This week saw the furthering of draconian legislation against Iran that may end up benefiting U.S. adversaries more than hurting Iran’s government. On Wednesday the House of Representatives passed the Iran Threat Reductions Act (H.R. 1905) and President Obama is expected to sign into law sanctions against Iran’s Central Bank (Bank Markazi) as part of the National Defense Authorization Act. H.R. 1905 includes measures that effectively bar U.S. officials from speaking to Iranian officials with some exceptions. While quoting an exchange between State Department spokesperson Victoria Nuland and Matthew Lee of the Associated Press, Foreign Policy’s Josh Rogin said Lee was essentially “pressing Nuland to admit that the administration is being bullied into accepting Iran sanctions law it doesn’t want”. Philip Weiss accordingly informs us that the main pusher of harsh Iran measures in congress are elements of the “Israel Lobby”:

AIPAC led the charge. AIPAC rolled the amendment out 3 weeks ago, and then led a letter-writing campaign to US Senators on the amendment, known as Kirk-Menendez (in part for the Senator from AIPAC, Mark Kirk of Illinois).

The National Iranian American Council, which advocates a mixture of diplomacy and targeted measures against Iran’s government, issued a strong statement against what it considers to be counter-productive legislation. According to policy director, Jamal Abdi:

These measures will not achieve anything but punish ordinary people, raise gas prices, and bring the U.S. and Iran closer to war…It will continue to squeeze Iranians and Iranian Americans from both sides, between the repression of the Iranian regime and the reckless sanctions policies of the United States.

Abdi wrote today that Obama’s initial resistance to the measures proved too weak against lobbying that’s targeting his upcoming presidential campaign:

But the administration’s public pushback also played into a political narrative being advanced by neoconservative groups like the American Enterprise Institute and the Emergency Committee to Save Israel, who say Obama is unwilling to confront Iran and is not a “true friend” of Israel. Ahead of a re-election in which Obama has few national security and foreign policy liabilities, it is an attack that the Obama campaign may fear is sticking. It may be no coincidence that the sanctions the president is being pressured to take in order to disprove this perception are ones that could raise gas prices in the US, and drive Europe and the global economy into recession. It is the economy, not foreign policy, where President Obama is most vulnerable.

USA*Engage, a broad coalition of businesses and trade associations, also issued a statement opposing the Iran Threat Reductions Act, arguing that it would work against the administration’s efforts to build an effective multilateral coalition on Iran:

…The H.R. 1905 vote and others like it only send mixed signals to those nations that have joined with the United States to press Iran to change course.  Votes like these may satisfy domestic political considerations, but they actually weaken American leadership and have the potential to unravel the calibrated, multilateral consensus that has been achieved.

Nuland said Thursday that the administration was studying how to apply sanctions targeting Iran’s Central Bank “while causing minimum disruption for friends and allies of the U.S.” This begs the question of how that’s possible when enforcement requires U.S. punishment of foreign banks that do business with Bank Markazi. While Asian allies are scrambling for ways to cope with the U.S.-led initiatives, China and Russia are reportedly looking forward to exploiting them for their own benefit. (Meanwhile China and Iran are gaining in Iraq.)

Fears have long been raised about the economic repercussions of targeting Iran’s Central Bank and its oil exports. Iran could respond by blockading the world’s most important oil-shipping route, the Strait of Hormuz. Yesterday a discussion on National Public Radio also highlighted how Iran could actually gain from higher oil prices caused by a reduction in global supply:

“There is absolutely a risk that in fact the price of oil would go up, which would mean that Iran would in fact have more money to fuel its nuclear ambitions, not less,” Wendy Sherman, a State Department undersecretary, testified before a Senate committee earlier this month.

Saudi Arabia is a key player in preventing that consequence and they still haven’t commented on an Iranian claim that the Saudis would not boost production to offset the effect of decreased Iranian exports. Despite tensions between Iran and Saudi Arabia that have dominated headlines, the countries held talks in Riyadh this week. Motivated by self-interest, Saudi Arabia also reportedly aligned with Iran in October by cutting oil output by 4% so prices didn’t fall below $100 a barrel.

Time will tell how the Saudis act this time, but so far Iran says it’s “not concerned“, Obama continues to be criticized by neoconservatives despite submitting to their pressure, and China and Russia seem to be basking in their good fortune. The only groups applauding the moves are hawkish organizations like the American Israel Public Affairs Committee, United Against Nuclear Iran and Israel, which on Sunday renewed calls for “paralyzing” sanctions on Iran.

Is anyone else scratching their head?