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October 2, 2006
New Iran Policy Toughens Sanctions

Condoleezza Rice will have a new tool in her pocket in the showdown with Iran over its nuclear ambitions. The Senate quietly passed a new Iran policy on Saturday, one which President Bush is expected to sign, that allows for sanctions on any business that supports Iran's nuclear or advanced weapons programs. When she travels to Cairo tomorrow, Rice intends on unveiling the implications of the new policy in an attempt to further isolate Teheran:

Bolstered by a new sanctions bill against Iran, Secretary of State Rice will press Arab foreign ministers tomorrow in Cairo to instruct banks in the region to cut ties to any entities contributing to Iran's nuclear program, support for terror, or pursuit of advanced conventional weapons.

If the gambit in Cairo succeeds, it will boost American efforts to punish Iran for its defiance of international resolutions on its nuclear program. In the last 18 months, the Bush administration has quietly succeeded in pressing four large European banks, including London-based HSBC, to stop doing business with Iran.

Indeed, when the Treasury Department announced earlier this month that Iran's Bank Saderat would be barred from American financial markets, three large Japanese banks also cut ties with the bank. Yesterday, the Iranian press announced that talks between Iran and Japan on a $2 billion deal to develop the Azadegan oil field had collapsed.

The Iran Freedom and Support Act, which the Senate passed Saturday and President Bush is expected to sign this week, threatens to bar from American financial markets all banks and companies that are found to be contributing to the Iranian nuclear project or its development of advanced weapons.

In fact, most of the audience in Cairo will not shed many tears over this new initiative. Most Gulf states already fear the threat of Iranian hegemony for a number of reasons. None of them want a non-Arab state dictating policy, nor do they want to kowtow to the Shi'ites. The new American policy will give them an excuse to do what they would probably want to do anyway, and this policy allows them to act in concert.

The new policy has already made a dent in Iranian economics, with the loss of the Japanese development deal on oil-field development. Iran will respond to the economic pressure by attempting to turn up the prices at the pumps. They convinced Venezuela and Nigeria to cut back production on Friday by 170,000 barrels a day. However, the same nations that want to see Teheran contained have the biggest production capability, and they could make up for any shortfalls by Iranian allies, if they want to keep pressure on the Iranians. Neither Venezuela nor Nigeria can afford to significantly reduce production for very long without some support from the rest of OPEC.

This, of course, reminds us that we need to move away from foreign oil as soon as possible.

The US appeared to have waited far too long to respond to Iranian stall tactics in the nuclear showdown. Bush's new efforts abroad to tighten the economic noose around the mullahs shows that the White House has gotten back into the game. Given the mediocre state of Iranian economics, which relies on oil for 80% of its income, the new push should have an immediate effect, and one noticeable to Iranian citizens. Perhaps this will motivate them to rethink their leadership.

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Posted by Ed Morrissey at October 2, 2006 6:25 AM

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