The European Union has extended a blacklist of individuals and companies with links to Iran’s nuclear and ballistic missile programs as it looks to clamp down on investment and technology transfer into the country.
The blacklist will be published on May 24, but experts told CNBC.com that it is expected to include European-headquartered banks that are believed to be facilitating investment into the nuclear industry.
The EU, along with Canada and the US, announced a tightening of sanctions last summer, as Iran continued to press on with its controversial nuclear program. The Iranian government remains insistent that its research is for peaceful purposes, but the US has continued to assert that Tehran is working on nuclear weapons.
The 2010 sanctions not only banned exports from the EU to Iran of any goods with potential military applications but also of equipment and technology used for exploration or the development of Iran’s natural gas resources, in an attempt to cut off financing to the Iranian government. Last year, 40 individuals and 50 companies were blacklisted.
“The rationale behind this was very much a financial one, in that Iran will not be able to keep on going with its nuclear program and its ballistic program without revenue from its oil and gas industry,” Marie Bos, Iran analyst at Control Risks, told CNBC.com. “It’s still largely dependent on oil revenues - about 80 percent of its economy is dependent on that – and given that both programs are incredibly costly, this money is absolutely critical to them.”
Bos said that sanctions have been hitting the Iranian economy – albeit mainly its mid-sized companies – and have restricted foreign investment.
“Essentially, raising letters of credit and transferring money has been very difficult, it’s a tedious process, so companies have either decided not to do it anymore, or find it extremely hard,” she said. “That has had an impact on especially medium-sized businesses in Iran, especially those that are importing goods.”
Rouzbeh Parsi, Iran expert at the EU Institute for Security Studies, told CNBC.com that while the sanctions may well affect the economy, the effect on the nuclear program itself could be limited. Iran can continue to sell hydrocarbons to Asian markets, and what resources it has will continue to be directed towards its nuclear program, Parsi said.
“When you’re hitting the Iranian economy, you’re primarily hitting society and the economy at large, and when you have a state that has these kinds of oil resources at its hand, and in a world where people still need oil, they always manage to sell it,” he explained.
“If you compare it with Iraq in the 1990s, there are some clear lessons to be learned. That is that the ones that are in power and have this kind of resource that they manage to get out – which they will as long as China and India and others want it – they will allocate those resources as they see fit," Parsi said.
“We haven’t seen anything yet to say that they think that the nuclear program isn’t worth it, so to speak., that they prefer to use it on education or whatever. Instead, they seem to be pursuing it.”