Still, U.S. officials and their European allies are discussing potential economic responses to Iran, as top Western officials converge on Washington on Monday for the spring meetings of the International Monetary Fund and the World Bank. Their options are limited because Iran is already one of the most heavily sanctioned countries in the world, with U.S. sanctions in force across its banking, manufacturing and energy sectors.
One of the most obvious remaining options is to aggressively expand sanctions against Chinese companies that have purchased large quantities of exported Iranian crude, which has provided a financial lifeline to Tehran as it remains cut off of the West. The United States imposed sanctions last year on some commercial links in the oil trade between China and Iran, but experts say the administration could go further by hitting more Chinese refineries and banks with these restrictions.
This, however, carries its own risks. Treasury Secretary Janet L. Yellen and other administration officials have tried to stabilize relations with China in recent months, and a sudden hit to energy production could infuriate Beijing. Additionally, the halt in Iranian crude sales could lead to higher oil prices globally amid tighter supply, which could lead to higher gas prices ahead of the presidential election in 2024.
“There aren’t a lot of game-changing options because much of Iran is already sanctioned,” said Rachel Ziemba, deputy senior fellow at the Center for a New American Security, a think tank on foreign policy. “But if you really want to suppress Iran’s oil revenues, you have to go through China and Chinese institutions.”
Sanctioning Chinese banks for facilitating the purchase of Iranian oil could remove up to 1.5 million barrels per day from global markets. That would push the price of oil above $100 a barrel, which would be a policy nightmare for the Biden administration, said Bob McNally, president of Rapidan Energy Group, a consulting firm.
“The last thing Biden wants is higher gas prices, which is why he wants Iran to sell its oil to China. He doesn’t want this oil blocked. It’s as simple as that; it cannot afford to sanction Iranian oil,” McNally said. “They might do symbolic things, go after a small business owner here or there, but that’s probably it.”
Biden called for calm following the Iranian attack. The United States has made clear that it will not participate in any Israeli military attack on Iran, and senior officials have stressed that its goal is to “defuse regional tensions” to avoid a wider conflagration. Israel’s war cabinet met Monday to deliberate on possible responses.
While the West rules out participation in a military response, an economic response to Iran’s actions appears increasingly certain. European Commission President Ursula von der Leyen said officials in Brussels would discuss tougher sanctions against Iran. “We will consider additional sanctions against Iran in close cooperation with our partners,” she said in a statement.
U.S. officials have, for example, discussed strengthening Iran’s access to frozen funds intended for humanitarian aid, according to two people familiar with the matter, who spoke on the condition of anonymity to describe private conversations. They also discussed imposing additional sanctions against Iranian officials and businesses. The first could prove largely symbolic: Iran already has difficulty accessing these funds. It is also unclear what impact sanctions would have on other companies, such as international suppliers of parts for Iranian drones.
A Treasury spokeswoman declined to comment on ongoing deliberations, but Yellen is expected to speak to the media on Tuesday.
The Biden administration also faces pressure from Capitol Hill to act. The House on Monday overwhelmingly approved legislation aimed at cracking down on Iranian oil sales to China. Critics have argued that Biden should have gone further to ensure Tehran was not able to reap billions of dollars from its oil exports.
“Following Iran’s massive and disproportionate attack on Israel, and with the prospect of escalation, all non-military measures must be on the table. This involves targeting current Iranian oil sales,” said Matthew Levitt, director of the Jeanette and Eli Reinhard Program on Counterterrorism and Intelligence at the Washington Institute for Near East Policy, a Washington-based think tank.
Yet other experts say the problem is that Washington has already adopted an overly aggressive stance toward Tehran. Iran has been under severe economic restrictions since the Trump administration abandoned President Barack Obama’s nuclear deal, leaving policymakers little room to deal with new emergencies.
“We have exerted maximum pressure (on Iran) since practically November 2018, and there is not much more to be done,” said Esfandyar Batmanghelidj, founder and CEO of the Bourse & Bazaar Foundation, a think tank focused on international affairs and economic diplomacy. “That’s really the problem with maximum pressure: You find yourself in a position where suddenly what you think is an Iranian policy issue is no longer just an Iranian policy issue. »
washingtonpost
