Obama aims at Iran

US President Barack Obama and Russian President Dmitri Medvedev held talks on the sidelines of the Copenhagen summit Friday, but climate change wasn't high on the agenda. Instead, the US campaign against Iran was the focus.

Stratfor.com

US President Barack Obama and Russian President Dmitri Medvedev met on the sidelines of the Copenhagen summit on climate change on Friday. The news of the meeting was leaked late Thursday and followed a phone call between the two leaders on Saturday.

There are plenty of issues for Obama and Medvedev to discuss, none of which concern climate change. We are already hearing rumblings that negotiations on the now-expired Strategic Arms Reduction Treaty (START) have run into new hurdles that are apparently big enough for the heads of state to try and sort out. The meat of this discussion, however, is likely to concern an issue that’s weighing heavily on Obama’s mind these days: Iran.

In just a few days, Obama’s deadline for Iran to negotiate seriously on its nuclear program will expire. He has already made several pledges to Israel that he will not continue the diplomatic track with Iran indefinitely, and Israel has every intention of holding him to this pledge. It’s no coincidence that as this deadline is nearing, reports of Iran’s alleged nuclear weapon plans are occurring on a near-daily basis. Obama therefore is very rapidly running out of time to demonstrate to Israel that he is taking meaningful action against Iran.

But the definition of meaningful in Washington is not the same as it is to state leaders in Tel Aviv. Israel is looking for swift and decisive action against Iran, not another drawn out cycle of futile negotiations, proposals and counterproposals for Iran to manipulate as it continues work on its nuclear program. The United States, on the other hand, is more interested in buying time on Iran, and the building of a sanctions regime does just that. Come January 1, the Obama administration can be expected to take a more aggressive line on sanctions against Iran. The sanctions effort will take two forms: an international sanctions regime in the United Nations Security Council (UNSC), and quieter, "smart” sanctions driven by the US Congress, US Department of Treasury and the Manhattan District Attorney Robert Morgenthau’s office.

In this latter effort, the United States is building up lawsuits against specific energy firms, shipping companies, insurers and banks that are involved in the energy trade with Iran. Since the United States has designated the Islamic Revolutionary Guard Corps (IRGC) as a terrorist entity, and the IRGC is heavily entrenched in Iran’s energy (particularly gasoline) trade, the United States can potentially charge these firms with supporting a terrorist organization. The $US536 million fine slapped on Credit Suisse this week for moving money through the US financial system on behalf of Iran was intended as a warning shot as STRATFOR sources have indicated that US fines on other major European banks can be expected in the weeks and months ahead. While these legal cases are in the works, the Iran Refined Petroleum Sanctions Act that is currently making its way through Congress will give the administration an additional pressure lever against firms that have continued to deal with Iran.

The smart sanctions approach can slowly and steadily stress Iran’s gasoline trade, but the United States still has to contend with Russia and China, the two major loopholes to any international sanctions regime against Iran. Both Russia and China have already made clear that neither one is interested in discussing sanctions. After all, as long as the United States is caught in a bind over Iran, the less Moscow and Beijing have to worry about Washington meddling in their affairs. Russia has a penchant for using its support for Iran to influence its own negotiations with the United States and has the option of surging gasoline supplies to Iran to break apart a US-led sanctions regime. China meanwhile continues to swap gasoline for crude in trading with Iran and has already scuttled a face-to-face P-5 1 meeting on sanctions (citing a scheduling conflict) in favour of a conference call on December 22.

China will continue to resist sanctions as long as Russia remains in the anti-sanctions camp in the UNSC. As much as China would prefer to stick to diplomacy and avoid disrupting its trade ties with Iran, it also doesn’t want to be left as the odd man out should the United States succeed in bringing Moscow on board with a gasoline sanctions regime. At the same time, Russia is now saying that it won’t participate in sanctions if China doesn’t also participate. RIA Novosti on Wednesday issued a report quoting Vladimir Yevseyev, a senior research associate at a prominent Russian think tank known to act as a mouthpiece for the Kremlin, in which he said that US sanctions moves against Iran would be useless without China’s involvement.

The back and forth between Russia and China over sanctions is a good preview of the type of frustration the United States can expect in the new year in trying to build an effective sanctions regime against Iran. If the United States becomes the ball in a ping-pong match over sanctions, Israel will make the case that the sanctions effort isn’t good enough, and that the United States will have to turn to military options to deal decisively with Iran. Obama therefore needs Chinese and Russian cooperation, and needs it fast.

It appears that Obama has already begun working on China. A report surfaced in Israel’s Haaretz Thursday claiming that Obama, during his recent visit to Beijing, warned Chinese President Hu Jintao that he would not be able to restrain Israel indefinitely from attacking Iranian nuclear installations. Such a message would be designed to convince China that it’s better off supporting sanctions and helping the United States restrain Israel than risk a war in the Persian Gulf that would send oil prices soaring and wreak havoc on the Chinese – not to mention global – economy. Judging by China’s behaviour, they don’t seem to be warming to the idea of sanctions.

And then we have the Obama meeting with Medvedev on Friday in Copenhagen. We know the United States will request yet again that Russia participate in sanctions against Iran. It isn’t clear what Obama is willing to offer in return for Russia’s cooperation (since making large sacrifices of US interests in Eurasia could come back to haunt the United States in the not-too-distant future), but if Moscow is even going to consider changing its tune on sanctions, Obama’s offer will have to be significantly more enticing than the ones made in the past.

Stratfor provides intelligence services for individuals, global corporations, and divisions of the US and foreign governments around the world.