Wall Street Journal – If the European Union's execution is as good as the rhetoric, then its latest round of economic sanctions will finally put more than token pressure on Iran over its nuclear-weapons program.
Until this week, the EU has focused on trying to prevent nuclear proliferation by restricting the export to Iran of nuclear and dual-use technology. But as the EU's ever-growing list of Iranian front companies and shell corporations attests, this was always a losing game.
With Monday's sanctions, the EU has followed the U.S. in directly targeting Iran's refined-petroleum products. The measures, made public Tuesday, bar the sale of equipment to Iran for use in its refining, liquified natural gas or exploration and production industry.
At the same time, the EU's foreign ministers have banned European firms from insuring or reinsuring any business owned or controlled by the Iranian government, or doing business in Iran, or operating at the direction of Iranian-owned companies. The EU has also ordered the freezing of the assets of a long list of Iranian banks. The list includes previously sanctioned Bank Melli, but also others that Europe previously seemed content to ignore, including Bank Saderat, Iran's Post Bank and Bahrain-based Future Bank.
Squeezing Iran's refined-petroleum industry, if effective, could raise the domestic political pressure on the Tehran government. Iran imports some 40% of its gasoline, despite its huge oil reserves, because of under-investment and a lack of refining capacity. As for the insurance ban, it will make it more difficult and expensive for Iran to import the gas that it needs, since shippers will find it harder to insure their cargo.
The catch is that Iran has already proved adept at using cut-outs and shell companies to hide its activities. The EU's long list of sanctioned entities, released Tuesday, attests to this. The list includes no fewer than 17 subsidiaries and front companies of Bank Melli, including Mazandran Textile Company, Mehr Cayman Ltd. and Assa Corporation, to name only a few.
Assa, the EU notes, "is a front company created and controlled by Bank Melli. It was set up by Bank Melli to channel money from the United States to Iran." Bank Refah, another on the list, "has taken over ongoing operations from Bank Melli in the wake of the sanctions imposed on the latter by the European Union." Bank Melli has been a critical financier for Iran's Revolutionary Guard.
So the danger going forward is twofold: First, the listed companies will no doubt try to hand the baton to successor firms, as Iran has done in the past. The second is that Europe's unity of purpose could crumble if the sanctions begin to have real effect and Iran responds by returning to the negotiating table—demanding, in return, that the sanctions be lifted.
Europe, to say nothing of the Obama Administration, might be tempted by such an offer, but accepting it would undermine any previous progress. If negotiations have any hope of working, it will only be because Tehran concludes that the cost of becoming a nuclear power exceeds what it perceives to be the benefits. We're skeptical that these latest sanctions will work against a regime that wants a bomb in order to become a dominant regional power, but at least the EU is finally doing more than going through the diplomatic motions.