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Washington Faces Resistance to Expansive Measures on the Table; China and Russia Absent From Meeting

By JAY SOLOMON

WASHINGTON — The Obama administration quietly convened its first meeting with 10 key allies this week to try to build consensus on new economic sanctions aimed at punishing Iran for its nuclear program.

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Associated Press

Iranian technicians work at the oil-separator facilities in the country’s Azadegan oil field. Some major buyers of Iranian oil worry that new sanctions on Tehran could hurt their economies.

The grouping — which participants have informally dubbed “the coalition of the like-minded nations” — included representatives of the Group of Seven bloc of industrialized nations, Saudi Arabia, the United Arab Emirates, Australia and South Korea, according to participants in the meeting.

China and Russia, who have both voiced reluctance to pursue new sanctions on Tehran, were notably absent. Secretary of State Hillary Clinton travels to Moscow next week and Iran is expected to be on her agenda during talks with Russian officials.

The meeting this week was held at the Treasury Department’s Washington headquarters and initiated by Stuart Levey, the Obama administration’s point man on Iran sanctions. Daniel Glaser, a deputy assistant secretary of the Treasury, headed up the majority of the deliberations, according to participants. A Treasury Department official declined to comment.

U.S. officials view the meeting as the first in a series of strategy sessions among the 11 countries on how to enact new financial penalties on Tehran should it rebuff international efforts to end its nuclear program diplomatically.

Participants in the Wednesday meeting said, however, that the U.S. is facing some resistance, even among its closest allies, to pushing ahead with some of the more expansive sanctions being considered.

President Barack Obama has given Tehran until year-end to respond to his offer of better relations and economic incentives from the West in exchange for Iran ceasing its production of nuclear fuel.

Treasury Department officials specifically outlined at the meeting eight areas where Washington believes Iran is vulnerable, according to participants.

These included efforts to choke off Iran’s access to refined petroleum projects; penalties on Iran’s insurance and re-insurance companies; initiatives to curb Iran’s ability to ship internationally; and renewed campaigns to cripple Iran’s banking sector. The U.S. is also exploring new ways, according to participants in the talks, to sanction key Iranian leaders and to inhibit their ability to travel internationally.

“The meeting was aimed at exploring as many areas of cooperation as possible,” said a diplomat who participated in the talks. “Everything is on the table.”

U.S. officials have in the past specifically cited a gasoline embargo on Iran as having a potentially significant impact, as Tehran imports roughly 30% of its gasoline needs. But countries like Japan and South Korea are major oil purchasers from Iran and worry how the sanctions campaigns could affect their economies. Close neighbors of Iran, such as Saudi Arabia and the U.A.E., meanwhile, are fearful of being targeted by Iran if tensions with the U.S. and its allies intensify in the coming months.

Last month, President Obama and key European allies disclosed a secret Iranian uranium-enrichment facility in the holy Iranian city of Qom that U.S. and European officials believe was being developed to produce the fissile material for atomic weapons.

The U.S. and its allies have, subsequently, begun intensifying their efforts to develop new sanctions on Iran should diplomatic efforts fail.

One participant in the talks said that without a consensus on sanctions the grouping of 11 countries might have to fall to the default position of taking the harshest measures they can individually. “That would be unlikely to force Iran to alter course,” said the diplomat. “But there are limitations on some countries’ ability to act.”

Mr. Levey and other senior U.S. officials were pressured by members of the Senate earlier this week to quickly pursue new sanctions on Iran. These lawmakers, including Democrats Charles Schumer of New York and Bob Casey of Pennsylvania, were specifically calling for the gasoline embargo and the sanctioning of Iran’s central bank.

U.S. officials, and participants in the Wednesday meeting, suggested an almost certain target for future actions will be Iran’s elite military unit, the Iranian Revolutionary Guard Corps. President Mahmoud Ahmadinejad is a veteran of the IRGC, and many of his closest allies are current or former members of the military unit.

The organization has come to dominate Iran’s economy and expanded its reach this month by moving into Iran’s telecommunications sector.

U.S. officials view a targeting of the IRGC as a means of hurting Iran’s leadership, but not its citizens.

The IRGC’s businesses “may well be an area where we can focus some attention and have the ability to — to bring others along with us and make it more effective,” Mr. Levey said in testimony Tuesday.

No formal date as been set for the next meeting of this informal coalition, said participants in the talks. But these countries will closely be following U.S. meetings with Iran in the coming weeks.

On Oct. 19, Iran will meet in Vienna with the U.S. and other global powers to discuss a plan to ship its low-enriched uranium to Russia and France for further processing. On Oct. 25, U.N. inspectors are scheduled to inspect the Qom facility.

Write to Jay Solomon at jay.solomon@wsj.com