Congress, Obama at Odds over New Iran Sanctions

Congress is considering a new series of hard-hitting Iran sanctions on everything from mining and construction to the Islamic republic's already besieged oil industry, despite concern from the Obama administration that the measures could interfere with nuclear negotiations.

House and Senate bills are both advancing at a time President Barack Obama's national security team is gauging whether Iranian President-elect Hasan Rouhani is serious about halting some elements of Tehran's uranium enrichment activity. Those involved in the process said the administration wants to temper Congressional plans until Rouhani takes office in August and has an opportunity to demonstrate whether his government will offer concessions.

The legislation would blacklist Iran's mining and construction sectors, effective next year, because they are seen as heavily linked to Iran's hard-line Revolutionary Guard corps. It also would commit the U.S. to the goal of ending all Iranian oil sales worldwide by 2015, targeting the regime's biggest revenue generator and prime source of money for its weapons and nuclear programs.

U.S. penalties that went into effect last year already have cut Iran's petroleum exports in half, but that still leaves billions of dollars coming in every month from Turkey, China and several other Asian countries.

The House's bill may pass before Congress' August recess. The Senate version won't get a vote until at least September, said Sen. Bob Menendez, chairman of the Senate Foreign Relations Committee and a leading advocate of tougher Iran sanctions. The Senate Banking Committee, which will put forward the package, is in ongoing consultations with the administration, according to one U.S. official who, like others, spoke on the condition of anonymity because they were not authorized to talk publicly about the sanctions.

Republican Sen. John McCain said the U.S. should immediately "plow ahead" with greater and tougher measures against Iran. "We're running out of time," he said.

The U.S. and many other countries believe Iran is seeking to develop nuclear weapons. Obama has said Iran has until sometime next year to prove to the world its nuclear program is peaceful. If diplomacy fails, the stage may be set for a military intervention by the U.S. or Israel, which sees an Iranian nuclear weapon as a threat to its very existence.

In a report last week, David Albright and Christina Walrond at the Washington-based Institute for Science and International Security concluded that Iran will be able to produce enough weapons-grade uranium for a nuclear explosive without being detected by mid-2014.

Iranians insist their program is solely for energy and research purposes.

The State Department wouldn't comment specifically on new legislation while it said it was waiting for Rouhani to be sworn in. "We will see what he does once in office," spokeswoman Marie Harf said.

A senior U.S. official said the administration's concerns were about the timing and content of the legislation.

If Rouhani is serious about compromise, setting new sanctions in advance of talks risks undercutting him, the official said. Even if the new Iranian leader isn't serious, the oil measures in particular are problematic, turning a potential U.S. diplomatic success into a failure.

If China or Japan, for example, decides to flout the U.S. demand to stop all importing from Iran, the administration would then have to weigh enforcing the law by blacklisting Chinese and Japanese banks and companies at the risk of widespread economic harm — including for Americans. The likelier result is that the U.S. does nothing, making the sanctions look hollow and eroding international solidarity on pressuring Iran.

Despite wide bilateral support in Congress for tougher sanctions, some Democrats and Republicans are embracing the administration's cautious approach. In a letter last week to Obama, 18 Republican House members joined more than 100 of their Democratic colleagues in urging the president to "reinvigorate U.S. efforts to secure a negotiated nuclear agreement" and give Rouhani a chance.

Rouhani's election clearly has bolstered hope of compromise. A former nuclear negotiator and relatively moderate cleric, Rouhani has suggested a more accommodating approach than his predecessor, Mahmoud Ahmadinejad. However, Iranian Supreme Leader Ayatollah Ali Khamenei has final say on nuclear issues.

Iranian Foreign Minister Ali Akbar Salehi said last week his country would be ready to resume talks once Rouhani, who takes office the first weekend in August, puts together a negotiating team.

World powers want the meeting "as soon as possible," Catherine Ashton, the European Union's foreign policy chief, said last week. Ashton has served as the point of contact for the U.S., Britain, China, France, Germany and Russia since talks with Iran restarted last year. They've yet to make significant headway despite four rounds of discussions.

Mark Dubowitz, executive director of the Foundation for Defense of Democracies and an adviser to Congress and the administration on Iran sanctions, said moving forward with new measures made sense. "Iran's nuclear ploys continue to beat Western economic pressure," he said. "The administration must go into the next round of negotiations with significant, re-enhanced leverage."

The administration has other options too. It could toughen enforcement of existing restrictions on Iran related to energy, shipping, port management and other sectors the U.S. has blacklisted in recent months. Dubowitz estimated that stamping out gold flows to Iran that already are subject to U.S. penalties could eliminate $20 billion a year in Iranian government revenue alone.

The rough parameters of any larger nuclear deal with Iran are clear. It would have to include the West scaling back some of the sanctions that have crippled Iran's economy over the past few years. In return, the Iranians probably would be allowed to continue producing low-enriched uranium for fuel but would be required to halt production of any higher-enriched material that comes closer to warhead-grade, and send existing stockpiles of such material out of the country for safekeeping. Western powers also would surely demand tougher monitoring of Tehran's nuclear activities.