It's hard to think of another case where sanctions have had such drastic effects on a country's economy so quickly. Iran used to export 2.14 million barrels of oil every day; that was two years ago. Now that number stands at some 890,000. The value of the rial has crashed, and the IMF reports that Iran's economy has shrunk for the first time in more than two decades. Even Mahmoud Ahmadinejad admits the country is feeling the pressure.
But despite the U.S. campaign to marginalize Iran, a new report suggests Washington may be unwittingly undercutting its own efforts by buying up Iranian oil -- a clear violation of the sanctions prohibiting almost all economic activity with the pariah state.
Since 2007, the U.S.-led coalition in Afghanistan has allocated $1.55 billion for the purchase of fuel for the Afghan national army (ANA). Problem is, nobody seems to know for certain whether that fuel came partly from Iran.
"DOD is unable to determine if any of the $1.1 billion in fuel purchased for the ANA between fiscal year 2007 and 2012 came from Iran, in violation of U.S. economic sanctions," according to the report filed by the Special Inspector General for Afghan Reconstruction (SIGAR). "Given the Afghan government's continued challenges in overseeing and expending direct assistance funds, it will become more difficult for DOD to account for the use of U.S. funds as it begins to transfer funds -- in March 2013 -- directly to the Afghan government for the procurement and delivery of ANSF fuel."
While tracking fuel sources might sound like an easy task ("Who did you pay?"), it's complicated by the fact that what gets put in Afghan vehicles is often the result of a blending process involving petroleum from Russia, Turkmenistan, and, if we're to believe a fuel vendor interviewed by SIGAR, possibly Iran.
Lest there be any doubt that this is a problem, the relevant language from the U.S. Treasury makes it clear:
IRANIAN PETROLEUM INDUSTRY - U.S. persons may not trade in Iranian oil or petroleum products refined in Iran, nor may they finance such trading. Similarly, U.S. persons may not perform services, including financing services, or supply goods or technology that would benefit the Iranian oil industry.
With defense secretary nominee Chuck Hagel taking questions from the Senate Armed Services Committee as we speak, this seems just like something that a Hagel opponent like Senator James Inhofe or Senator David Vitter might bring up.
Update, 12:03 p.m. Eastern: The State Department has announced that it will go after companies that deliberately obscure the origins of Iranian oil:
U.S. to target firms that help Iran disguise origin of oil shipments to skirt western sanctions - U.S. State Dept official #BREAKING-- Reuters World (@ReutersWorld) January 31, 2013
View SIGAR's full report here: