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Robert Naiman

Robert Naiman

Posted: August 1, 2008 12:43 PM

Want Lower Gas Prices? Lift AIPAC's Sanctions on Iran

Senator McCain, President Bush, and some of their oil industry friends are urging Americans to support overturning a 26-year ban on offshore drilling as a way to bring down gas prices. Of course, it's snake oil designed for what the Joe Lieberman campaign affectionately called "low information voters."

As Dean Baker and Nichole Szembrot of the Center for Economic and Policy Research noted in a June 2008 paper ,

the Energy Information Agency (EIA) projects that Senator McCain's proposal would have no impact in the near-term since it will be close to a decade before the first oil can be extracted from the currently protected offshore areas. The EIA projects that production will reach 200,000 barrels a day (0.2 percent of projected world production) at peak production in close to twenty years. It describes this amount as too small to have any significant effect on oil prices.

In contrast, if the United States had continued raising auto fuel efficiency standards annually between 1985-2005 by a quarter of the amount it raised them annually from 1980-1985 -- instead of leaving them virtually unchanged -- the result would have roughly been the equivalent of 3.3 million barrels of oil per day in new production in 2008 -- 16 times the impact of McCain's Offshore Drilling [MOD], CEPR reports.

What about the impact of lifting sanctions on Iran?

"Sanctions are pushing up the cost of oil," notes Juan Cole in a recent piece on Salon.
I asked Cole what his estimate of the scale of this effect was. If Iran could have expanded production of oil from 4 million barrels a day in the late 1990s to 6 million barrels a day today, that would be an extra 2 million barrels a day, i.e. 88 million barrels a day globally instead of 86, Cole says.

I asked Dean Baker of CEPR what could be the impact of lifting sanctions on Iran, and he wrote:

"Suppose they open up to foreign investment and production goes up 1-2 million barrels a day after a few years...It's 5 to 10 times McCain's offshore drilling."

So, summarizing in a table, using MOD ["McCain's Offshore Drilling"] as our "numeraire," as the economists say, we have the following:

Modest Conservation: 16 MOD
Lift Sanctions on Iran: 5-10 MOD
McCain's Offshore Drilling: 1 MOD

Now, some would surely argue that simply lifting sanctions on Iran is not politically feasible, because there is currently a "Washington Consensus" for sanctions on Iran supported by groups like AIPAC, linked to its nuclear program, relations with Iraq, Hamas, Hizbollah, etc.

Let's concede for the sake of discussion that that is true. What about the lifting of sanctions in the context of a real, negotiated deal with Iran? Would such a deal be more likely if Americans realized that the likely effect of such a deal would include an increase in world oil production roughly equivalent to 5-10 MODs?

Consider the following.

First, insofar as the sanctions were aimed at stopping Iran from having a nuclear program, or having relations with Iraq, Hamas, or Hizbollah that the US doesn't like, they have obviously not achieved their goals. If sanctions are expanded, (for example, by trying to ban Iran's gas imports, through what effectively amounts to an international blockade, as AIPAC has proposed) then they will drive up the price of oil still further, and it seems unlikely that the U.S. will be able to get Russia and China and Germany to agree to expand the sanctions to the degree necessary to achieve any of those goals.

Second, a key reason that the U.S. can't win support for the effective expansion of sanctions is that current U.S. policies are based on goals that are not widely seen internationally as legitimate. It's one thing to say you don't want Iran to have nuclear weapons. For that goal there is widespread international support (including -- according to their repeated public statements -- all the leaders of Iran, and the majority of Iranian public opinion.) But the current U.S. goal is to prevent Iran from having any nuclear program at all that involves the enrichment of uranium, and that goal has weak international support.

Suppose the U.S. changed its goals with respect to Iran to make them more realistic. Suppose, for example, that instead of trying to ban enrichment of uranium in Iran entirely -- a nonstarter for the overwhelming majority of Iranian public opinion -- the US were to seek to put Iran's uranium enrichment program under full international control, as Ambassador Pickering has proposed.

Suppose that instead of the unrealistic goals of demanding that Iran not "support" allies in Iraq, Lebanon, and Palestine, the US sought Iran's agreement to support its allies only politically and financially, and for Iran to use its influence with its allies to diminish violence and promote national reconciliation in these countries, as Iran has offered to do in the past and indeed has already done in Iraq and Lebanon. Suppose that, as seems quite plausible, as a result of this shift in U.S. policy the U.S. was able to get a deal with Iran, and lift the sanctions.

Should not the fact that such a policy could bring the benefit of 5-10 MODs be part of our debate over policy towards Iran? Would Americans tolerate that AIPAC dictate US policy towards Iran if they realized that it was costing them every time they went to the pump?

Here's a first step: don't let AIPAC drive up gas prices even more. Ask Congress to reject AIPAC's resolution seeking to ban Iran's gas imports.

Ambassador Pickering calls for talks with Iran without preconditions and advocates for a multinational uranium enrichment consortium in Iran.