Sanction narcotic too potent for US to resist

Economic sanctions are to diplomacy what an unmanned flying drone is to warfare. Both weapons allow a government to harass and isolate a rival without direct engagement.

Economic sanctions are to diplomacy what an unmanned flying drone is to warfare. Both weapons allow a government to harass and isolate a rival without having to engage it directly - politically in negotiations, or bloodily in combat. Like a pilotless aircraft - which can bomb targets from high in the air, often with unanticipated results - sanctions can harm entire populations, as well as the leaders they are deployed against. Sometimes, they end up empowering the very regimes they target at the expense of the citizenry.

Throughout the 1990s, the UN, with US backing, imposed an embargo on Saddam Hussein's Iraq that caused the deaths of millions of people, including an estimated 500,000 children. ("We think the price is worth it," the then secretary of state, Madeleine Albright, infamously said in 1996.) Meanwhile, Hussein skimmed tens of billions of dollars from the inevitable smuggling trade, which he used to nurture his rule.

Sanctions on North Korea failed to prevent Pyongyang from developing nuclear weapons, although it has successfully reduced 24 million people to abject poverty. A half-century-old embargo on Cuba has done more to breed anti-American hostility among its people than Fidel Castro, the Cuban dictator, ever could incite with his four-hour public harangues. Then there is Iran, the country that has dogged the US government since its freely elected prime minister was brought down in 1953 by a coup engineered by Dwight Eisenhower, the president at the time. (Some might see in this a cycle of action and reaction, though not in Washington, where Newtonian theory is rejected.)

Until recently, it was widely thought that the former Bush administration had successfully throttled Iran's funding lifeline by cajoling or coercing the world's major banks from doing business with Iran while shutting down its front companies in Dubai. When the strategy to blacklist Iranian banks and importers was first unveiled two years ago, Newsweek magazine hailed it as "probably the only really effective way left... to put pressure on a government that has threatened a new Holocaust". As late as last November, The New York Times Sunday Magazine credited Stuart Levy, the architect of the blacklist, for helping to bring the Iranian economy to its knees.

The story suggested the administration of the US President, Barack Obama, would most certainly want to continue "the most direct and aggressive stuff we've got going", as a US official quoted in the story described the list. "It delivers." Except that it doesn't. Early this month, New York state and federal authorities announced that Lloyds TSB Group, a British bank, had agreed to pay US$350 million (Dh1.28 billion) to settle accusations that it had helped Iranian banks conceal billions of dollars that over the years had coursed through the US financial system. Some of that money, the officials acknowledged, may have been diverted to Tehran's nuclear weapons programme, in particular for the purchase of tungsten used in the guidance systems of long-range missiles.

"Despite multiple attempts by the Bush administration to halt illegal imports," reported a front-page article in the Jan 11 edition of The Washington Post, "the technology pipeline to Tehran is flowing at an even faster pace." Items that had slipped past Mr Levy's dragnet included circuit boards, software and global positioning systems devices used to build upgraded versions of the roadside bombs that continue to stalk US forces in Iraq. In most cases, according to the Post, Iranian importers simply shifted their supply network from Dubai to South East Asian countries such as Malaysia.

None of this would surprise anyone who relies on hawala, the ancient financial system common among the developing economies of the Middle East and Asia, to do business. In a region with often primitive banking systems, the corner money changer plays a more important role in financial transactions than banks. Even the US Treasury doesn't have the resources to shut down such a network, so, in defiance of the blacklist, Iran manages to fund its nuclear programme as well as Arab militant groups.

Washington can take credit for dissuading energy companies from developing Iran's vast oil and gas resources, although Iran's inept petroleum bureaucracy was doing a pretty good job of scaring away private investment long before the US Treasury stepped in. If anything, America's high-pressure attempt to segregate Iran from the global financial system will probably be the strongest campaign issue for Mahmoud Ahmadinejad, the president, when he runs for re-election later this year. No doubt Mr Obama will keep Iran on the list. However, such sanctions have failed as a foreign policy tactic, they are too powerful a political narcotic for Washington to resist, particularly where the pro-Israel lobby is concerned.

But Mr Obama also seems to understand that the only solution to Tehran's desire for a nuclear deterrent - perhaps the one aspiration the Iranian people share with their leaders - is to engage it directly and with respect, however unappetising such a prospect might be. @Email:[e-mail]