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Smarter sanctions

On Iran, the options for the U.S. are limited, but the best ones are through the U.N. Security Council.

March 19, 2007

ECONOMIC SANCTIONS have a bad reputation. That's unfortunate, because the kind of sanctions the United States is proposing for Iran are more effective and more humane than sanctions used to be. They also happen to be more realistic than any of the other options regarding Tehran.

So just how good is the draft package of sanctions against Iran that is now pending before the U.N. Security Council? Better than expected, actually, though not as tough as the United States would like.

The resolution was agreed on last week after a remarkably short negotiation -- just 20 days -- among the United States, Britain, China, France, Germany and Russia. The full Security Council could adopt the resolution as early as this week. If Iranian President Mahmoud Ahmadinejad comes to New York to bully, hector and threaten the council before the vote, as now seems likely, he'll probably succeed in making the vote for sanctions unanimous.

The resolution is winning international support from such traditional friends of Tehran as Moscow precisely because it does not attempt to crush the entire Iranian economy. But it does target the business ventures and people directly responsible for Iran's nuclear and ballistic missile programs, freezing the assets of research institutes, scientists, a major bank and seven senior members of the Iranian Revolutionary Guard, as well as companies that are owned by and help finance the guard's activities. (Like China's Red Army, Iran's Revolutionary Guard is mostly self-financed by its extensive business activities.)

But even more powerful is the private sector's reaction to the financial sanctions against Iran and its response to a global ban on giving Iran grants, loans or any financial assistance other than humanitarian aid. Already, some financial institutions are demurring about doing business with Iran, worrying about "reputational risk" and the need for greater "due diligence" before entering into any ventures. Some have declined to issue new letters of credit to Iranian companies. Capital flight from Iran to offshore Persian Gulf banks is reportedly underway.

Meanwhile, the ayatollahs' revolutionary baby boom has spawned a massive youth unemployment problem. Ahmadinejad's mismanagement of the Iranian economy has brought on high inflation and popular ire.

A new high-denomination currency note introduced last week features the nuclear symbol superimposed on a map of Iran, but there are already jokes about how little it will purchase. U.N. sanctions won't bring Iran to its knees and cannot stop a determined nuclear weapons program. But they might help create a climate in which Iran's hard-line, pro-nuclear president can fail on his own.

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