Wall Street Journal: Iran’s oil exports have been halved by economic sanctions, but that still leaves the regime with around $50 billion in oil income this year, according to calculations by the Foundation for Defense of Democracies. Nevertheless, the Iranian economy has taken a substantial hit from sanctions. After the ‘cripple date,’ it will likely take six months for the regime to truly feel the bite.
By REUEL MARC GERECHT
AND MARK DUBOWITZ
Iran’s oil exports have been halved by economic sanctions, but that still leaves the regime with around $50 billion in oil income this year, according to calculations by the Foundation for Defense of Democracies. Nevertheless, the Iranian economy has taken a substantial hit from sanctions. After the rial lost nearly half of its value in a week earlier this month, Tehran began severely restricting access to dollars and euros.
That’s a welcome sign for anyone who hopes that international sanctions will cause the Tehran regime to abandon its nuclear-weapons program. But the currency restrictions were also a warning: In all probability the regime is battening down the hatches, husbanding foreign-exchange reserves, and preparing for a long ordeal. Given the progress that Tehran has already made with its nuclear plans—still-hidden centrifuge manufacturing plants, enrichment facilities at Natanz and Fordow, a likely weaponization facility at Parchin, and an extensive ballistic-missile program—the regime faces a short, relatively inexpensive dash to the nuclear finish line.
How close it is to that finish line, and how much more time should be allowed for sanctions to work before it’s too late, and a pre-emptive military strike becomes essential?
The first task in answering the question is to make a solid guess about the Islamic Republic’s economic cripple date. That will arrive when its hard-currency reserves are insufficient to cover its hard-currency payments; when the import of foreign goods is no longer possible; when the rial becomes worthless paper; and when precious metals and barter become the only means of exchange.
There is no way of knowing whether Ayatollah Ali Khamenei, Iran’s supreme leader, and his Revolutionary Guards will ever relent in their nuclear ambitions—there is always the possibility that the economy could crater disastrously but the regime would keep enriching uranium anyway. For those who want to give sanctions every chance of succeeding, though, the working assumption must be that a collapsed economy will cause the mullahs to relent.
Common sense would suggest that the cripple date should arrive at least six months before Iran could go nuclear; six months would likely be required for the economic disaster to fully affect the regime. Fear and depression would need time to ripple through the Islamic Republic’s formidable political system—Mr. Khamenei and his praetorians are, after all, serious revolutionaries.
In his recent speech to the United Nations, Israeli Prime Minister Benjamin Netanyahu described when he considers that the red line for a nuclear Iran will have been reached: late spring/early summer 2013, when the regime will have enough 20%-enriched uranium to make one bomb. For those who take the Israeli threat of a pre-emptive strike seriously and believe it would be a mistake, then the economic cripple date would have to occur within the next three months—by mid-January—for the Iranian regime to be staring at imminent economic collapse before the Israelis’ red line in June.
President Obama has avoided citing a red line that he would not allow Iran to cross. He has said that Iran must not go nuclear, but he clearly doesn’t subscribe to the Israeli view that a nuclear-weapon capability is in itself a casus belli. Mr. Obama instead has suggested that the Iranians’ clear intent to assemble a bomb, not just acquiring the ingredients, is what he regards as a red line that would require pre-emptive force. By that definition, military action could be avoided until the Iranians were caught in flagrante delicto.
And they might be caught. Iran’s nuclear program is different from that of the Soviets, Chinese, Indians, Pakistanis and North Koreans. They all went nuclear clandestinely, surprising the Central Intelligence Agency. Since Iran’s secret program was revealed, Tehran has kept its enrichment plants—though not suspected weapons-design facilities—open to U.N. inspection. Although the regime may have become more proficient at deception, it is generally assumed that the plants at Natanz and Fordow are the only enrichment sites. Prudence should lead us, however, to challenge this assumption since the regime tried to hide both sites and cheats rapaciously.
If they are the only sites, then a crucial issue arises: At what point does the stockpiling of 20%-enriched uranium so diminish the time for processing weapons-grade material that—even if the U.N.’s International Atomic Energy Agency could rapidly detect the diversion—Iran could become a threshold nuclear state in less than 30 days? After all, IAEA inspections currently occur about once a month.
It’s not certain when that moment will arrive, given Iranian secrecy. But a reasonable guess, based on the increasing number of centrifuges, is that Tehran will be there by the end of 2013. Once the regime processes medium-enriched uranium into weapons-grade, then militarily stopping the program isn’t practical. That’s because designing nuclear triggers or warheads for the country’s ever-growing supply of ballistic missiles could be done in small, undetectable facilities. If we assume January 2014 as the nuclear drop-dead date (by the U.S. standard), then American and European sanctions would need to collapse the Islamic Republic’s economy by July 2013.
By that calculation, and leaving a minimum of six months for economic collapse to ripple through the Iranian system, the U.S. and its allies have nine months from today to crater Iran’s economy. With $50 billion a year still pouring in from oil sales, and Tehran likely to have stockpiled additional foreign-exchange reserves in anticipation of sanctions, the government seems capable of lasting well past next summer.
It is incumbent, then, on the Treasury Department (the most creative source of sanctions ideas within the executive branch), the State Department, the National Security Council and CIA to determine what steps need to be taken to accelerate the grip of sanctions on Iran, and to more rapidly deplete those reserves, if a red line—Israel’s in June or America’s in January 2014—is not going to be crossed, necessitating military action.
One immediate step the administration could take would be to finally blacklist Iran’s central bank for supporting proliferation and terrorism, shutting the bank off completely from the international financial system. The administration could prohibit all nonhumanitarian commercial exports to Iran and use the threat of sanctions to encourage compliance by Iran’s export partners; at a minimum, the administration should remove waivers that currently allow countries reducing their purchases of Iranian oil to increase their commercial sales to the Islamic Republic. And it could target Iranian government assets held by international financial institutions to cut off Iran’s access to its foreign-exchange reserves.
Finally, the administration could ban foreign tankers carrying oil products to or from Iran from calling at U.S. ports, and designate all of Iran’s energy industry as a zone of proliferation concern—including the Iranian tanker company NITC—which would allow sanctions to strike more Iranian and foreign companies that bring in hard currency.
It is astonishing that these steps have not already been taken. In their absence, Iran’s economy has been allowed to remain healthy enough to leave a vanishingly short time for sanctions to do the work that would head off military action, whether sooner by Israel or later by the United States.
Mr. Gerecht, a former CIA case officer, is a senior fellow at the Foundation for Defense of Democracies. Mr. Dubowitz is FDD’s executive director and heads its Iran sanctions project.