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Iran Sanctions Starting To Bite

Iran's Oil Minister says sanctions imposed by the United Nations Security Council are harming Iran's ability to invest in oil infrastructure. "The problems they have made for banks," he says, "have troubled financing of some projects."

The sanctions are a response to Iran's refusal to abide by its international obligations under the Nuclear Non-Proliferation Treaty. In addition, U.S. Treasury Department officials are alerting foreign governments and banking officials about how the Iranian government uses the international financial system to finance terrorism and support its nuclear program.

U.S. State Department spokesman Sean McCormack commented on the negative effects Tehran's policies are having on Iran's economy:

"Certainly, none of the headlines in the news reports concerning Iran's action in Iraq and throughout the region and around the globe for that matter does Iran's reputation any good. Very clearly, this is a government that has a cloud over it, and that cloud is only getting darker. It is only growing. . . .That is going to have costs in the international financial system. That is going to have costs in the business community. Without governments even acting, businesses are going to ask questions of themselves: Do we really want to do business with this government if our reputations are somehow going to be sullied by interacting with this government or some of these government entities?"

Several banks in Europe and Japan have decided to restrict or ban transactions with Iran. Akbar Torkan, managing director of Iran's state-run Oil and Gas Company, acknowledged that unless much needed investment can be found, Iran's oil production capacity will fall by about five per cent every year.

Secretary of State Condoleezza Rice says the United States and other countries will continue working on financial measures that will send a clear message to the Iranian government. That message, says Ms. Rice, is that "you cannot use the benefits of the international financial system and continue to pursue a nuclear weapon."

Meanwhile, the incentive package first offered to Iran in June 2006 by the five Permanent Members of the U.N. Security Council plus Germany, remains on the table. If Tehran agrees to suspend nuclear enrichment and abide by its obligations, Iran will receive assistance in its civilian nuclear energy program, as well as in other fields including transportation, medicine and trade. And the U.N. Security Council sanctions will be lifted.