Today, the United States imposed stiff sanctions against the Iranian regime, targeting the Iranian military structure and a number of Iranian banks and individuals it accuses of backing nuclear proliferation and terror-related activities.
The Islamic Revolutionary Guard Corps (IRGC), its elite unit engaged in terrorism known as the Qods force and nine other IRGC-affiliated entities, the Ministry of Defense and Armed Forces, three of Iran's largest state-owned banks, five IRGC-affiliated individuals, and three individuals affiliated with Iran's Aerospace Industries Organization (AIO) are now designated under Executive Orders 13382 and 13224.
"What this means is that no U.S. citizen or private organization will be allowed to engage in financial transactions with these persons and entities," Secretary of State Condoleezza Rice said in a joint announcement with Treasury Secretary Henry Paulson. "In addition, any assets that these designees have under U.S. jurisdiction will be immediately frozen," she added.
"Iran funnels hundreds of millions of dollars each year through the international financial system to terrorists," Treasury Secretary Henry Paulson said. "Iran's banks aid this conduct using a range of deceptive financial practices intended to evade even the most stringent risk management controls."
Last month, representatives of world powers announced that unless a November report shows a "positive outcome" of talks with Iran about its uranium enrichment program, they will move ahead with plans for a resolution imposing additional sanctions on the country.
The U.N. Security Council has repeatedly demanded that Iran suspend enrichment of uranium and has imposed limited sanctions on Tehran for refusing to comply. The European Union is weighing its own unilateral sanctions.
The sudden fall of Ali Larijani, Iran’s chief nuclear negotiator, from the grace of the Supreme Leader Ali Khamenei, and his replacement with another former IRGC commander close to Ahmadinejad, settles one core issue in the nuclear standoff with Tehran: negotiations are at a dead end.
The key question, however, is about the effectiveness of international sanctions to halt Tehran’s drive to get the A-bomb.
The short answer is that, while not sufficient by themselves, an array of multilateral punitive financial measures within and outside of the United Nations Security Council have put measurable squeeze on Tehran’s financial chokeholds. Equally decisive, they have been instrumental in fueling further political disarray within the regime. The new designation of the IRGC and its affiliated organizations would make life even more miserable for the regime.
Sepah Bank, the fifth largest state-owned bank in Iran with 1,700 branches, and described by a U.S. Treasury Department official as “the financial linchpin of Iran’s missile procurement network," has been seriously hurt by the UN action. The bank has reportedly lost approximately $4 billion by being shut out of Europe.
The latest annual report of Bank Sepah International Plc (BSIP), the company’s fully owned subsidiary in London, laments that “the operating environment for the bank became increasingly difficult” in 2007.
Other state-run banks have been feeling the pressure too. Iran’s Central Bank has routinely tried to shield Sepah Bank from sanctions by hiding its identity when making deals for proliferation-related projects. This ploy is now haunting the Central Bank and other Iranian financial institutions, as news about the abusive practices is driving foreign banks away.
The October 25 designation of Iran's Melli, Mellat and Saderat Banks by the Treasury Department, resulting from their involvement with Iran's proliferation activities or its support for terrorism, will further financially squeeze Tehran.
Since 1980, the United States has imposed an array of different sanctions targeting a variety of Tehran’s outlaw behavior ranging from sponsorship of terrorism and long-range missiles development, to WMD and nuclear proliferation. The measures put in place by the Treasury Department’s Financial Crimes Enforcement Network (FinCen) that target Iran’s banking and business sectors are among the most effective of these sanctions.
FinCen has warned U.S. banks that Iran is now stepping up its “deceptive” tactics for evading sanctions such as funneling transactions through front companies. Stuart Levey, the undersecretary for terrorism and financial intelligence at the Treasury Department, has already convinced 40 banks to stop doing business with Iran.
Meanwhile on the other side of the Atlantic, with almost a U-turn shift in France’s approach toward Tehran’s nuclear program after new President Nicolas Sarkozy took the helm last summer, there is a new and much needed energy for the efforts to beef up the existing punitive sanctions.
France has recently called on the European Union to implement its own sanctions independent of the UN. Despite EU’s reluctance to follow France’s call, there are increasing European punitive actions against Tehran. The French banking industry is exiting Iran; 50 percent of its banks in Iran have shut down, including BNP Paribas, France’s second-largest bank. Others include Credit Lyonnais, Société Générale SA and French Bank of General Development. The latter, under pressure from the United States, withdrew from its commitment to invest some $1.8 billion for two critical development phases of the South Pars oil and gas field.
