US steps up Iran sanctions ahead of talks

The US has unveiled new sanctions against Iran, in a move that highlights Washington’s drive to keep pressure on the Islamic Republic ahead of a new round of negotiations with Tehran next month.

Tuesday’s announcement by the Treasury department, targeted at Iran’s main shipping line and its Revolutionary Guard Corps, also marks the way US and international sanctions now hit Iran’s overall economy.

“Because our sanctions are focused on illicit conduct, the fact that they have an impact on Iran and cause economic discomfort is legitimate,” Stuart Levey, the US Treasury undersecretary who spearheads the sanctions effort, told the Financial Times in an interview.

“It’s our belief that, the more stark the choice for Iran, the better chance you have of a change in Iran’s conduct.”

Tehran has also just slashed fuel subsidies, a step the US believes is connected with its own sanctions on refined oil shipments to Iran. Tehran has inadequate refining capacity of its own.

Mr Levey emphasised the US and its allies would be maintaining pressure on Tehran ahead of talks next month in Istanbul. A previous round of negotiations this month in Geneva failed to yield any progress on the dispute over Iran’s nuclear programme.

US officials say the sanctions campaign is discomfiting Iran’s leadership, but add that there is little sign the pressure has prompted the country to consider seriously international calls for it to rein in its nuclear activities. While Iran insists the programme is purely peaceful, the US and its allies suspect it of seeking nuclear weapons capability.

Unilateral moves by Washington are also magnified by recent US legislation that threatens sanctions against groups from third countries that do business with listed Iranian banks and companies, thus making the impact of US Treasury designations international in scope.

Of particular significance are the series of moves against the Islamic Republic of Iran Shipping Lines, Iran’s biggest container shipping group, which physically carries out much of the country’s non-oil trade. Even before Tuesday’s announcement, the European Union had targeted the company, including subsidiaries in the UK, Germany, Italy and Malta, and a UN resolution had frozen the assets of three of its subsidiaries and called on member states to “exercise vigilance” over dealings with the company as a whole.

US officials say the company is now in dire straits, unable to get financing or insurance from many western groups and practically barred from many international ports, not least because of the risk its vessels will be impounded because of overdue loans.

“IRISL is very unsettled if not thrown by these arrests,” said Adam Szubin, head of the Treasury’s Offiice of Foreign Assets Control, referring to moves by authorities in Singapore, Hong Kong, and Malta to hold five IRISL ships because of disputes over loan payments.

He described as a “pincer move” the US’s latest step – targeting an Iranian group that has stepped in to provide insurance to IRISL that international companies are reluctant to sell. If IRISL is unable to demonstrate adequate insurance, the number of ports it is able to call at could also be further reduced.

Other steps announced by the US Treasury on Tuesday target a holding company for the Revolutionary Guard that owns two Iranian banks, and the Guards’ own shipping company, Liner Transport Kish, which the US says has transported arms to Hizbollah.

Copyright The Financial Times Limited 2010.