December 1, 2011

Senate Passes Sanctions Despite White House Objections


Menendez hearing

Washington D.C. – Despite strong opposition from Obama Administration officials, the Senate unanimously passed legislation to force the President to impose sanctions on countries and companies that do business with Iran’s central bank or purchase Iranian oil. The provision was adopted as an amendment to Congress’ annual defense policy bill and must be approved by the House of Representatives before going to the President.

“The irony of this amendment is…there’s absolutely a risk that in fact the price of oil would go up, which means that Iran would in fact have more money to fuel its nuclear ambitions, not less, ” Undersecretary of State Wendy Sherman told the Senate Foreign Relations Committee hours before the vote.

The sanctions, sponsored by Senators Robert Menendez (D-NJ) and Mark Kirk (R-IL), have been endorsed as the harshest measure possible against Iran short of military strikes. It would impose a near total ban on any foreign government or financial institution from conducting transactions related to Iran. Critics have argued that similar to measures were taken against Iraq in the 1990s and contributed to humanitarian suffering that punished ordinary people and left the Saddam Hussein regime undeterred. Administration officials warned Senate backers of the proposal, which was offered as an amendment to the annual defense authorization bill, that it could increase the cost of gas and threaten economies in Europe and Asia.

There is “real concern that the amendment…has the potential to actually increase revenues to Iran,” testified Undersecretary of Treasury David Cohen.

Treasury Secretary Tim Geithner, sent a letter to the Senate this morning ahead of a planned vote on the sanctions proposal, conveying the Administration’s “strong opposition” to the amendment, warning that it would undermine international efforts to undermine Iran. “Rather than motivating these countries to join us in increasing pressure on Iran,” wrote Geithner, “they are more likely to resent our actions and resist following our lead – a consequence that would serve the Iranians more than it harms them.” While the U.S. does not conduct any transactions with Iran’s central bank, supporters of the sanctions proposal reason that the U.S. can use sanctions against other countries to force them to end all business regarding Iran. Cohen, however, argued that the “threat of coercion that is contained in the amendment” would alienate, rather than unite, the international community regarding the United States’ Iran strategy. Cohen said that the Obama Administration’s efforts had led to a significant withdrawal by other countries and entities from Iran’s economy. He said the Senate’s proposal could “result in less cooperation because of the reaction to the threat that is being visited on their financial institutions.” Senate supporters of the sanctions were unconvinced. “We need to cut off the fuel!” exclaimed Senator Menendez, who excoriated the Administration officials for opposing his measure. Members of the committee accused the Administration of attempting to “torpedo” the central bank sanctions effort at the last minute. Earlier versions of the proposal had been deemed controversial because of the impact they would have on gas prices in the U.S. and the impact they could have on European economies at risk of recession. The amendment’s supporters had agreed to a new version of the amendment that provides limited waivers aimed at preventing such outcomes. But concerns persist that the practical effect would still not prevent an oil price spike. The officials assured the committee that the Administration shares the same goal as the Senators supporting central bank sanctions. “We have a disagreement with the tactics,” added Cohen. “There’s a better way to go about it.” Related proposals to sanction Iranian oil exports by the European Union were reportedly put on hold today due to opposition from Greece, which is relying on credit purchases of Iranian oil in lieu of other willing sellers. However, the measure moved forward as an amendment in the Senate with no opposing votes. It was attached to a bill authorizing military programs for 2012, which passed the Senate and is expected to go to the President later this month. Although an annual defense authorization bill has passed Congress each of the past forty-eight years, the White House has issued a veto threat regarding separate unresolved provisions in this year’s bill.




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