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Diplomacy in Action

Briefing on the Latest Sanctions on Iran


Special Briefing
Senior Administration Officials
Via Teleconference
Washington, DC
May 24, 2011

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OPERATOR: Welcome, and thank you for standing by. At this time, all participants are in a listen-only mode. Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

I’d like to introduce your host for today’s conference, Mr. Mark Toner. Sir, you may begin.

MR. TONER: Sure. Thank you very much, and thanks to all of you for joining us.

Earlier today, as you all know, we did announce that Secretary of State Clinton has decided to impose sanction on a number of foreign entities under the Iran Sanctions Act of 1996, as amended by the Comprehensive Iran Sanctions Accountability and Divestment Act – and that’s, of course, known as CISADA – for their activities in support of Iran’s energy sector.

Joining us today to talk about these efforts in greater detail and answer some of your questions is [Senior Administration Official One] and [Senior Administration Official Two]. Without further ado – well, just to set the ground rules, these two individuals will be henceforth known as Senior Administration Official Number One and Senior Administration Official Number Two.

I will now hand it over to Senior Administration Official Number Two to talk a bit about the sanctions as well as – then we’ll open it up to your questions. And again, just a reminder, this is on background.

Go ahead, [Senior Administration Official Two].

SENIOR ADMINISTRATION OFFICIAL TWO: Mark, thank you very much, and thank you all for joining the call.

Sanctions imposed by the Obama Administration today are part of our dual-track strategy of engagement and pressure to address the challenges posed by Iran. Iran has so far not demonstrated a willingness to meet its international obligations or negotiate seriously on its nuclear program, and so we and our international partners have had no choice but to step up pressures in the hope that Iran will reconsider what’s in its own best interest.

The Administration’s sanctions policies have already had a significant impact on Iran’s energy sector. Five major oil companies have committed to terminate their involvement in Iran. Major suppliers of refined petroleum and energy traders have stopped sales of refined product to Iran. Jet fuel suppliers are now refusing to supply jet fuel to Iran Air at most destinations in Europe and Asia where Iran Air flies. And now the imposition of sanctions against seven companies under the amended Iran Sanctions Act will send a strong signal to companies around the world about the risks of doing business with Iran.

Now, the seven companies today bring the total to nine of companies sanctioned by the Obama Administration under the amended Iran Sanctions Act. The Obama Administration is the first administration to impose sanctions under this – under the Iran Sanctions Act.

And in addition to imposing sanctions under the amended ISA for providing refined petroleum products or services to Iran, the Administration also announced today sanctions against 16 companies and individuals under the Iran, North Korea, Syria Nonproliferation Act for transferring equipment or technology that could make a material contribution to weapons of mass destruction or missile programs, primarily in Iran.

The entities sanctioned today under INKSNA include three Chinese entities and one Chinese individual, two entities from Belarus, five Iranian entities and one Iranian individual, one North Korean entity, two Syrian entities, and one Venezuelan entity. So the sanctions announced today fall under two U.S. sanctions laws, the amended ISA and INKSNA. But they’re part of a much broader set of measures being pursued internationally to follow on to UN Security Council Resolution 1929, which was adopted in June of 2010.

Just today, the European Union, the 27 countries of the European Union, announced the imposition of sanctions on a hundred additional entities, including the Hamburg-based Europe-Iranian Handelsbank, which is a major Iranian bank that provided access to Iran to European financial markets. We believe there’s a growing consensus on the need to sharpen the choice for Iran and bring it to the conclusion that it should meet its international obligations and address international concerns about its nuclear program.

With that, we’ll open it up to questions.

MR. TONER: Great. Obviously, we’ll take your questions now and I’d just ask that, before asking your question, you identify yourself and your media affiliation.

Operator?

OPERATOR: If you would like to ask a question, please press *1. To withdraw your question, please press *2. Again, to ask a question, please press *1. Please stand by for the first question.

Gary Gentile from Platts, your line is open.

QUESTION: Hi, thanks for taking the call. I’m interested particularly in the sanctions that were announced against PDVSA. The release says that it does not apply to subsidiaries, so I want to kind of get some clarification on that, because, as you know, CITGO is a major subsidiary with operations here in the U.S. They also have a U.S. financing arm called PDVSA-USA, and I wanted to see if those companies are considered subsidiaries and what – how the sanctions may or may not apply to them.

SENIOR ADMINISTRATION OFFICIAL ONE: Hi, this is [Senior Administration Official One]. PDVSA can continue to export crude to its U.S. refinery operations in the U.S., including CITGO.

