2013 looks like being a crunch year in Iran's relationship with the outside world - between a military and a negotiated outcome to her long running pursuit of nuclear capability.
On the one hand, Tehran gets ever closer to being able to make enough weapons grade enriched uranium to build a nuclear warhead and on the other the regime confronts an economic crisis of increasing intensity and from which there is no easy exit without relief from UN, US and EU international economic sanctions.
Another round of talks with Tehran led by the EU's Foreign Affairs Representative Catherine Ashton began in Kazakhstan this week. As on previous occasions, an issue will be the good faith of the Iranian side: are they coming to the table to seek agreement on the substance of nuclear issues or is this simply one more play in a long line of feints designed to get relief from economic pressure? While the genuineness of Iran's willingness to negotiate on core nuclear issues remains in doubt, it is important that no slackening is signalled in the greatly strengthened sanctions regime which has played its part in getting Tehran to the table once again. Indeed, the reverse of soft pedalling is needed: remaining gaps need closing, especially those which bear directly on Iran's ability to continue her enrichment programme.
One such is Iran's shipping industry- the life line of the economy- and certain key commodities it still carries. Most Iranian trade travels by sea. Sanctions targeting Iran's shipping industry have made it increasingly difficult for the regime to export oil and petrochemical products, import raw materials, and ship weapons to its proxies in the region. But loopholes remain.
Working with United Against Nuclear Iran (UANI), a non-partisan, US non-profit group, seeking to prevent a nuclear armed Iran, the UK based think tank, Institute for Strategic Dialogue (ISD) has for the last year argued for a strengthening of the European sanctions regime against Iranian tankers. In a move advocated by UANI-ISD, the European Union in October banned the licensing and provision of technical services and spare parts for the Iranian maritime industry. As almost all vessels of the Iranian tanker fleet are fitted with European engines, this has impeded the safety certification of these engines. And without a safety certificate, access to international harbours has become next to impossible for Iranian tankers. Furthermore, as a result of Iranian oil being delivered on uninsured, uncertified tankers sailing flagless with unsafe engines, customers of Iranian oil are now demanding significant discounts.
In the much tightened sanctions regime, there still remain important loopholes, some of them directly enabling Iran to continue her nuclear programme. The ability to obtain or produce steel is an example. As the sanctions regime has made payment for imports into Iran increasingly difficult, shipments of steel have fallen drastically. As a result, Iran has turned to domestic production. To fuel this, Iranian imports of coal and coke rose dramatically in 2012. The majority of the vessels transporting these goods are either insured or reinsured in Europe. European sanctions legislation should be amended urgently to ban insurance and reinsurance for ships that carry coal, coke, and other raw materials necessary for steel production, to Iran.
It is in the nature of sanctions regimes that they need constant adaptation when gaps are spotted. The case of Iran is no exception. Thus, port authorities round the world now need to be directed to prevent maritime service providers from circulating freely after visiting Iranian ports. Unless they are providing humanitarian services, ships calling at Iranian harbours should be refused entry to European and American ports, thereby compelling shipping companies and their clients to choose between access to Western markets and continuing their operations in Iran.
Economic sanctions incur significant economic losses for all parties. Provided they are successful, they nevertheless represent the least bad way forward in relation to Iran. And to give diplomacy a real chance of success, they have to be efficient and effective.