The Swiss ABN Amro Holding NV, Credit Suisse Group and UBS AG, and the British Barclays PLC and HSBC Holdings PLC have also reduced or ended their business in Iran.
Although the German government is dragging its feet to get in line with France and the United States to adopt tougher measures, three of the leading German banks, Deutsche Bank AG, that country's largest, Commerzbank AG, the second-largest, and Dresdner Bank, have terminated most of their dealings with Tehran.
How does President Mahmoud Ahmadinejad, who has claimed Tehran's nuclear dossier “is now closed” and has dismissed the UNSC sanction resolutions as “worthless piece of paper,” deal with the bad news about Iran’s fast growing financial isolation and its impact on Iran’s economy? Simple; with full backing of Supreme Leader Ali Khamenei, he purges his top officials and resorts to desperate suppressive measures to keep the restive population at bay.
Just in the past several months, Ahmadinejad has fired the governor of the Central Bank and the oil minister — two key cabinet posts, over Tehran’s eroding relationships with foreign banks and failure to find investors to fund oil projects. The sudden announcement of fuel rationing last summer, turned Tehran and other major cities into the scene of massive anti-regime protests where — far beyond the regime’s energy policies — the totality of ayatollahs’ regime was targeted. The politically-suppressed, socially-suffocated and economically-deprived people burnt down hundreds of state-run fuel pumps, chanting death to dictatorship.
After these riots, a state-run daily in Iran, Etemad, acknowledged that growing bread and butter issues have turned into a major national security matter for the regime. “It does not matter what the event is; it could be the loss of the national soccer team, sudden loss of electricity, the cutting off of the drinking water, or the sudden and unexpected rationing of the fuel ... They all can spark a riot ... Although most of these riots are put down after the security and military agencies intervene, every act of riot adds to the collective memory of the people who will use it as capital or a learned experience for the next uprising,” the paper said.
It is therefore very evident that sanctions have a unique impact on Tehran’s political and financial capabilities. But the key question, far more important than the one about the effectiveness of sanctions, is that would the sanctions alone force Tehran to stop enriching uranium, come clean about its entire nuclear program, and change its outlaw behavior? Not likely.
However, weakened by series of dismissals and factional rivalries, plagued by intrinsically dysfunctional theocratic system, and faced with an increasingly defiant and repression-resilient populace and an organized opposition spearheaded by the Mujahedin-e Khalq (MEK), Tehran is extremely vulnerable. A foreign correspondent reported last summer from Tehran that “The launch of writing slogans on the walls in big cities in favor of MEK brings back bitter memories in mullahs’ minds … The Iranian rulers are very concerned and alarmed. Not because of unfeasible foreign military attack but because of peoples’ support for Mojahedin-e-Khalq. Today, MEK is highly capable of attracting the young people born and raised after the revolution.”
Thanks to information obtained by its vast network inside the country, this group has exposed the regime's secret nuclear sites and uncovered secret terrorist training camps and bomb-making factories that continue to ignite violence in Iraq.
Crippling Tehran's financial lifeblood would further weaken its internal terror machine, demoralize the financially vulnerable IRGC, and heighten the internal conflict among the warring factions ruling the country. At the same time, removing restrictions from the main Iranian opposition would act as a signal that the West recognizes the legitimate right of the Iranian people to determine their own destiny which, by all indications, is an Iran free of tyranny, terrorism and nuclear weapons.
Alireza Jafarzadeh is a FOX News Channel Foreign Affairs Analyst and the author of "The Iran Threat: President Ahmadinejad and the Coming Nuclear Crisis" (Palgrave Macmillan, 2007).
Jafarzadeh has revealed Iran's terrorist network in Iraq and its terror training camps since 2003. He first disclosed the existence of the Natanz uranium enrichment facility and the Arak heavy water facility in August 2002.
Prior to becoming a contributor for FOX, and until August 2003, Jafarzadeh acted for a dozen years as the chief congressional liaison and media spokesman for the U.S. representative office of Iran's parliament in exile, the National Council of Resistance of Iran.
Alireza Jafarzadeh, the deputy director of the Washington office of the National Council of Resistance of Iran, is credited with exposing Iranian nuclear sites in Natanz and Arak in 2002, triggering International Atomic Energy Agency inspections. He is the author of "The Iran Threat" (Palgrave MacMillan: 2008). His email is Jafarzadeh@ncrius.org, and is on twitter @A_Jafarzadeh.