Home

WMD Programs

Iran's Suspect Entities

Iran's Suppliers

Our Publications

Iran Watch Library

International Organization Documents

Government Documents

Private Viewpoints

Reactions to Iran's WMD Efforts

Useful Links

Search

Us pursues financial sanctions as un process stalls

By Valerie Lincy
Updated November 10, 2008

(Click here to access status report archive)

 

International diplomatic efforts to freeze Iran’s uranium enrichment program have all but stalled, as the world prepares for a change of leadership in the United States. President-elect Barack Obama has said that the United States should take the lead in these efforts, and that his administration would be willing to engage Iran directly under the right conditions. He has also endorsed the ongoing “P5+1” initiative, involving France, Britain, Germany, Russia and China, which seeks to win an enrichment freeze through a combination of incentives offers and U.N. sanctions.

Greater U.S. involvement could energize this flagging initiative. At present, the countries involved are unable to agree on what to do next, with China and Russia refusing to consider further U.N. sanctions. In fact, the last U.N. Security Council resolution, quietly adopted on September 27th, condemned Iran’s refusal to comply with international demands by suspending uranium enrichment but failed to punish this defiance by imposing any new penalties.

While unsuccessful in convincing the world to adopt stronger sanctions against Iran, the United States has pursued unilateral measures aimed at isolating Iran from the commercial and financial system. On November 10, the Department of the Treasury revoked Iran’s license for “U-turn” bank transfers, which had allowed certain dollar-based transactions involving Iranian entities to briefly enter the United States before being sent to offshore banks. The United States already prohibits U-turn transactions involving specific Iranian state-owned banks, including Bank Melli, Bank Mellat, Bank Sepah, Future Bank and the Export Development Bank of Iran. With some exceptions, U-turn transactions will now be prohibited for all remaining Iranian banks, including Iran’s central bank.

Earlier, on September 17, the United States froze the assets of six Iranian military entities linked to missile and nuclear work, including several electronics firms controlled by the Ministry of Defense Armed Forces Logistics. And on September 10, the United States took the extraordinary step of blacklisting Iran's national shipping line, eighteen of its affiliates and some 120 individual ships, all for supporting Tehran's nuclear and missile development. The hope is that U.S. sanctions against the Islamic Republic of Iran Shipping Lines (IRISL) will prompt other countries and firms, including maritime insurers, to see business with IRISL as dangerous. IRISL and its affiliates are specifically accused of providing logistical services to Iran's Ministry of Defense Armed Forces Logistics, by facilitating transport to U.N. designated proliferators and falsifying documents to disguise this assistance. The U.S. action prohibits transactions between U.S. persons and the designated entities and freezes their assets under U.S. jurisdiction. It also reinforces U.N. Security Council Resolution 1803, passed in March, which called on countries to inspect suspicious IRISL cargo to and from Iran.

U.S. allies have also adopted measures to punish Iran. Most recently the Australian government announced new travel and trade restrictions against nearly 40 individuals and organizations for their contribution to Iran’s nuclear and missile programs. The sanctions target 20 Iranian individuals and 18 organizations, including Iran’s bank Melli and Saderat. In addition, Australia will no longer provide new financial support for trade with Iran under trade promotion and finance programs. Earlier, in August, the European Union strengthen financial sanctions against Iran, requiring member states to “exercise restraint” in using public money to support trade with Iran, to inspect suspicious air and sea cargo to and from Iran, and placing additional due diligence requirements on E.U.-based financial institutions in their activities with Iranian banks.

Yet these measures, in addition to Iran’s domestic financial woes, have not yet succeeded in convincing Iran that its nuclear program is too costly to pursue. In fact, Iran continues to make strides in enriching uranium – an activity that is allowing Iran to build a nuclear weapon capability by accumulating a stockpile of low-enriched uranium it claims to want for reactor fuel. As of early November, Iran’s stockpile of this material stood at about 576 kg, and it is producing approximately 48 kg each month using an ever-growing number of centrifuges, almost 4,000 at last count.

This progress was reported by the International Atomic Energy Agency on September 15, along with the fact that the Agency’s investigation into alleged military dimensions to Iran's nuclear work has come to a grinding halt. Without greater cooperation and transparency from Iran, the Agency pessimistically concludes that it will be unable to certify that Iran's nuclear intentions are entirely peaceful. Open issues of "serious concern" include reports that Iran acquired from the Khan network designs for a more sophisticated nuclear warhead, small enough to fit atop Iran’s medium-range Shahab-3 missile. The IAEA has described additional activities that, if true, would confirm that Iran, at least at some point, sought to develop nuclear weapons. These activities include:

There have also been allegations that Iran is exploring the possibility of extracting enriched uranium from spent reactor fuel. Reportedly, according to an intelligence report provided to the IAEA by a member country, Iran has conducted covert experiments aimed at recovering highly enriched uranium from irradiated reactor fuel used at a research reactor at the Tehran Nuclear Research Center. Such work would contravene binding Security Council resolutions and would give Iran an additional means of growing its enriched uranium stockpile.

