs Committee who introduced the bill with Rep Eliot Engel, a New York Democrat, said the United States has no higher national security priority than preventing a nuclear-armed Iran.
Royce said the Supreme Leader Ayatollah Ali Khamenei’s drive to develop a nuclear arsenal was evident. “New president or not, I am convinced that Iran’s Supreme Leader intends to continue on this path,” he said.

The vote showed a growing disagreement between the White House and Congress on Iran policy. A senior administration official said on Wednesday the White House is not opposed to new sanctions in principle, but wants to give Rowhani a chance.
The Treasury Department last week partially eased sanctions on Iran by expanding a list of medical devices that can be exported there without special permission.
One of the 20 lawmakers to vote against the bill, Jim McDermott, a Washington-state Democrat, said shortly before the vote that the rush to sanction Iran before Rowhani takes office could hurt efforts to deflate the nuclear issue.

“It’s a dangerous sign to send and it limits our ability to find a diplomatic solution to nuclear arms in Iran,” McDermott said.
A supporter of harsher sanctions disagreed.
Ayatollah Ali Khamenei “doesn’t see our flexibility and good faith efforts as a sign of good intentions, he sees it as a sign of weakness,” said Mark Dubowitz, the head of Foundation of Defense of Democracies, an advocate of sanctions.
“If anything, it’s only going to be massively intensified sanctions that get him to blink.”
But Trita Parsi, the president of the National Iranian American Council, said the House action undermines the US strategy which has long been one of good cop - bad cop.
The White House has taken a softer stance toward Iran’s nuclear program and Congress has taken a tougher one. But now there are signs that the good cop cannot control the bad cop, he said.
“The impression on the Iranian side is not that it’s good cop bad cop, but complete chaos and mayhem,” Parsi said.

The bill also further denies Iran’s government access to foreign currency reserves, and targets Iranian efforts to circumvent international sanctions against its shipping business.
“I think it’s too much. Asian countries don’t have much oil resources and they need to import a lot from the Middle East,” said a trader with a North Asian buyer of Iranian crude. “If the United States keeps pushing further, it would be a big burden for Asian refineries.”
While the bill has more steps to clear before becoming law, other buyers, apart from China, have already begun voicing their inability to reduce dependence on Iranian oil much further.
“Cuts in our imports from Iran have been the maximum as compared to other Asian countries,” an Indian industry executive said. “At this moment there is no scope for further reduction.”
India cut its Iranian oil imports by 43 percent over the first half of the year. That’s more than the 27 percent cut by South Korea and 22.5 percent by Japan.

Turkey would also struggle to cut its crude oil imports from Iran any further, a Turkish official said.
Meanwhile, Russia said on Thursday a vote by the US House of Representatives to tighten sanctions against Iran would not help resolve the dispute over Tehran’s nuclear programme.
Congress passed a bill on Wednesday that will cut Iran’s oil exports to nearly zero, in an attempt to reduce the flow of funds to its nuclear programme and send a strong message to Tehran before President-elect Hassan Rowhani is sworn in.
Russian Deputy Foreign Minister Gennady Gatilov said that United Nations Security Council sanctions already in place against Tehran were sufficient. He suggested the US bill, which still has more steps to clear before becoming law, was counterproductive.

“Any additional sanctions are actually aimed at the economic strangulation of Iran, but not at solving the problem of non-proliferation,” Gatilov told Interfax news agency. “What has been done through the Security Council is quite adequate and sufficient.”
World powers hope Iran’s relatively moderate new leader will comply with demands for Tehran to scale back nuclear work, which they suspect is aimed at enabling it to make bombs. Iran says the nuclear activities are purely for civilian purposes.
Russian President Vladimir Putin is expected to push for concessions from Iran on its nuclear programme when he meets Rowhani in Kyrgyzstan in September. Russia is a veto-weilding permanent member of the UN Security Council and one of six world powers involved in talks on Iran’s nuclear programme.

Iran said Thursday the new sanctions approved by the US House of Representatives aimed at curbing Tehran’s controversial nuclear drive will only serve to complicate efforts to negotiate a solution.
The House approved the new measures on Wednesday as a means to prevent Iran gaining nuclear weapons capability, sending a signal to Tehran before its new president is sworn in in parliament on Sunday.
The measure, which overwhelmingly passed 400-20, would slap strict limits on Iran’s already heavily-sanctioned oil industry, as well as on other sectors of the country’s ailing economy, including the automobile and mining sectors.

“The only influence these sanctions have is to make finding a solution to existing issues more complicated and more difficult... especially on the issue of nuclear talks,” foreign ministry spokesman Abbas Araqchi told ISNA news agency.
“Imposing sanctions on Iran is a failed policy and will not help find a rational solution... Insisting on this policy is surprising as it will not change the Islamic republic’s stance,” he added.
Critics say the vote was badly timed, coming just days before Hassan Rowhani, a former Iranian nuclear negotiator under reformist leader Mohammad Khatami, takes over as president.
Advocates of diplomacy have suggested that the United States should use the departure of outgoing President Mahmoud Ahmadinejad as a chance to seek engagement with Iran, instead of maintaining a rigid posture.



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