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Cutting the Iran-China Connection

Thursday, February 14, 2013

Time for meaningful non-military pressure against Iran is quickly running out. U.S. policy needs to inflict more economic pain now.

Just what will it take to bring Iran’s nuclear ambitions to heel? The past year has seen a dramatic expansion of economic pressure against the Iranian regime by the United States and Europe, all with a single-minded purpose: to ratchet up the costs to Iran of its stubborn atomic endeavor.

Yet Iran’s economy, though undeniably ailing, remains afloat. True, Iranian officials have admitted that their country’s energy trade has constricted by nearly half as a result of U.S. and European sanctions, costing the Islamic Republic around $100 million daily. But the Iranian regime remains defiant and has embraced the idea of fiscal austerity — what the country’s supreme leader, Ali Khamenei, terms an “economy of resistance” — as an antidote to Western pressure.

Time, moreover, seems to be on Tehran’s side. Western intelligence sources warn that Iran could have nuclear weapons as soon as a year-and-a-half from now. Yet, according to modeling done by the Washington-based think tank Foundation for Defense of Democracies, Iran’s economic “cripple date” — the moment at which the Iranian regime will need to either cave on its nuclear program or face fiscal implosion — could lie later than that, perhaps significantly so.

As a practical matter, that means that the Iranian regime could well muddle through until the ayatollahs get the bomb. And once that happens, the international consensus about Iran’s isolation will begin to crumble, as sympathetic countries and companies angle for a return to business as usual with Tehran.

By necessity, then, U.S. policy needs to focus on broadening the economic pain inflicted on Iran’s rulers. It has begun to do so; sweeping new provisions recently passed by Congress as part of the National Defense Authorization Act and since signed into law by President Obama target entire sectors of the Iranian economy in what amounts to a significant bid to expand fiscal pressure on the Iranian regime.

Yet a shift in geographic focus is also necessary. That’s because, as its economic fortunes have dimmed, Iran has increasingly turned to Asia as its economic lifeline. Asian nations (among them Japan, India, and South Korea) now make up the lion’s share of Iran’s energy trade. But it is China, long the Islamic Republic’s most stalwart diplomatic ally in the region, that has assumed the role of an indispensable energy partner.

China, long the Islamic Republic’s most stalwart diplomatic ally in the region, has assumed the role of an indispensable energy partner.

The numbers tell the story. According to the Economist Intelligence Unit, China now accounts for approximately 50 percent of Iran’s crude oil exports. That means that Beijing buys half of the roughly 1 million barrels per day that Iran sells abroad. And while Chinese imports of Iranian oil — like those of India, Japan and South Korea — have declined appreciably over the past year, falling by more than one-fifth, it’s clear that much more still can be done by Beijing.

And not just on the energy front. China has long assisted Iran in the defense arena and remains a critical source of nuclear assistance and know-how for the Iranian regime. In fact, according to knowledgeable nonproliferation experts, if Beijing were to crack down in earnest on Chinese entities engaged in such trade, the results would likely cripple Iran’s atomic program, at least in the near term.

Yet the Chinese government hasn’t done anything of the sort. Instead, it has adopted what amounts to an incremental policy on Iran. On energy, it has done the bare minimum necessary to remain within the letter, if not the spirit, of new economic restrictions being levied by the West. On nuclear proliferation, Beijing has done even less.

It’s a strategy that has worked, at least so far. Twice now, China has received waivers from the Obama administration exempting it from penalties imposed by new U.S. sanctions, despite a host of irregularities relating to its energy trade with Iran. In granting the waivers, the White House has made abundantly clear that it hopes carrots, rather than sticks, will help China to come around.

Perhaps that will be the case. But among policymakers in Washington, there’s a growing realization that time for meaningful non-military pressure against Iran is quickly running out. There should also be a recognition that if U.S. sanctions are to stand a prayer of stopping Iran’s march toward the bomb, they will need to focus in earnest on cutting the Iran-China connection.

Ilan Berman is vice president of the American Foreign Policy Council.

FURTHER READING: Berman also writes “Another Surrender in the War of Ideas.” Maseh Zarif says “Iran's Centrifuge Plans Would Undermine U.S. Policy Assumptions.” John R. Bolton contributes “What to Ask Chuck Hagel about Iran's Nuclear Threat.” Michael Rubin discusses “Deciphering Iranian Decision Making and Strategy Today.”

Image by Dianna Ingram / Bergman Group

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