Tuesday, January 30, 2007

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Why doesn't the EU have an OFAC?

Steven Weisman has a story in the New York Times evaluating the transatlantic effort to squeeze Iran. There have been a few bumps in the road:

European governments are resisting Bush administration demands that they curtail support for exports to Iran and that they block transactions and freeze assets of some Iranian companies, officials on both sides say. The resistance threatens to open a new rift between Europe and the United States over Iran.

Administration officials say a new American drive to reduce exports to Iran and cut off its financial transactions is intended to further isolate Iran commercially amid the first signs that global pressure has hurt Iran’s oil production and its economy. There are also reports of rising political dissent in Iran....

One irony of the latest pressure, European and American officials say, is that on their own, many European banks have begun to cut back their transactions with Iran, partly because of a Treasury Department ban on using dollars in deals involving two leading Iranian banks.

American pressure on European governments, as opposed to banks, has been less successful, administration and European officials say....

The administration says that European governments provided $18 billion in government loan guarantees for Iran in 2005. The numbers have gone down in the last year, but not by much, American and European officials say.

American officials say that European governments may have facilitated illicit business and that European governments must do more to stop such transactions. Treasury Secretary Henry M. Paulson Jr. has said the United States has shared with Europeans the names of at least 30 front companies involved in terrorism or weapons programs.

“They’ve told us they don’t have the tools,” said a senior American official. “Our answer is: get them.”

“We want to squeeze the Iranians,” said a European official. “But there are varying degrees of political will in Europe about turning the thumbscrews. It’s not straightforward for the European Union to do what the United States wants.”

Another European official said: “We are going to be very cautious about what the Treasury Department wants us to do. We can see that banks are slowing their business with Iran. But because there are huge European business interests involved, we have to be very careful.”

European officials argue that beyond the political and business interests in Europe are legal problems, because European governments lack the tools used by the Treasury Department under various American statutes to freeze assets or block transactions based on secret intelligence information.

A week ago, on Jan. 22, European foreign ministers met in Brussels and adopted a measure that might lead to laws similar to the economic sanctions, laws and presidential directives used in the United States, various officials say. But it is not clear how far those laws will reach once they are adopted.

I suspect that most of the rift on this issue is related to the difference in economic interdependence between the US and EU when it comes to Iran. However, the lack of an institutional infrastructure on the EU side is not insignificant. The Europeans have never had the equivalent of OFAC -- the Office of Foreign Assets Control that oversees the nitty-gritty implementation of U.S. sanctions.

The question is.... why? Economic sanctions have been a popular policy tool for the past fifteen years or so. Economic power is the primary means through which the EU tries to exert its influence in world politics. A EuroOFAC would, one hopes, allow the Europeans to implemebnt sanctions more quickly, while at the same time allowing for more precise in their targeting.

So why hasn't it happened yet? Two possible reasons:

1) European countries are less sanctions-happy than the United States. This is true, but there's a chicken-egg problem with this story -- the EU doesn't sanction as often because the tools aren't there;

2) European countries don't want to cede more foreign policymaking power to the EU. This is undoubtedly true, but again, I think it's overblown. A EuroOFAC would not be in charge of deciding when to sanction, but implementing the decision after its been made. The memver countries would still hold that decision-making power. There might be a slippery-slope logic at work, though -- making sanctions easier to execute puts the onus on the countries to decide to act.

I'm sure there are other reasons -- and I'mm sure my readers will inform me at great length about them.

This is part and parcel of a larger question, however -- to what extent does the EU really want to be seen as a great power? Is it willing to develop the traditional tools of statecraft that befit the moniker?

posted by Dan on 01.30.07 at 08:09 AM


Isn't it simply that the Euros think Iran's nukes will never be aimed at them or at any country they like?

posted by: JohnF on 01.30.07 at 08:09 AM [permalink]

There's nothing new about this.

When the Ottoman Turks besieged Vienna in 1683 they used French cannons (& other weapons), financed by Genoan credit.

This is how Europe works - it's their default mode.

What was remarkable and unusual was their willingess to work together during the cold war. Not the way they are acting now.

posted by: Jos Bleau on 01.30.07 at 08:09 AM [permalink]

This is part and parcel of a larger question, however -- to what extent does the EU really want to be seen as a great power? Is it willing to develop the traditional tools of statecraft that befit the moniker?

As a European, I find this question quite amusing.
The EU would love to be seen as a great power, but to do the unpopular heavylifting, well, that is the USA's job.

In sum, Steyn put it best, something along the lines of: "Americans have responsibilities, Europeans have attitudes."

posted by: Varangy on 01.30.07 at 08:09 AM [permalink]

It is especially puzzling insofar as the Commission has developed all sorts of robust bureaucratic instruments over the years; i.e. it has the bureuacratic capability to do competition policy, review mergers, et cetera, but not to implement economic sanctions.

posted by: Charlie on 01.30.07 at 08:09 AM [permalink]

It seems to me that the Europeans want to have it all, the ability to advocate for sanctions but not have to actually have to enforce them. It like the others have said. Let's have the right attitude, but let the Americans do the heavy lifting.

posted by: BCN on 01.30.07 at 08:09 AM [permalink]

As a French I don't see Iran as a danger.
For me the most dangerous country now is Pakistan.

And they are not very , very dangerous.

For me Americans, seen the collapse of Soviet Union, try to find a new scapegoat : Arab countries ,Venezuela, France, Iran, Noth Korea.

You are prisoners of your Calvinist view (A French again). You are always searching for "bad doers" or evil country.

The problem is that the rest of the world don't see the world the same as you.
hints : if you search for a new scapegoat China is a good candidate. Much more interesting than Iran.


posted by: JLS on 01.30.07 at 08:09 AM [permalink]

JLS would seem to provide evidence for JohnF's point (he was the first commenter).

I can't help thinking of Trotsky's statement, "You may not care about the revolution, but the revolution cares about you."

posted by: Roger Sweeny on 01.30.07 at 08:09 AM [permalink]

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