Iran, Trade Partners Stymie Sanctions

Tuesday, September 2, 2008

Mohammad Ramin Khoshlessan

The Washington Times recently reported that the United States’ sanctions on Iran’s oil and gas sectors have failed to achieve the desired result, noting that Russia and China continue to invest billions of dollars in Iran.

Russia and China have brushed off the U.S. demands for a halt to investments in the Islamic Republic and are investing billions in Iran’s energy projects.

The Washington Times report pointed out that the U.S. had some success in dissuading European companies from investing in Iran and that companies like Total and Royal Dutch Shell refrained from closing new energy sector contracts with Iran. However, U.S. pressure did not affect Russia and China. On the contrary, Russia decided to increase investments in Iran’s oil and gas projects and appears determined to continue this trend.

Between 2000 and 2007, the Russian state-controlled energy giant Gazprom invested $4 billion in Iran. Since the beginning of the year, Moscow has taken steps to expand cooperation with Tehran in the energy sector. In February, Gazprom announced that it would expand its involvement in developing and investing in Iran’s South Pars natural gas field as well as assist Tehran’s oil exploration efforts. In July, Gazprom signed a multi-million dollar agreement with the National Iranian Oil Company to help Iran develop its oil and gas fields.

Meanwhile, in a meeting in July between Iranian President Mahmud Ahmadinejad and Gazprom CEO Alexei Miller, the Russian side expressed interest in investing in Iran’s Azadegan oil field, which has estimated reserves of over 42 billion barrels of crude oil.

Two weeks after the Iran-Gazprom announcement, the Iranian government stated that it had reached a $100 billion agreement with the Chinese oil giant Sinopec. The Chinese firm agreed to purchase Iranian natural gas and help develop one of Iran’s largest oil fields. In exchange, Tehran agreed to export 150,000 barrels of oil per day to China at market prices.

A recent Associated Press report pointed out that even though the West’s sanctions have put some pressure on Iranian businesses, they have not been able to halt commercial transactions between Iran and other countries.

The report said EU sanctions may stop business with some European companies and isolate Iranian banks, but they cannot hamper the role played by Iran’s southern neighbor, the United Arab Emirates, and particularly its financial hub Dubai, which acts as a key gateway for business with Iran.

AP pointed to the deep business ties between Dubai and Tehran and stated that $8 billion worth of goods is re-exported to Iran through Dubai annually, accounting for nearly a fifth of Iran’s total imports last year.

The report also noted that 500,000 Iranians live in the UAE, with assets estimated at $300 billion, about 300 weekly flights connect the two countries, and 9,500 companies in the UAE have an Iranian partner.

A prominent political analyst at the Emirates University, Abdullah Abdul Khaleq, told AP, “We don’t want to antagonize our neighbor Iran or upset our friend the United States. We don’t want to get very close to America and at the same time distance ourselves from Iran.”

He added, “UN collective sanctions are binding upon all countries and the UAE has a duty to obey them. But sanctions by the U.S. or Europe are not binding, and we are not party to it and won’t pay attention.”

In addition, Russia and China know that it is in their best interests to maintain close political and economic ties with Iran, and these two ascendant powers have no inclination to bow to the dictates of the United States and its allies.

Thus, it is clear that the Westerners’ efforts to pressure Iran by tightening sanctions have fallen flat, since Iran’s trade partners -- most notably Russia, China, and the UAE -- are doing what they can to thwart these measures by expanding their investments in Iran, especially in the oil and gas sectors.


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