 

The world ratchets up pressure

Countries leading diplomacy with Iran remain devoted to a two-track strategy: Penalties – such as U.N., E.U. and U.S. sanctions – are coupled with offers of incentives and engagement. To implement U.N. Security Council resolutions and to further tighten the noose around Iran’s nuclear and missile developers, the United States has largely relied on Executive Order 13382. Of the 75 entities listed in Security Council Resolutions 1737, 1747 and 1803, the United States has designated 42 under this Executive Order, which freezes the bank accounts and financial assets of these entities, and prohibits U.S. persons from doing business with them. U.S. action against a number of entities not yet designated by the Council have probably had more impact, notably sanctions imposed in October 2007 against several major Iranian banks. The U.S. Congress has also sought to close loopholes in sanctions laws that allow foreign-based subsidiaries of U.S. companies to trade with Iran, that allow countries like the United Arab Emirates to serve as a platform for the transshipment of U.S. origin goods to Iran, and that allow the administration to balk at imposing penalties on foreign energy companies willing to invest in Iran.

The United States has also invoked antiterrorism and banking laws to encourage major financial institutions in Europe, the United States and the Middle East to limit or cut ties with Iran. On March 20, the Treasury Department’s Financial Crimes Enforcement Network warned U.S. banks that Iran is resorting to "an array of deceptive practices" in order to avoid sanctions. According to Treasury, Iran's central bank, also known as Bank Markazi, may be facilitating transactions for sanctioned Iranian banks. Bank Markazi and other Iranian banks have also requested that their names be removed from global transactions in order to mask the parties in the transaction. A number of banks have limited or ended business with Iran because of these risks, which has made it more costly and difficult for Iran to move hard currency around the world, and has raised the cost of doing business for the Iranian government and Iranian companies.

For its part, the European Union has pursued sanctions beyond the Security Council, most recently in late June, when 26 additional Iranian entities linked to missile and nuclear work were targeted – including Iran’s Bank Melli and officials from Iran’s Islamic Revolutionary Guard Corps and Ministry of Defense. The move, which followed months of internal debate, requires all E.U. member states to freeze the assets of listed entities and to institute a travel ban on listed individuals. Earlier, in April 2007, the E.U. acted outside the Council in hitting 23 Iranian entities with such penalties.

Iran’s refusal to suspend enrichment, reprocessing and heavy water work has now led the U.N. Security Council to vote sanctions three times: Resolution 1803 of March 3, 2008, resolution 1747 of March 24, 2007, and resolution 1737 of December 23, 2006. These resolutions bar Iran from importing or exporting most items related to uranium enrichment, reprocessing, heavy water and nuclear weapon delivery systems, and bar states from providing Iran with financial or technical assistance aimed at acquiring these items. Resolution 1803 also bars Iran from purchasing dual-use nuclear and missile items, requests that countries inspect suspect cargoes to and from Iran, reduce public financial support for business with Iran, and cut back on transactions involving Iranian banks, particularly Bank Saderat and Bank Melli. However, the resolution’s language leaves plenty of room for countries uninterested in enforcing such measures to opt out. Combined, the resolutions call for a freeze on the assets of some 75 Iranian entities linked to missile and nuclear work. Resolution 1747 also bars Iran from exporting conventional arms and related materials and asks states to “exercise vigilance and restraint” in transferring arms to Iran. States must also “exercise vigilance” in providing Iranian nationals with specialized nuclear and missile-related training and are called upon, but not required, to cut off “grants, financial assistance, and concessional loans” to the Iranian government. In addition, countries must report whether a person sanctioned by the Council has entered into or transited through their territory. Resolution 1803 puts five additional individuals under an international travel ban.

In order to oversee implementation, the Security Council created a Committee composed of Council members, responsible for investigating alleged violations of the resolutions, for expanding the asset freeze and travel surveillance to additional entities, and for considering exemption requests. As of September 11, 2008, out of 192 countries, the Committee had received reports on the implementation of resolution 1737 from only 89 countries, reports on the implementation of resolution 1747 from 76 countries, and reports on the implementation of resolution 1803 from 56 countries. The Committee also received one notification related to the transfer of nuclear items to Iran for its Bushehr reactor. Resolution 1803 expands the Committee’s responsibilities, requiring countries to report within five days on the results of any cargo inspection authorized by the resolution.

