New measure to ‘lock up’ Iran oil earnings: US official

Reuters/Washington

The US has aggressively ramped up its use of financial sanctions this year to pressure Iran to stop pursuing nuclear weapons, but a measure that takes effect in February could have the most dramatic impact yet, according to the Treasury Department’s top sanctions official.

Starting February 6, US law will prevent Iran from repatriating earnings it gets from its shrinking oil export trade, a powerful sanction that will “lock up” a substantial amount of Tehran’s funds, David Cohen, undersecretary for terrorism and financial intelligence at the US Treasury Department, said on Thursday.

“Iran’s oil revenues will largely be shackled within a given country and only useable to purchase goods from that country,” Cohen said in a speech to the Foundation for Defence of Democracies, a group that has advocated tougher sanctions.

A year ago, the US Congress passed a law requiring buyers of Iranian oil to make significant cuts to their oil purchases, or risk being cut off from the US financial system.

The new measure, developed by Senator Robert Menendez, a New Jersey Democrat, and Mark Kirk, an Illinois Republican, was part of a second sanctions package passed by Congress in August.

Along with a European Union embargo on Iranian oil, the sanctions have cut Iran’s oil exports by more than 50%, costing Iran up to $5bn per month, and led to a plunge in Iran’s currency, the rial, Cohen said.

The US and European Union are hoping the economic pressure will force Iran to address international concerns about its nuclear programme, which Tehran insists is for peaceful purposes.

“We are committed to increasing the financial pressure on Iran as long as necessary, and we will continue to look for innovative ways to make the Iranian regime bear the financial costs of its behaviour,” Cohen said.

The US has so far granted sanctions waivers to importers for their oil dealings with Iran because the countries have substantially reduced their purchases.

Starting in February, a foreign bank handling transactions related to Iranian oil sales must ensure the payments are held in an account within the importing country, and are used only for permissible trade between that country and Iran.

If banks transfer Iran’s oil earnings beyond their borders, they will risk losing access to the US banking system, Cohen explained.

“Virtually all countries that purchase oil from Iran run a significant trade deficit, meaning the value of their oil imports from Iran is greater than the value of their exports to Iran,” Cohen said.

“As a result, this provision should lock up a substantial portion of Iran’s earnings in each of these countries,” he said, noting US officials have been meeting with international buyers to explain the new law.

Japan, which counts on Iranian oil but has slashed its purchases in compliance with sanctions laws, has expressed concern about the new provision taking effect in February.

The US Senate agreed to a third package of sanctions last week that would add similar restrictions on payments for Iran’s natural gas exports, and makes clear that sales or transfers of precious metals to Iran are not permissible.

It is part of a defence bill that may be finalised by the Senate and House of Representatives by the end of the year, after which it would land on President Barack Obama’s desk to be signed into law.

Yemen foils jailbreak by Qaeda men

Yemeni guards foiled an attempted prison break by 25 Al Qaeda convicts yesterday, some of them considered as high risk, a security official said.

“The guards from Aden central prison foiled an escape attempt with the discovery of an 8m long tunnel dug by the 25 detainees,” the official told AFP.

“Another 2m and the tunnel would have reached a market near the prison” in the Mansura district of Yemen’s main southern city, he added.

The detainees included “some dangerous elements who were to be transferred to Sanaa,” the official said.

Aden prison houses many suspected or convicted members of Al Qaeda which has been particularly active in the south and southeast of Yemen.

In December last year, 12 Al Qaeda prisoners escaped from the jail, just months after 60 escaped from a prison in the port of Mukalla, killing a guard.

In June this year, five Al Qaeda prisoners broke out of a jail in Hodeida on the Red Sea coast.