February 10, 2010

U.S. sanctions IRGC engineering firms

A day after Iran said it was beginning to feed low enriched uranium through centrifuges at its Natanz pilot facility to create nuclear medical isotopes, the U.S. has announced sanctions on four engineering firms said to be controlled by Iran's Islamic Revolutionary Guards Corps (IRGC).

The Treasury Department announced today that it is formally designating four subsidiaries of the Khatam al-Anbiya Construction Headquarters as well as the IRGC general who runs the firm, Rostam Qasemi. The action is based on a 2005 Executive Order freezing the assets of designated WMD proliferators and their supporters, the Treasury Department said.

Treasury in 2007 designated the Khatam al-Anbiya engineering firm itself, which Treasury described as "involved in the construction of streets, highways, tunnels, water coneyance projects, agricultural restorations projects and pipelines." Today, it formally designated four subsidiaries: the Fater Engineering Institute, the Imensazen Consultant Engineers Institute (ICEI), the Makin Institute, and the Rahab Institute. 

“As the IRGC consolidates control over broad swaths of the Iranian economy, displacing ordinary Iranian businessmen in favor of a select group of insiders, it is hiding behind companies like Khatam al-Anbiya and its affiliates to maintain vital ties to the outside world,” Treasury Undersecretary and sanctions czar Stuart Levey said in a statement. "Today's action exposing Khatam al-Anbiya subsidiaries will help firms worldwide avoid business that ultimately benefits the IRGC and its dangerous activities.”

"This is all about the timing," said former Treasury Department official Michael Jacobson, now with the Washington Institute for Near East Policy. "This is an effort to show, 'We're serious about ramping up the pressure.'"

The Obama administration has "been talking about [sanctioning] the IRGC for a long time," Jacobson continued. "This is where there is the most consensus internationally. This is the one thing everyone can agree on" to penalize, he said, citing the IRGC's role in human rights abuses, in the Iranian economic sector, and proliferation.

In October 2007, the U.S. designated the IRGC and IRGC-Qods Force for their involvement in proliferation and terrorism-support activites. Elements of the IRGC have also been designated for UN sanctions under two previous UN Security Council resolutions on proliferation grounds.

The Foundation for the Defense of Democracies' Mark Dubowitz said today's designation was a good start, given the dominant role of the parent firm (whose full name is Gharargah Sazandegi-ye Khatam al-Anbia, or GHORB) in the Iranian energy sector. "To have any meaningful impact on the activities of the IRGC, targeted sanctions must focus on the Guard’s leaders and front companies active in Iran's energy sector," he said. "Oil provides about 80% of Iran’s export earnings and 50% of government revenue."

"Given the dominance of the Revolutionary Guard in the Iranian energy sector, Asian and European companies might find it difficult to do business in this energy sector without transacting with IRGC companies," he added.

In 2006, Dubowitz said, Ghorb received more than $7 billion in contracts including, as reported by International Oil Daily, a $2 billion contract to oversee the development of the South Pars gas project, and a $1.3 billion no-bid contract for a gas pipeline running from a port near South Pars to the border with Pakistan.

In recent Iran policy discussion, the Obama administration has been cautious about sanctioning the firms of countries that it is working with internationally to isolate Iran, as bills recently passed in both houses of Congress would do, in particular as it seeks to get a new resolution on Iran through the UN Security Council. Among the countries it needs to vote for a resolution at the Security Council, several countries with energy and other investments in Iran, including Austria, Russia, and Japan. 

China, a permanent member of the Security Council, has so far indicated it does not support new economic sanctions on Iran. But some western diplomats expect that it will at least abstain from a veto, or possibly support a weak resolution. It takes nine countries to pass a resolution in the 15 member UN Security Council, but the U.S. would want it to pass ideally with a bigger margin to signal international solidary. 

"As these things go, they usually try to get as close to unanimous as possible because of concerns that a split vote will send the wrong message to Tehran," says the Foreign Policy Initiative's Jamie Fly, a former Bush-era NSC official. 

But even a weak UN Security Council resolution could help facilitate further international action on Iran, including European Union sanctions on Iran. The EU is currently Iran's second largest trading partner, after China, the Financial Times reported this week.

Defense Secretary Robert Gates wants a new UN sanctions resolution on Iran passed in "weeks, not months," his spokesman Geoff Morrell said yesterday.

Meantime, the International Atomic Energy Agency said that it would convene a board of governors meeting on Friday. At the last one in November, the IAEA board of governors voted for a resolution rebuking Iran for its lack of compliance with the IAEA, including for failing to disclose its construction of an enrichment facility in Qom until last September.

The IAEA rebuke passed overwhelmingly, including with votes of Moscow and Beijing. Malaysia reportedly recently recalled its rep to the IAEA for voting against the resolution.

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