Nuclear progress

After an intermittent freeze on uranium enrichment that lasted several years, Iran resumed enrichment work in January 2006. From March 2004 through late August 2008, it had produced some 342 tons of uranium hexafluoride (UF6) – a gas that can be enriched to make fuel for reactors or bombs – at its Uranium Conversion Facility (UCF) in Isfahan. Since early 2007, Iran has stepped up work at its underground commercial-scale enrichment plant at Natanz, with the installation of piping, wiring and control panels, and the installation and linkage of IR-1 (P-1) centrifuges in a cascade. Twenty-three cascades of 164 machines are now operating there, or about 3,770 centrifuges. All these centrifuges have been fed with UF6, and the feed rate has increased in recent months. Since December 12, 2007, Iran has processed some 6,000 kg of UF6, as compared to 1,670 kg from February through December 2007. The production rate of low-enriched uranium has increased as well. From mid-December 2007 through late August 2008, Iran produced 405 kg of this material enriched up to four percent U-235, as compared to 75 kg during the earlier period.

Iran has also enriched uranium in cascades of 10, 12 and 164 IR-1 centrifuges at its pilot plant at Natanz, though work there on this first-generation machine seems to be decreasing. Instead, Iran is using the pilot plant to develop its more advanced centrifuges, including the IR-2 and IR-3, all of which have been operating with UF6. The IR-2 is a sub-critical machine with a single carbon fiber rotor and no bellows, according to a report by the Institute for Science and International Security. It is not clear whether Iran is able to manufacture, assemble and install the IR-2 in large quantities, as Iran may rely on foreign suppliers for some of the machine’s key materials and parts. However, Iran is working to make centrifuge operations entirely indigenous; at its Kalaye Electric research and development laboratory, Iran is developing not only centrifuge components, but also measuring equipment and vacuum pumps.

The 342 tons of UF6 Iran has produced so far, if enriched to weapon grade, would be sufficient to make several dozen nuclear weapons, assuming that between 15 and 25 kg of uranium enriched to 93 percent U-235 would be needed for each bomb. As of early October 2008, its stockpile of low-enriched uranium contains some 13 kg of U-235. The key questions are how quickly this stockpile will grown, how well Iran can manufacture and install more working IR-1 , IR-2 and IR-3 centrifuges, whether it can successfully operate multiple, linked cascades of these machines on a continual basis, and whether the UF6 feedstock material it is producing is of sufficiently high quality for successful enrichment.

Meanwhile, other parts of Iran’s nuclear program have also progressed. Despite calls by the U.N. Security Council, the IAEA and Europe to abandon the project, Iran has pushed forward with its heavy water production plant at Arak, and with its 40-megawatt heavy water reactor nearby. On November 24, 2007, the head of Iran’s Atomic Energy Organization claimed that Iran had already produced fuel for the plant, which is still under construction. The heavy water plant was inaugurated in August 2006, and Iran claims that it is fully operational and able to produce heavy water with 99.8 percent purity. The IAEA board indefinitely blocked Iran’s request for technical assistance for this project at a meeting in November 2007, over concerns that the reactor could be used to produce plutonium for weapons. IAEA inspectors regularly visit the reactor and conduct design verification, most recently on August 27. However, inspectors’ access to the heavy water production plant is blocked as long as Iran fails to implement the Agency’s Additional Protocol allowing for enhanced inspections. According to the IAEA, satellite imagery confirms Iran’s claim that the plant is operating.

After years of delay, the light water power reactor at Bushehr, which is being built by Russia for over $1 billion, is nearing completion. Delivery of the reactor fuel needed for start-up, some 82 tons, was completed in January 2008. There have been conflicting reports as to when the reactor might be launched though it is unlikely to happen this year. The billion dollar reactor is expected to supply 1,000 megawatts of energy to the national power grid. Each year, the reactor will also generate spent fuel containing some 250 kg of weapon-useable plutonium – enough to fuel several dozen nuclear weapons after further processing. The spent fuel will be returned to Russia, in accordance with a protocol signed in February 2005.

Grounds for suspicion

Since February 2003, the IAEA has published 21 reports on Iran’s secret nuclear work, the most recent of which appeared in September 2008. This report concluded that the Agency is able to “verify the non-diversion of declared nuclear material in Iran,” but that it is unable to confirm the absence of undeclared material and activities without greater transparency and cooperation from Iran.

