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US law forbids oil and gas deals with Iran

March 13, 2013

Iranian President Mahmoud Ahmadinejad (L) and his Pakistani counterpart Asif Ali Zardari attend the inauguration ceremony of a gas pipeline linking the two neighbours in the Iranian border city of Chah Bahar on March 11, 2013. – AFP Photo

WASHINGTON: A US law, that the State Department says can be used against Pakistan if it finalises the gas pipeline deal, forbids any major investment in Iran’s energy sector.

The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, as explained by the Congressional Research Service, requires the US president to:

Impose sanctions “if a person has, with actual knowledge, made an investment of $20 million or more that directly and significantly contributed to Iran's ability to develop its petroleum resources.”

The sanctions will also apply on “any combination of investments of at least $5 million which in the aggregate equals or exceeds $20 million in any 12-month period.”

The act also directs the US President to impose sanctions if a person has, with actual knowledge, sold, leased, or provided to Iran “any goods, services, technology, information, or support that would allow Iran to maintain or expand its domestic production of refined petroleum resources, including any assistance in refinery construction, modernisation, or repair.”

Sanctions will also apply if a person has, with actual knowledge, provided Iran with refined petroleum resources or “engaged in any activity that could contribute to Iran's ability to import refined petroleum resources, including providing shipping, insurance, or financing services for such activity.”

Sanctions established under this Act are in addition to any sanctions already imposed under the Iran Sanctions Act of 1996.

The 2010 act establishes additional sanctions prohibiting specified foreign exchange, banking, and property transactions.

The 2010 Act extended US economic sanctions placed on Iran under the Iran Sanctions Act of 1996 and punishes companies and individuals who aid Iran's petroleum sector.

It is part of a larger US campaign to target the Iranian petroleum industry with the aim to force Iran to abandon its nuclear programme. The act was passed by the House (408-8) and Senate (99-0) on June 24, 2010 and signed into law by President Barack Obama on July 1, 2010.

As the US State Department spokesperson Victoria Nuland said on Monday, the act forced the European Union and Japan to drastically reduce their dependence on Iranian oil.

“In the case of the EU, they’re now at zero. In the case of Japan, they’ve been making a steady decline, as have other countries that we have waived sanctions on,” she said,

But the Iran-Pakistan gas pipeline project, if finalised, “would take Pakistan in the wrong direction right at a time that we’re trying to work with Pakistan on better, more reliable ways to meet its energy needs.”

During the 2012 presidential campaign, Mr Obama said that the US-sponsored economic sanctions were “crippling the Iranian economy” which was now “in shambles."

In recent congressional debates, both Republican and Democratic lawmakers hoped the sanctions will soon force Iran to give up its nuclear programme.

They also claimed that the sanctions had triggered such widespread discontent in Iran that the regime could be toppled in a popular revolt.

An Israeli foreign minister document, leaked recently, reported that Iranian energy exports had fallen by 50 per cent after the European Union joined the United States last year in imposing an oil embargo on Iran.

US officials and diplomatic sources in Washington say that allowing Pakistan to finalise the pipeline deal will reduce the impact of the sanctions by allowing Iran to export its gas. That’s why, they argue, Washington is opposing the deal.

But a report posted on a popular US news site noted that the sanctions were hurting the Iranian people, not the government. The sanctions were making the Iranian currency “increasingly worthless,” the report added. The currency, Rial, has dropped 80 per cent in just the past year.

“This was making it hard for Iranians to procure medicine from overseas. The price of an imported wheelchair has increased ten-fold in just a year. The price for a cancer patient to receive chemotherapy has nearly tripled, and filters for kidney dialysis are up by 325 per cent,” said the report while urging the United States to ease the sanctions.