By Peter Spiegel, Jay Solomon and Joe Lauria

Source:

May 18, 2010

WASHINGTON—The U.S. announced a long-sought deal with Russia and China on a new list of sanctions to punish Iran for its nuclear program, and the United Nations took them up within hours, in a move to reassert control of nuclear diplomacy after Tehran tried to pre-empt sanctions a day earlier.

Washington called the proposed list the toughest sanctions to date, but U.S. officials acknowledged they had to be softened in key areas to gain Russian and Chinese agreement.

And even as China joined in, Beijing’s foreign ministry also praised the last-minute deal Iran made with Brazil and Turkey as “welcome,” and dubbed the two rival efforts “dual tracks”—leaving some uncertainty over where China would ultimately side.

The agreement on a draft U.N. resolution was reached within the last several days. Senior administration officials said its unveiling was timed as a direct response to the Turkish-Brazilian pact, in which Tehran renewed an offer to swap much of its nuclear fuel outside its borders for enrichment.

“This announcement is as convincing an answer to the efforts undertaken in Tehran over the last few days as any we could provide,” Secretary of State Hillary Clinton said on Tuesday.

Russian ambassador to the U.N. Vitaly Churkin told reporters that Russia would have preferred to wait a day or two after the Brazil-Iranian deal, but the U.S. wanted to put it on the table right away.

Western officials feared that the deal reached in Tehran could throw up new hurdles to the already-delayed sanctions regime.

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Mrs. Clinton said Tuesday that while the U.S. believed Turkey and Brazil’s moves were “sincere efforts,” the U.S. and its fellow permanent members of the U.N. Security council were “proceeding to rally the international community on behalf of a strong sanctions resolution.”

There was no public reaction from Iranian officials by late Tuesday to the announcement of a sanctions deal.

The Turkish and Brazilian efforts still could throw a wrench into the U.S. plans. Maria Luiza Ribeiro Viotti, Brazil’s ambassador to the U.N., told reporters outside the Security Council after seeing the draft that Brazil wasn’t ready to engage in negotiations over the text because of the “new situation” presented by the fuel-swap deal.

“It is the first time that the Iranians, at such a high level, have put in writing the swap, which creates a new confidence building,” she said. The fuel-swap deal is not “meant to address all the issues,” she added, “but it is a very important first step and we should seize this opportunity.”

China has long been the most resistent permanent member of the U.N. Security Council to sanctions, partly because of its reliance on Iranian oil. China’s veto power has forced the U.S. to vigorously pursue its support and compromise on key elements of the plan. Beijing’s use of the “dual tracks” phrase, meanwhile, echoed U.S. language promising to keep pursuing diplomacy along with punishment.

The proposed sanctions list includes a prohibition of sales on a wide range of conventional weapons—from fighter planes to missile systems—as well as a ban on countries from providing harbor to ships suspected of carrying contraband goods headed to Iran.

Overall they are significantly weaker than earlier drafts circulated by the administration. Many provisions contain loopholes allowing countries to evade their intent: They only urge, rather than require, countries to comply.

“We think this is a strong resolution that will substantially increase the pressure on Iran and the isolation that it feels, but it is part of a process and is not an end in itself,” said a senior U.S. official involved in the negotiations.

U.S. officials acknowledged the new resolution alone was unlikely to halt Iran’s nuclear ambitions; instead, they said it could lead other countries to enact their own unilateral financial sanctions that could have more bite.

The U.S. initially hoped to blacklist two of Iran’s major transportation companies, the state-owned Islamic Republic of Iran Shipping Lines and IranAir Cargo.

Both are alleged to play a major role in moving Iranian arms and procuring equipment for Iran’s nuclear program. The current draft, however, calls for closer scrutiny of the companies’ operations.

In addition, U.S. officials had initially hoped to secure an international ban on investments in certain Iranian financial instruments, like bonds, and in Iran’s insurance sector.

The current draft only calls for greater scrutiny of the indemnification of companies that could be involved in Iran’s weapons trade. The U.S. also backed off an earlier plan to blacklist Iran’s central bank.

The resolution avoids measures against Iran’s biggest economic driver, its energy industry, despite calls by some members of Congress for “crippling sanctions” aimed specifically at the sector.

Legislation passed by both houses of Congress, for instance, would require sanctions against any foreign companies doing business with Iran’s oil industry.

“There’s no doubt that broader sanctions, aimed at the oil and gas sectors, would hurt more,” said Sharon Squassoni, former head of nonproliferation at the State Department now at the Center for Strategic and International Studies. “But few states have been willing to cut their ties with an important source of oil and gas; they don’t want to lose out on future investments.”

Important U.S. allies like Japan and South Korea are major buyers of Iranian crude and officials have argued that to deprive them of the ability to buy Iranian oil would be destabilizing for global energy markets.

Still, U.S. officials said they believed the sanctions resolution could have a significant impact on Iran’s ability to build up its nuclear capabilities with impunity.

Among the provisions most touted by U.S. officials is a measure that calls upon countries to block any financial transaction that could be tied to Iranian nuclear proliferation.

The senior U.S. official said the provision was similar to, but broader than, a measure adopted last year in sanctions against North Korea, adding it has proven among the most effective tools in curtailing Pyongyang’s program.

“It has been a very effective tool for the U.S. and others to limit and call into question financial transactions across the globe that could contribute to Iran’s nuclear or proliferation-sensitive activities,” the official said.

Though the U.S. failed to formally blacklist IRISL, the Iranian shipping company, or IranAir, U.S. officials still believe they can use the latest resolution to significantly impact Tehran’s ability to import and export dual-use technologies and to prove arms support for Iranian allies, such as the militant groups Hamas and Hezbollah.

An earlier 2008 U.N. resolution already calls for member states to closely scrutinize the operations of these companies.

And the U.S. Treasury has used this language to launch a global campaign to pressure international insurance companies not do business with IRISL or Iran Air.

In recent months, important insurance “clubs” in the U.K and Bermuda have ceased doing business with IRISL. U.S. officials believe they’re greatly increasing the cost of Iran’s business dealings.

U.S. officials hope the newest resolution will give Treasury greater powers to pressure international corporations away from doing business with Iran, by naming specific companies they should shy away from. It could serve as informal embargo on Iran if its transportation companies can’t operate internationally, U.S. officials said.

Washington on Tuesday also offered a detailed critique of the Turkish-Brazilian deal struck in Tehran. Although it bears some of the hallmarks of the original deal offered to Iran last year—allowing Tehran to ship its nuclear fuel overseas to be enriched to levels used in medical research—Mrs. Clinton said it still had significant failings, particularly Iran’s refusal to halt its own nuclear enrichment.

Mrs. Clinton said the deal also had an “amorphous timeline” for removing the low-enriched uranium from Iran, which could take “months of further negotiation” to begin. “That is just not acceptable to us and to our partners,” she said.

—Chip Cummins and Jason Dean contributed to this article.