Doubts about the peaceful nature of Iran’s nuclear work have grown in response to Iran’s decision to limit its cooperation with the IAEA and its refusal to address allegations of military links to its nuclear work, which the Agency considers to be “detailed in content” and “generally consistent”. In early February 2008, the IAEA presented member states, including Iran, with specific evidence that Iran had pursued work related to nuclear weapons. In its May 2008 report, the Agency listed eighteen documents supporting these allegations. Iran has called the documents “forged” or “fabricated,” but still refuses to help the Agency investigate their validity by providing access to individuals, records and sites. For instance, it has barred IAEA inspectors from interviewing Mohsen Fakhrizadeh, former head of the Physics Research Center who was reportedly described by the IAEA as the Iranian military official in charge of Iran's nuclear effort. Since May, the IAEA has made a number of concrete proposals aimed at breaking this impasse – none of which Iran has accepted.

The IAEA has also presented specific information showing that a company in Iran involved in uranium conversion was in touch with a team designing the inner cone of a missile re-entry vehicle that could, according to the Agency, “quite likely accommodate” a nuclear warhead. The IAEA wants Iran to explain documents and technical information that link Iran to the testing of high voltage detonator firing equipment, the development of exploding bridge wire detonators and an arrangement for underground, remote explosive testing. The Agency considers these activities to be “relevant to nuclear weapon R&D.”

The IAEA also wants clarification on Iran’s efforts to procure such potentially nuclear weapon-related items as spark gaps, shock wave software, neutron sources, corrosion resistant steel parts and radiation measurement equipment. These items might have been intended for use in interrelated studies on uranium conversion, high explosives testing and the design of a nuclear-capable missile re-entry vehicle.

The IAEA is still reviewing elements of Iran’s undeclared nuclear program, including the illicit import of centrifuge equipment in the late 1980s and 1990s. In November 2007, Iran finally turned over a one-page document containing a 1987 offer from the network run by Pakistani scientist A.Q. Khan. According to Iran, this is the only remaining evidence of the offer, which included supplying a disassembled P-1 centrifuge, centrifuge manufacturing specifications, blueprints for a “complete plant,” and materials to make 2,000 centrifuges. The offer also included auxiliary vacuum and electrical drive equipment, mechanical, electrical and electronic support equipment for the centrifuge plant, and a document on how to reduce UF6 to metal, and how to cast and machine enriched, natural and depleted uranium into “hemispherical forms.” Iran insists that it only received some components for two disassembled centrifuges along with supporting drawings and specifications.

After reviewing what the Agency described as “the limited documentation provided by Iran,” the IAEA concluded that its findings matched Iran’s statements about the 1987 acquisition of P-1 centrifuge technology. However, several questions about Iran’s early research and development work following this offer remain open, including the genesis of a 1993 offer of P-1 enrichment technology from the Khan network and the conditions under which Iran received a document on how to make hemispheres of uranium metal—an activity uniquely useful for bomb making.

As for the development of its more advanced centrifuge program, Iran is sticking to its unlikely story that after receiving a full set of drawings for Pakistan’s P-2 from the Khan network in 1996, during a meeting in Dubai, it conducted no work at all on the P-2 until 2002, and that it never received P-2 components. Iran has also insisted that it procured only a small number of magnets for the P-2. The IAEA was unable to substantiate evidence that Iran received 900 magnets from a foreign supplier during the period between 1996 and 2002 when Iran says it undertook no work on the P-2. As a result, the Agency has concluded its findings about Iran’s P-2 activities match Iran’s statements. Yet, Iran’s current pursuit of the IR-2 makes uncertainties about the program’s early development troubling.

Moreover, in response to Security Council resolution 1747, a government spokesman announced that instead of notifying the Agency of new building and renovating plans for nuclear facilities as soon as they are decided, Iran would revert to providing such information 180 days before the introduction of nuclear material into such facilities. The change, still contested by the IAEA, will further limit the Agency’s ability to understand Iran’s nuclear status and its future plans – a task already limited by Iran’s February 2006 decision to end application of the Additional Protocol. Under the basic inspection agreement that is currently in place in Iran, the IAEA must still be allowed to observe any enrichment activity that takes place. However, Agency inspectors are no longer able to inspect Iran’s progress in manufacturing or assembling centrifuges and related equipment.

