Setting the sanctions trap for Iran

The next step in this pressure campaign is the sanctions regime being crafted by Stuart Levey, undersecretary of the Treasury for terrorism and financial intelligence. This will have several interlocking components: The showpiece will be a new U.N. Security Council resolution to add sanctions against the Iranian Revolutionary Guard Corps and its affiliated companies, along with other Iranian firms involved in manufacturing, transporting and financing weapons shipments and other illicit activities. But that’s just the beginning.

The administration knows the resolution will be watered down by Russia and China, but it wants the U.N. sanctions anyway — as a platform for additional measures by the United States and its allies. It’s these private and unilateral sanctions that will have real bite: As the Iranians try to evade them, their deception will trigger additional punitive measures…

An example of how the sticky trap can work is the case of the state-owned Bank Sepah. The United States imposed sanctions in January 2007, alleging that the bank had financed development of missiles that could carry nuclear weapons. The United Nations added its own sanctions against the bank in March 2007.

The Iranians allegedly then turned to two other state-owned institutions to finance nuclear activities, Bank Melli and Bank Mellat. The United States hit them with sanctions, too, and pressured international banks to stop doing business with them. Banks that allegedly helped the Iranians evade controls were whacked with big fines. To settle U.S. government charges last December, the British bank Lloyds agreed to pay $217 million and Credit Suisse agreed to pay $536 million. Most global banks have decided that doing business with Tehran isn’t worth the risk.