QUESTION: Okay. And PDVSA-USA, the financing arm that – the sanctions don’t apply to them?

SENIOR ADMINISTRATION OFFICIAL ONE: Does not apply to subsidiaries of PDVSA.

QUESTION: Thank you.

MR. TONER: Next question.

OPERATOR: Next question comes from Emily Cadei from Congressional Quarterly. Your line is open.

QUESTION: Hi. I wanted to get a little bit more information about the timing of the announcement. I know Congress came out last week, for example, with a new sanctions bill to tighten up some sanctions and expand others, and I was just curious if that prompted this announcement. And also, if you could speak to the Administration’s position about further legislation – legislative efforts to tighten up sanctions; do you support those efforts, do you think that the Administration needs more tools?

SENIOR ADMINISTRATION OFFICIAL TWO: On the question of timing, we’ve been reviewing these cases for some time. There’s an interagency process that’s involved, a substantial investigation. And then we provide our recommendations to the key decision-makers. It’s taken a while, but we’ve finally reached conclusions. The timing was unrelated to interest in Congress to tighten the restrictions regarding Iran. One element – it’s perhaps related to June 1st, the CISADA legislation, requires us to do a report on companies engaged in refined petroleum activities with Iran. That’s coming up. And it makes sense, as we’re preparing this report, to draw some bottom lines, and we did. And so we think the timing is right as far as that’s concerned.

Concerning interest on the Hill and new legislation regarding Iran, we’ve seen reports, we’ve read draft bills that have been put forward, and we’re studying them very carefully. We very much value CISADA, the bill that was signed into law by President Obama June 1. We have used it aggressively in our efforts to step up pressures against Iran, and we’ll want to work closely with the Congress to ensure that we have the strongest possible legal basis for putting pressure on Iran.

MR. TONER: Next question.

OPERATOR: Jonathan Landay from McClatchy Newspapers, your line is open.

QUESTION: Hi. I wanted to talk about the philosophy behind the sanctions, in that the United States had previously – has previously sought to, quote/unquote, “spare the ordinary people of Iraq” – of Iran, sorry – “from sanctions.” And yet by hitting gasoline imports for the first time, that’s what these new measures will do. Are you concerned about the impact that could have within Iran itself and on whether or not it will, in fact, increase, for instance, popular support for the government as the government uses this to point that the United States – as being the cause of its economic – of the economic problems that Iran is undergoing – increasing economic problems that Iran is undergoing?

SENIOR ADMINISTRATION OFFICIAL TWO: A few things. Security Council Resolution 1929 recognizes a connection between Iran’s energy revenues and its nuclear and missile programs. The revenues it acquires through its energy sales do contribute to its proliferation program, so that was recognized internationally as a tie-in. And so we – this is one basis for going after the energy sector. Also, some of the equipment and technology you can acquire for the energy sector’s dual use can have applications to certain military programs in Iran, so that’s one reason we’ve gone after that particular sector in Iran. Our evidence, and this comes from reports, from countries that have embassies in Tehran and other anecdotal evidence, suggest that these measures that we have adopted have not adversely impacted the citizens of Iran and that the economic difficulties that exist in Iran, and they are substantial, are primarily the result of the mismanagement of the economy by the Iranian Government.

MR. TONER: Next question.

OPERATOR: A question from Bahman Kalbasi from BBC. Your line is open.

QUESTION: Thank you. Following up on that question, selling petroleum that people put in their cars to drive around, I’m not sure how it’s exactly directly to the energy sector. But specifically on the PDVSA one, you’re targeting them because they’re selling reformate – cargoes of reformate, which is to clean the production of petroleum inside that is happening in the last few months. And we’ve been getting lots of reports of medical experts in Iran saying what Iran is producing inside in haste is not clean and it’s causing cancer and it’s – people are feeling the difference because they’re not up to the international standards and results of – being more difficult to buy petroleum internationally. Now, you’re targeting a company that is selling them an equipment to clean that up. How do you justify that, telling the Iranian people that we want to make sure the gasoline you’re driving on is not even clean?

SENIOR ADMINISTRATION OFFICIAL ONE: I think that the Administration is charged with implementing the law, and the law is very clear that refined products, including reformate, are subject to the sanctions. So we implemented a very careful process and we have – implementing sanctions because it was a clear violation of the law.

MR. TONER: Next question.

OPERATOR: Sonia Schott from Globovision Venezuela, your line is open.

QUESTION: Yes, thank you so much. I was wondering if you can talk about the scope of the sanctions, the impact of the sanctions, specifically regarding for PDVS – PDVSA, Venezuela. What will it – does it mean for Venezuela and for oil petroleum company? Thank you.