Foreign assistance

Imports of nuclear-, chemical- and missile-related equipment have been indispensable to Iran’s weapon efforts. The latest report by the U.S. Director of Central Intelligence on transfers of mass destruction and advanced conventional weapon technology, which covers 2006, claims that Iran has continued to seek foreign assistance from entities in Russia, China, and North Korea. According to the report, China is Iran’s main conventional weapon supplier; Russia supplies Iran’s “civilian nuclear program”; and North Korean and Iran have “a longstanding relationship with respect to the purchase and development of ballistic missile technology.”

The nuclear smuggling network run by Pakistani scientist A. Q. Khan is believed to have been the main supplier to Iran’s centrifuge enrichment program. Speculation as to exactly what equipment and material Iran received has been the subject of numerous media reports since Libya renounced its mass destruction weapons and the Khan network was revealed as Libya’s primary supplier. The IAEA has already confirmed that the enrichment programs in Iran and Libya relied on the same technology obtained from the same foreign sources. And Iran’s P-2 centrifuge design is the same as the one found by the Agency in Libya. The P-1 centrifuges Iran has installed at Natanz are of an early European design, similar to the machines that have been under the control of the Khan Research Laboratories (KRL) in Pakistan. If Iran indeed received the same package of nuclear goods as did Libya, then it is possible that Iran received the same Chinese-origin bomb design. Iran may also have received more sophisticated nuclear weapon designs from the Khan network. Such designs were found on computers seized from Swiss nationals Friedrich, Marco and Urs Tinner. The Tinners were a known part of the Khan smuggling network and the designs found on their computers would reportedly require only 15 kilograms of highly enriched uranium and would be small enough to fit atop Iran’s medium-range Shahab-3 missile.

China has also provided key assistance to Iran’s nuclear effort. Chinese entities have helped Iran prospect for uranium, have sold UF6 ready for enrichment and have provided Iran with blueprints, equipment test reports, and equipment design information for its uranium conversion plant at Isfahan.

Russia’s main contribution is the 1,000 MW light-water power reactor it has been building at Bushehr. As of December 2005, 700 Iranian experts had completed training at Russia's Novovoronezh training center, which is run by the Russian nuclear power agency Rosenergoatom. The training included a theory course, work on a nuclear power unit simulator, and work at Russian nuclear power plants similar to the Bushehr reactor. The Iranian experts will continue their training at the Bushehr reactor itself. In addition to the reactor, Russian entities are alleged to have supplied laser equipment for uranium enrichment, know-how for heavy water reactors, and help with heavy water and nuclear-grade graphite production.

Iran has also sought dual-use nuclear technology from some members of the Nuclear Suppliers Group (NSG), an organization of 45 nuclear supplier countries.  According to the New York Times, seven NSG countries have denied Iran the purchase of nuclear-related materials at least 75 times, mostly since 2002. Iranian end users involved in these denied sales, according to the Times, include the government of Iran, the atomic energy organization, energy, engineering, aircraft and petrochemical companies, schools and universities, a plasma physics center, a helicopter support company and mineral research centers. Denied sales involved nickel powder, petrochemical plant components, compressors, furnaces, steel flanges and fittings, electron microscopes, radiometric ore-sorting machines, valves and tubing, lasers, a rotary drilling rig, a mass spectrometer and a nitrogen production plant.

China, Russia and North Korea have combined to supply Iran’s missiles. Iran’s 1,300 kilometer Shahab-3 missile is essentially an imported North Korean Nodong missile enhanced by Russian technology. It was distributed to Iran’s Revolutionary Guards in June 2003 and has since been tested several times. And it is widely assumed that if Iran fields a Shahab-4 missile, it will be a copy of Russia’s SS-4 missile. Both the Nodong and the SS-4 can carry a nuclear warhead. In January 2007, Russian defense minister Sergei Ivanov confirmed that Russia had delivered Tor-M1 air defense missile systems to Iran. Iran has already tested the missiles and will use them to defend key nuclear sites. North Korea, in addition to selling the Nodong missile, has furnished Iran a fleet of SCUD-B and SCUD-C short-range missiles, plus the factories to make them. Both the SCUD-B and SCUD-C have a diameter sufficient to accommodate a compact nuclear warhead.

From China, Iran has imported the 150 kilometer CSS-8 ballistic missile and a series of land-, sea-, and air-launched short-range cruise missiles. Many of these latter are anti-ship weapons.

In addition, Grigory Omelchenko, a member of Ukraine’s parliament, revealed in early February 2005 that a former officer in Ukraine’s secret police sold six unarmed Soviet-era cruise missiles to Iran between 1999 and 2001. The nuclear-capable missile, known as the KH-55 or the AS-15, has a range of up to 3,000 km and travels near the ground in order to avoid air defenses.