Obama administration takes back seat on Iran sanctions

Reporting from Washington —  Despite the Obama administration’s vows to cripple Iran with economic sanctions, it is leaders in Congress and Europe who have seized the lead in the West’s long-running campaign to punish Tehran for its suspected nuclear weapons program.

In recent months, the toughest moves to deter Iran from pursuing its presumed nuclear ambitions have come from a bipartisan group in Congress and European allies, especially Britain and France. The White House at first resisted these steps before embracing them as inevitable.

The administration has imposed dozens of sanctions on Iran since 2009, but it has carefully calibrated their effect. Officials fear that too powerful a blow to the world’s third-largest oil exporter could cause an oil price increase, damaging the global economic recovery, undermining international support for the sanctions campaign and creating political trouble in an election year.

For example, top administration officials late last year were strongly resistant when Congress slapped Iran’s central bank with harsh sanctions. The European Union then went further, however, imposing an embargo to halt purchases of Iranian oil by European nations over the ensuing five months.

This month, Congress began crafting legislation that would essentially cut Iran out of the global clearinghouse for international financial transactions known as SWIFT, or the Society for Worldwide Interbank Financial Telecommunication. The far-reaching step could inflict severe damage to Iran’s economy by restricting the ability of banks and other institutions to move funds in or out of the country.

On Friday, SWIFT announced that it was “ready to implement sanctions against Iranian financial institutions” in response to new regulations the EU is set to enact.

Mark Dubowitz, an energy expert who has been advising Congress on sanctions, said the Obama administration has tried to add sanctions “in a measured way to assure international support and to avoid anything that would spook oil and financial markets.”

But as concern over Iran’s nuclear progress has intensified, members of Congress, with support from the French and British governments, “have really taken the lead in being aggressive,” said Dubowitz, who is executive director of a pro-sanctions group called Foundation for Defense of Democracies.

The latest sanctions clearly are having an effect. In recent weeks, the value of the Iranian currency has plummeted and prices for food and other consumer goods have soared, causing hardship for ordinary Iranians and putting political pressure on the regime.

A major crisis with Iran carries political risks for the White House. A war or other disruptive event that causes a sharp rise in oil prices could endanger the United States’ fragile economic recovery and probably President Obama’s chances for reelection.

As a result, the White House has had to scramble to keep up with the pace set by Congress and the Europeans. While critics have long accused Obama of “leading from behind” by empowering other countries to carry out America’s bidding on world crises, the administration is now trying to avoid the appearance of “following from behind.”

Administration officials insist they have been aggressive on Iran. They point to their latest action, an announcement Thursday that the U.S. will blacklist Iran’s Ministry of Intelligence and Security for its support of Syrian President Bashar Assad’s brutal repression of opposition protests, as well as for its backing of militant groups Hamas and Hezbollah.

“Sometimes the folks involved in this on the Hill don’t appreciate all the knock-on effects these things can have on the U.S. economy, the world economy, the oil markets.… Sometimes it looks easy to use a sledgehammer, and we have to come in and say, ‘Let’s figure out how to use a scalpel,’ ” said a senior administration official who asked to remain anonymous while discussing negotiations.

But U.S. lawmakers have a different, more pointed perspective. Highly sensitive to Israel’s fears of a nuclear-armed Iran, they argue that because Iran is finally feeling the pain of sanctions, now is the time to pile on more.

Some members of Congress hope to force the ouster of the regime in Tehran, although that is not U.S. policy, while others hope more sanctions will persuade Israel to forgo a military strike. Either way, lawmakers of both parties and both chambers have voted lopsidedly, on vote after vote, in favor of action.

When Congress began devising central bank sanctions last fall, Treasury Secretary Timothy Geithner met key lawmakers and made an emotional plea for them to change course. The Senate voted 100 to 0 to press ahead.

“The Obama administration was, in fact, inclined to continue a kind of incremental ratcheting of sanctions, but thanks to one of the most universal votes we’ve seen in a divided Capitol Hill in several years, the administration was really forced to move forward with the decision to sanction the central bank,” said Suzanne Maloney, an Iran specialist at the Brookings Institution’s Saban Center for Middle East Policy.

When Obama signed the legislation in December, he added language in a signing statement suggesting that the administration might delay implementation. Yet the administration has more recently publicly embraced the sanctions as a viable tool.

The administration had considered trying to sever Iran from the SWIFT system, which is used by the world’s major financial institutions, even though no country has ever been cut from SWIFT. But it worried that such a move might encourage other countries to try a similar tactic to isolate adversaries in the future. Officials also were wary of adding more pressure on Iran before it was clear how much damage earlier sanctions could do, congressional aides said.

When the Senate Banking Committee began preparing legislation on SWIFT, a Treasury Department official met with aides to ask that it be watered down. After the committee adopted the original language, the administration then changed course and voiced support for the measure.

Some lawmakers also say the administration is not tough enough in enforcing sanctions.

This week, it issued guidelines on how it will determine whether countries have sufficiently cut purchases of Iranian oil, as required under U.S. sanctions passed last year, in favor of other oil suppliers.

Sens. Mark Steven Kirk (R-Ill.) and Robert Menendez (D-N.J.) argued that the administration should set a specific goal. But the administration rejected that notion, preferring more latitude to decide whether to punish Iranian customers who are also key American allies, such as Japan and South Korea.

Crunch time will come in June when the administration must decide whether to punish nations that haven’t complied. U.S. officials could still waive the rules if they determine sanctioning those nations would create unacceptable damage to the world economy.

But going easy in a campaign year may subject Obama to political attacks that he is weak on Iran and indifferent on Israel.

“It’s going to be a moment of truth,” said Dubowitz of the pro-sanctions advocacy group.

paul.richter@latimes.com