SENIOR ADMINISTRATION OFFICIAL TWO: The specific sanctions adopted for PDVSA would prohibit the company from competing for U.S. Government procurement contracts, from securing financing from the Export-Import Bank of the United States and from obtaining U.S. export licenses. The sanctions do not apply to PDVSA subsidiaries and do not prohibit the export of crude oil to the United States.

MR. TONER: The next question.

OPERATOR: Lee Ross with Fox News, your line is open.

QUESTION: Yes. Earlier in the call it was said that the sanctions announced were following a substantial investigation. I guess if you could go a little bit more into that, what open source information is out there that led to these entities and for what is perhaps not openly available, what tools -- what led you to identify the specific seven?

SENIOR ADMINISTRATION OFFICIAL TWO: Well, when we get information that prohibited transactions or activities may have taken place, we investigate in a number of ways. Sometimes there’s publicly available information. Governments sometimes publish information themselves. Other times you can find about it in the trade press. But when we get information, we can pursue it with governments of concerned entities, we can go directly to the entities, follow up to talk to them about it, we also have our own intelligence sources that add to the picture. But the investigation really looks at all of these sources.

MR. TONER: Okay. We have time for just a few more questions. Next question.

OPERATOR: David Ivanovich from Argus Media, your line is open.

QUESTION: Hi, thanks very much. I’m just trying to understand a little bit more about the bite that these sanctions might have on PDVSA. First of all, can you tell us why you chose not to sanction any of their subsidiaries? And secondly, when you talk about government procurement contracts, securing financing from Ex-Im and the U.S. export licenses, has PDVSA actually applied for any of those in the past? Thanks.

SENIOR ADMINISTRATION OFFICIAL THREE: This is [Senior Administration Official Three] to follow up on that. Yes, they have applied for export licenses and Export-Import financing in the past. I don’t have – I can’t provide specific numbers on that, but they have utilized those programs in the past.

MR. TONER: Okay, next question, and a reminder that our last speaker obviously introduced himself but is also on background.

OPERATOR: Andrew Quinn from Reuters, your line is open.

QUESTION: Yeah, this is a follow-on question to that. I’m wondering if any of the companies mentioned under either of these categories of sanctions today have any appreciable U.S. exposure. Are these sanctions actually going to hit any business that they have here, or is this more a symbolic move and one that you hope will sort of push them out of world markets?

And secondly, Venezuela is obviously a major U.S. oil supplier. Did you discuss with the government before these sanctions were imposed, and is there any concern that Chavez might follow through on threats that he makes periodically to cut off U.S. oil supplies in retaliation?

SENIOR ADMINISTRATION OFFICIAL TWO: It is true that for most of these entities, there are very few, if any, commercial dealings with the United States. And so the immediate practical impact of the sanctions will be minimal, but it would impact possible future cooperation by these entities with the United States. But I think more significantly, these sanctions send a strong signal to companies around the world about the risks of dealing with Iran. So it serves as a signal, a deterrent, as much as it does as having a near-term, practical impact.

SENIOR ADMINISTRATION OFFICIAL ONE: I think it’s important to emphasize that the sanctions do not restrict PDVSA’s ability to export oil to the U.S. or to world oil markets.

MR. TONER: Okay, thanks. Time for just one more question.

OPERATOR: David Lerman from Bloomberg News, your line is open.

QUESTION: Hi, thanks. I just wanted to clarify one thing. I think you said this is the first time sanctions had been imposed under the Iran Sanctions Act, or at least this Administration the first time it’s happened, then I thought I heard you say this brings to nine the number of energy companies that have been targeted with a list of seven today. Did I miss two from last year? Can you just clarify the history of that?

SENIOR ADMINISTRATION OFFICIAL TWO: Yes. Actually, I did, in fact, say that this was – that this Administration was the first administration to impose sanctions under the Iran Sanctions Act, and to date this Administration has imposed sanctions on nine companies. In addition to the seven announced today, there was a – there were two – Naftiran Intertrade Company, which is a Switzerland-based Iranian company, and Belarusneft, which is a company based in Belarus. Those sanctions were announced earlier in the Administration and the seven today brings the number to nine.

QUESTION: But the act since 1996 has had no sanctions up till, like, last year?

SENIOR ADMINISTRATION OFFICIAL TWO: That’s correct.

MR. TONER: Okay. Well, thank you all for taking time out of your busy days to join us and appreciate it. Again, just a final reminder that all the comments were – given today were on background as senior Administration officials. Thanks again.



PRN: 2011/826



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