The drumbeat for another round of draconian sanctions against Iran is growing louder on Capitol Hill. While Illinois Senator Mark Kirk's proposed legislation to “collapse the Central Bank of Iran” was intended to be attached to the now-stalled international affairs funding bill, the pressure from Congress for another round of indiscriminate sanctions continues to build. Some U.S. officials have called sanctioning Iran’s Central Bank “the nuclear option” because it would deal a devastating blow to the teetering global economy, and inflict untold human suffering in Iran.
Still, such an initiative is expected to receive overwhelming bipartisan support, following a letter Senators Kirk and Charles Schumer wrote to the administration calling for the administration to impose sanctions on the Central Bank of Iran, which 92 senators have signed. The Kirk initiative this week appears to be similar to one offered by Rep. Howard Berman in the House Foreign Affairs Committee last week, and would effectively bind the administration into imposing sanctions against the Central Bank of Iran. The committee approved Berman's amendment.
The Obama administration has signaled that it won't immediately seek sanctions on the Central Bank of Iran because, as the Los Angeles Times reported, “U.S. officials have decided that such sanctions could disrupt oil markets and further damage the U.S. and world economies”. Nobody mentioned these concerns during the Republican presidential candidate debate on November 12 in South Carolina, where candidates enthusiastically endorsed U.S. sanctioning of the Central Bank of Iran, along with calls for military action against Iran and funding violence through ‘insurgents’ in Iran.
What if Iranians Created a Banking Crisis in the U.S.?
You don't have to be an economist to understand that the most vulnerable sectors of any society bear the brunt of any economic crisis and that shutting down any economy in the world would damage the global economy. The full extent of economic consequences from U.S. sanctions on the Central Bank is still unclear, but the fact that the explicit goal of these broad sanctions is to destroy the Iranian economy is deeply troubling in and of itself.
Many proponents of broad sanctions argue that inflicting such widespread suffering—either directly or through the Iranian people—will pressure the Iranian government to change course. For example, Rep. Sherman (CA), a prominent proponent of broad sanctions against Iran, has gone so far as to endorse sanctions because they would cause suffering, writing in an August 9, 2010 op-ed in The Hill that “critics…. argued that [sanctions on Iran] will hurt the Iranian people. Quite frankly, we need to do just that.”
However, as Professor Robert Pape of the University of Chicago pointed out at a recent congressional briefing, manufacturing an economic crisis in Iran is not likely to persuade the Iran government to abandon its abandon its pursuit of a nuclear weapons capability, nor would it be likely to persuade the Iranian people to submit to U.S. wishes.
“Imagine, if you would, the Iranians were suddenly able in one single day to create a banking crisis in the United States that made it impossible for us to cash our checks…I don’t think it would make us do what Iran wanted,” Dr. Pape said.
Dr. Pape has also pointed out that while sanctions are often marketed as a substitute for war, “economic sanctions are often a prelude to using military force.” Once sanctions fail—as they almost always do—proponents for war use the failure of sanctions to justify military confrontation. In the case of Iran in particular, more than three decades of U.S. sanctions have failed to prevent Iran from pursuing a nuclear weapons capability.
Indiscriminate Sanctions Pave Path to War
Based on a comprehensive study of modern-day sanctions, Dr. Pape found that sanctions have failed to achieve their objectives in 95.7% of cases since World War I, and that sanctions are three times more likely to end in military conflict than success.
While the U.S. did join the U.N. Security Council in imposing sanctions on Iraq and Libya, which ultimately ended in war, if the U.S. were to impose sanctions on the Central Bank of Iran, it would be the first time that the U.S. has ever imposed unilateral and extraterritorial sanctions on a central bank.
Among other functions, the Central Bank of Iran regulates Iranian currency, just as the Federal Reserve regulates the U.S. dollar. Since central banks are accorded sovereign immunity, some argue that it contravenes international law to sanction the Central Bank of Iran. Some Iranian officials have declared that any sanctions on the Central Bank would be treated as an act of war.
Sanctioning Iran’s Central Bank would be yet another blow to prospects for a diplomatic resolution to Iran’s nuclear program, at the expense of the global economy and the Iranian people. The U.N.'s Children Agency (UNICEF) estimated that the oil embargo on Iraq, which included sanctions on Iraq’s Central Bank, contributed to the deaths of half a million children, which could be repeated after additional rounds of broad sanctions against Iran.
Rather than prevent war, sanctioning the Central Bank would harden the resolve of the proponents for war in both the U.S. and Iran, and would give Iran's hardliners further incentive to pursue nuclear weapons as an attempt to deter a U.S. attack.