Obama Turns to China, Mideast to Bid to Get Iran Sanctions `Globalized'

By Viola Gienger - Jul 29, 2010

The Obama administration will urge China and other governments in Asia, the Middle East and South America to impose sanctions on Iran in a widening effort to persuade the regime to abandon any pursuit of nuclear weapons.

Deputy Assistant Secretary of the Treasury Daniel Glaser told the House Oversight and Government Reform Committee in Washington today that he and other U.S. officials will travel to these regions to ensure sanctions against Iran are “globalized.”

China will be a key focus, said Robert Einhorn, a special adviser at the State Department. He said he and Glaser will visit Beijing to speak with officials there at the end of August, and that the issue is being raised at the highest levels.

“We need to speak with the Chinese,” Einhorn told the committee. “We need for them to enforce” United Nations sanctions “conscientiously” and stop coming to Iran’s aid when companies from other countries end their business with the regime, he said.

While European companies identified by the U.S. as investing in Iran’s energy sector have responded, oil and gas services suppliers in China, Russia, India and South Korea haven’t commented, Joseph Christoff, international affairs director at the Government Accountability Office, told the panel.

Skirting Sanctions

The United Arab Emirates must be targeted more aggressively for its role as a transshipment point for supplies to Iran from companies seeking to skirt sanctions, Christoff said.

The U.S. has ramped up sanctions on Iran and companies doing business with the regime after diplomatic efforts last year failed to halt the country’s uranium enrichment, a process that can be used to produce fuel or make a nuclear bomb.

A new round of UN sanctions was followed earlier this month by intensified U.S. penalties.

The sanctions pressure is critical to prevent an escalation of the threat from Iran, Einhorn and several committee members said.

“A nuclear-armed Iran would severely threaten the security and stability of a part of the world crucial to our interests and to the health of the global economy,” Einhorn told the panel.

No Waivers

Congress should make sure the administration doesn’t waive the U.S. sanctions as presidents have in the past to protect alliances with countries where violating companies are based, several lawmakers said.

“If we don’t do that, in my opinion, I think we are on the precipice of a war which could threaten the economy of the United States, not just the Middle East” because of the U.S. dependence on oil and gas from the region, said Representative Dan Burton, an Indiana Republican.

Officials of Repsol YPF SA of Spain have met with the GAO twice in past three months since the agency issued a list of 41 companies that have commercial activity in Iranian oil, gas or petrochemicals, Christoff said.

Repsol provided a letter that it had submitted to Iran saying it’s pulling out of a $10 billion liquefied natural gas project in which it had a 25 percent stake, he told the panel.

‘Pulling Out’

“They just met with us again on Monday and said that they had informed their partner Shell that they were officially pulling out after July 31,” he said, referring to Royal Dutch Shell Plc, Europe’s largest oil company. Christoff said Shell has a 50 percent stake in a $10 billion project.

Shell is among companies that have said they’re still considering whether to continue their investments, he said. New sanctions adopted this month by the European Union probably will accelerate Shell’s decision, he said.

European energy companies including Shell and Repsol have postponed gas accords in Iran amid U.S. pressure over the nuclear issue. Shell and Repsol discussed developing two blocks of the South Pars field and building what would be Iran’s first liquefied natural gas plant. Iran has the world’s second-largest gas reserves after Russia.

Gasoline Deliveries

Three Russian state-controlled oil companies, including OAO Rosneft and OAO Gazprom Neft, may begin delivering gasoline to Iran in a month, said the head of the Iran Commission of the Moscow Chamber of Commerce & Industry.

Talks are being held on a “working level” and the first delivery may take place in late August or September, Rajab Safarov said in an interview in Moscow today.

Glaser, a deputy assistant secretary for terrorist financing and financial crimes, and Einhorn, who advises on the spread of nuclear weapons and arms control, also will visit Seoul and Tokyo next week to discuss sanctions on Iran and North Korea.

Einhorn praised the European Union for its decision this week to impose its toughest sanctions yet, including a ban on new investment in Iran’s oil and gas industries, restrictions on export-credit guarantees and closer monitoring of banks that do business with the country.

“It set some very high standards for sanctions,” Einhorn said. Next week’s trip is intended “to see if Japan and South Korea could come up to that mark.”

In China, the two will press officials to “enforce the letter of” the latest UN Security Council resolution, he said. They’ll also urge the Chinese to “take strong steps against” entities that are assisting Iran’s missile programs in any way, Einhorn told the committee.

“The Chinese will argue that they have important energy security needs,” he said. “In our view, they are overachieving in terms of their energy security needs. We think they have to kind of rebalance their priorities.”

To contact the reporter on this story: Viola Gienger in Washington at vgienger@bloomberg.net.

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