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U.S. Officials Say Iran Sanctions Having 'Dramatic' Effect'

Stuart Levey of the U.S. Treasury Department told Congress that Iran was becoming financially isolated.

WASHINGTON -- U.S. officials say international sanctions against Iran have cost its government billions and slowed its suspected efforts to build nuclear weapons.

Stuart Levey, the U.S. Treasury Department's undersecretary for terrorism and financial intelligence, told the House of Representatives Committee on Foreign Affairs on December 1 that Washington and the international community have "made significant progress" on implementing a strategy toward Iran aimed at putting pressure on Tehran to fulfill its obligations under international nonproliferation treaties.

Levey told the Congressional committee that the impact of June's UN Security Council Resolution 1929 -- in addition to bilateral sanctions from the United States and EU that cut Iran off from financial services and energy sector investment, and froze the assets of "a wide range of illicit Iranian actors" -- have sharply impacted Iran's economy.

"What we are seeing thus far is very dramatic. Even banks that had previously been willing to do business with designated Iranian banks are now reversing course and cutting ties with Iran altogether," Levey said.

Financial Isolation

A few years ago, Iran was making deals with the world's largest and most prestigious banks, Levey said, and today was "relegated to the margins of the international financial system...finding it increasingly difficult to access the large-scale, sophisticated financial services necessary to run a modern economy efficiently."

Some 17 Iranian banks are now blacklisted by most major financial centers and a new U.S. law effectively forces international financial institutions to choose between dealings with the United States or Iran.

The U.S. Treasury has heavily targeted the Islamic Republic of Iran Shipping Lines (IRISL) with sanctions for transporting weapons-related materials.

Levey said France's Credit Agricole Corporate & Investment Bank seized three IRISL ships a few months ago in Singapore because Iran could not buy insurance for the vessels, which violated terms of a $235 million loan agreement.

Further, Levey said the economic difficulties were causing disarray among Iran's leadership, which he said "appears to have underestimated the severity and effects of the global financial measures, giving rise to internal Iranian criticism and finger-pointing."

"The cumulative effect of sanctions has been to increasingly isolate Iran from the international financial system. Iran is effectively unable to access financial services from reputable banks and it is finding it increasingly difficult to conduct major transactions in dollars or euros," he said.

Those difficulties were part of the reason Iran's currency, the rial, plunged sharply in September, setting off a prolonged effort by Iran's Central Bank to stabilize it.

Sharpening The Choices

Testifying with Levey at the hearing was U.S. Undersecretary of State William Burns, who told the panel that Iran could lose $50 billion to $60 billion in potential energy investments, along with critical technology and know-how from major international companies.

"The net result of all of the measures we have applied in recent months is substantial, far more substantial than any previous set of steps," he said.

In written testimony submitted for the official record, Burns also noted that "sanctions have hindered Iran's development of a nuclear weapons capability and the means to deliver them."

To the panel, he said he couldn't "predict how these collective and individual measures will affect the choices Iran's leadership makes" but vowed that the United States "will continue to sharpen those choices."

"We will show what's possible if Iran meets its international obligations and adheres to the same responsibilities that apply to other nations. We will intensify the cost of continued noncompliance and show Iran the pursuit of a nuclear weapons program will make it less secure, not more secure," he said.

President Barack Obama's top adviser on Iran, Dennis Ross, said today that U.S. attempts to pressure Iran into negotiations were "never meant to humiliate Iran or put Iran in a corner."

In remarks at a policy discussion at the U.S. Institute For Peace in Washington, Ross said the sanctions that followed failed attempts to get Iran back to the negotiating table seem to have caught Tehran off-guard. "I think it's fair to say that the severity and the scope of these sanctions surprised Iran," he said.

The so-called P5+1 negotiating group -- Russia, Great Britain, France, China, Germany, and the United States -- will meet next week in Geneva for nuclear talks with Iranian officials for the first time in more than a year.

Burns said the group was approaching the meeting with a "genuine readiness to engage constructively."

He added, "The door is open to serious negotiation if Iran is prepared to walk through it."

with agency reports