U.S., Europe choose risky strategy with sanctions on Iran

Reporting from Washington and Tehran —  By imposing new economic sanctions that aim to punish ordinary Iranians as well as high-ranking officials, Washington and its European allies have embraced a risky strategy that could backfire on their efforts to stop Tehran’s suspected nuclear weapons program.

The Obama and George W. Bush administrations sought for years to pressure Iran with so-called smart sanctions that targeted the country’s elites.

But in recent weeks, the Obama administration and its allies have thrown smart sanctions overboard, slapping Iran with broad restrictions on oil exports and banking that they hope will damage the economy so badly that they force the leadership to change course.

The Iranian economy has started to suffer. The value of the currency has plummeted, prices are rising, credit is tight and anxious consumers are snapping up staples in expectation of worse to come.

But some current and former officials acknowledge doubts about whether indiscriminate sanctions will turn the country against the mullahs, or only serve to stir anger against the West.

On Sunday, the Iranian oil minister, Rostam Ghasemi, said that Iran will soon stop oil exports to “certain countries” — a reaction to the European Union’s decision to impose an embargo on imports of Iranian oil as of July 1. The minister did not identify the target countries, but such a move could harm already ailing economies in nations such as Greece and Spain.

In Iran, people are expressing skepticism the policy will work. Ray Takeyh, a former Obama administration advisor on Iran, said it was difficult to predict what will happen.

“All we have now is theories,” he said. “It’s just not clear.”

There is a risk that acute suffering of Iran’s people could split the Western coalition that supports sanctions — as happened when the United Nations imposed an economic embargo on Saddam Hussein’s Iraq.

Iran insists that its nuclear program is intended for only peaceful purposes. But many Western countries and others fear Iran may be less than a year away from gaining the know-how to make a bomb.

The new Western measures include a European oil embargo, which aims to sharply reduce the oil revenue on which Iran depends, and U.S. sanctions on Iran’s central bank, which are intended to sever Tehran from the world economy. Western officials are trying to amplify the effects of these steps by persuading other top purchasers of Iranian oil — Japan, South Korea, China and India — to turn to other sources for at least part of their supply.

Iranian President Mahmoud Ahmadinejad described the latest sanctions as “the heaviest onslaught on a nation in history.”

Critics are wary of being seen as tools of foreign governments.

“The silent opposition inside the country does not want to be stooges of the United States and other countries,” said Fariborz Raisdana, a political and economic analyst. “They want to find a domestic solution for their own country.”

There is wide and growing concern that the sanctions will punish the most vulnerable.

“The first victims will be the poor and helpless,” Raisdana said. “Then the middle class, and ultimately the tiny minority of the rich whose consumer goods are imported from abroad.”

Ahmadinejad has made much the same argument, saying officials would still be able to drive their government-owned cars without feeling the pinch. He said Thursday that Iran was open to talks about its nuclear program.

Over the weekend, inspectors for a U.N. watchdog agency arrived in Iran to inspect the nation’s nuclear facilities. Iranian Foreign Minister Ali Akbar Salehi vowed transparency with the inspectors and said the visiting officials would have access to any site they asked to see.

In a sign of the public’s anxiety about the collapsing value of their savings, consumers are stockpiling nonperishable goods as a hedge against rising prices.

“People are anxious to buy detergent powder and staple foodstuff and store it for the future,” said a shopkeeper, who gave his name as Ali Agha. “They expect prices will go up in the near future and they can save a bit by buying things at the old price.”

Colin Kahl, who until last month was a senior Pentagon official for the Middle East, said he saw “some evidence” in anecdotal comments of Iranians that sanctions will increase public pressure on authorities. But Kahl, who is now with the Center for a New American Security and Georgetown University, acknowledged that the evidence was limited.

The administration moved toward broad sanctions gradually and reluctantly.

At the beginning of the Obama presidency, U.S. officials emphasized that they believed such sanctions would punish the innocent and could backfire politically.

After imposing broad sanctions on Hussein and Serbian strongman Slobodan Milosevic, world powers mostly came to the view that sanctions could be manipulated by governments to consolidate their political support and even make huge profits.

Secretary of State Hillary Rodham Clinton said the administration wanted to hit the government “without contributing to the suffering of the ordinary people, who deserve better than what they are currently receiving.”

But efforts to freeze the assets, constrain the businesses and limit foreign travel of the elites weren’t enough to bring the government to the negotiating table.

“They convinced the Iranian leadership that we were hostile to them, but they weren’t enough to bring them to the table,” Kahl said.

U.S. lawmakers, sensitive to Israel’s worries about the Iranian nuclear program, increasingly clamored for sanctions that would hit the entire Iranian economy. In December, the Senate forced the administration’s hand by voting unanimously for legislation imposing sanctions on the Iranian central bank. Sanctions already imposed on other banks leave the central bank as the only institution that can carry out transactions for the oil industry, on which the Iranian economy depends.

“They’d gone this route and rejected it,” said George A. Lopez, a specialist on economic sanctions at Notre Dame University. “Now they’re retracing the historical path.”

A senior official of the Treasury Department, which implements the sanctions program, said: “We have no interest in harming ordinary Iranians. But the responsibility for that [lies] clearly with the Iranian government, whose intransigence has led to greater diplomatic and economic isolation.”

Even with the more powerful sanctions, Iran is hardly faced with the kind of privations suffered by Iraq.

U.S. and European officials say they intend to monitor the effects of the sanctions carefully, to make sure that they do not bite so hard that they backfire.

Still, officials say they may pile on more punishments if these don’t do the job because they view the alternative, military action, as even less appealing.

“If Iran continues to choose its path of defiance, we will continue to develop new and innovative ways to impose new and ever more costly sanctions,” Treasury official David Cohen told Congress in December.

paul.richter@latimes.com

Times staff writer Richter reported from Washington and special correspondent Mostaghim from Tehran. Staff writer Patrick J. McDonnell in Beirut contributed to this report.