Iran Oil-Swap Proposal Prompts Questions on U.S. Sanctions Strategy

Iranian Revolutionary Guard speedboats pass an oil tanker off the coast of southern Iran in 2012. U.S. House Foreign Affairs Committee Chairman Ed Royce (R-Calif.) on Monday urged the Obama administration to explain how it would respond if Iran and Russia finalize a "sanctions-busting" oil deal.
National Journal
Diane Barnes
June 3, 2014, 10:49 a.m.

A seni­or U.S. law­maker wants the Obama ad­min­is­tra­tion to ex­plain how it would re­spond if Ir­an and Rus­sia fi­nal­ize a “sanc­tions-bust­ing” oil deal.

U.S. House For­eign Af­fairs Com­mit­tee Chair­man Ed Royce (R-Cal­if.) said the po­ten­tial “oil-for-goods” plan would cir­cum­vent in­ter­na­tion­al ef­forts to squeeze con­ces­sions from Ir­an on its bomb-us­able nuc­le­ar activ­it­ies. In a Monday let­ter, he asked Sec­ret­ary of State John Kerry to identi­fy what “des­ig­na­tion and en­force­ment steps” the ad­min­is­tra­tion would pur­sue if the po­ten­tial $20 bil­lion ar­range­ment takes ef­fect.

Ne­go­ti­at­ors for Rus­sia, the United States and four oth­er coun­tries are of­fer­ing Ir­an re­lief from eco­nom­ic pres­sure if the Middle East­ern na­tion sig­ni­fic­antly di­als back its con­tested atom­ic ef­forts. Tehran denies it is seek­ing a nuc­le­ar-bomb ca­pa­city, and so far has not offered curbs suf­fi­cient to sat­is­fy Wash­ing­ton and its al­lies.

Royce said the pro­pos­al for Ir­an to trade oil for non­mon­et­ary goods from Rus­sia “would present a clear vi­ol­a­tion of Ir­an’s ob­lig­a­tions and would un­der­mine the ra­tionale be­hind the cur­rent ne­go­ti­ations.” Treas­ury Sec­ret­ary Jack Lew in April said Wash­ing­ton could pen­al­ize groups or in­di­vidu­als that en­gage in trade un­der the pos­sible pact, but he did not spe­cify what leg­al au­thor­it­ies would per­mit such ac­tion.

The law­maker also asked for a run­down of steps by Wash­ing­ton or its part­ners “to de­ter a po­ten­tial deal.”

The United States con­tends that a six-month in­ter­im ac­cord ob­lig­ates Ir­an to cap its av­er­age daily oil ex­ports to six key oil-im­port­ing na­tions at about a mil­lion bar­rels. Royce said the list does not in­clude Rus­sia, po­ten­tially en­abling a barter deal to boost Tehran’s daily oil sales by up to half a mil­lion ad­di­tion­al bar­rels.

Royce also aired con­cern over in­dic­a­tions that Mo­scow may sup­ply Ir­an with arms or nuc­le­ar sys­tems un­der the pro­posed ar­range­ment.

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