Iran Is Not Fazed by Threatened Sanctions on Its Gasoline Imports

German chancellor Angela Merkel and French president Nicolas Sarkozy this week issued a blunt threat of energy sanctions if Iran continues to flout the international community on its nuclear program.

“If there is no progress by next month, we would have to react with further sanctions,” Merkel said Friday, Aug. 21 and again Thursday, Aug. 27. “What is clear is that Tehran, whose president constantly questions Israel's right to exist, must not get the atomic bomb.”

She noted that the “5P+1 Group” – Britain, China, France, Russia the US and Germany – would get together in September to discuss how to ratchet up the pressure on Iran. “I don't want to preempt the talks but economic sanctions dealing with the energy sector are on the table,” she said. “We must also speak about them with our partners Russia and China.”

Wednesday, Aug. 26, Sarkozy trod in Merkel's footsteps, telling French ambassadors in his annual address that tougher sanctions would have to be discussed if Tehran does not change its position on the contentious nuclear program.

“It is the same leaders in Iran who say that the nuclear program is peaceful and that the elections were honest. Who can believe them?” Sarkozy said.

The two European leaders have therefore swung much closer to the Obama administration following secret talks begun early this month to persuade them to back the US decision to restrict the sale of gasoline and other refined petrol products including oils to an intransigent Iran.

A naval blockade considered

To make its position clear, Washington on Aug. 3 leaked plans to cut off commercial ties with firms selling gasoline to Iran, blacklist their products and have their maritime insurance revoked. When the Obama administration wanted to know if Paris and Berlin would join this embargo if Moscow and Beijing blocked its passage through the UN Security Council, Merkel at first proposed engaging them before deciding on unilateral sanctions. But in her more recent statements, she has inched closer toward Washington's position.

“If Iran got atomic weapons it would a dangerous situation,” she said. “That is why sanctions would be justified.”

Sarkozy went a lot further than the German chancellor, offering to join US energy sanctions without ifs or buts and even thinking about deploying the French Navy alongside the US fleet for a blockade to enforce them.

Because it is short of oil refineries, Iran must import 40% of its consumption of gasoline and petrol extracts, such as the various oils required for industry. An energy embargo could therefore bring the Iranian economy and possibly the regime to it its knees.

Iran has tried and failed to limit gasoline sales by rationing and hiking prices. Nevertheless, DEBKA–Net-Weekly intelligence and Iran sources report, no Western undercover agency has detected any sign of Tehran preparing for such a disaster or even laying in emergency stocks of essential gasoline.

Above all, it makes no sense for Tehran to spend $7 billion a year to import gasoline and petrol products, when half this sum would suffice to build a modern refining industry to meet its needs.

All the same, Iranian authorities exhibit utter indifference to possible American and European sanctions on gasoline and refuse to answer questions on the subject.

Iran is already a smuggler-based economy

The solution to this mystery, say our sources, appears in a Western intelligence paper produced this month which suggests that Iran is most likely working on clandestine sanctions-busting measures through the Revolutionary Guards covert al Qods Brigades intelligence arms. Secret long-term contracts are being signed for gasoline and other refined products to be supplied by Persian Gulf and Central Asian nations through private dealers and middle-men of the energy markets.

Clauses have been inserted under which suppliers guarantee to meet in full their commitments to provide Iran with gasoline in 2011 and 2012, regardless of sanctions or any other obstacles.

Tehran has made down-payments on these contracts.

That is one explanation for Tehran's blase attitude on energy sanctions.

Another reason offered by the same intelligence estimate is that Iran feels it can safely depend on the vast smuggling networks it has thrown across the Persian Gulf and Middle East. The quantity of goods imported and exported through these illicit back-channels may be as much as three times that of the above-board trade in and out of Iran.

One striking example of this network's modus operandi is the way it siphons off and markets at least 12 percent of neighboring Iraq's daily oil product. The stolen crude is conveyed to market by rail, truck or mini-tankers through Syria, Bahrain and Kuwait.