Insider news & Analysis in Iran
New Sanctions on Iran Highlight Growing Impatience with Hardline Political Dominance

By INU Staff

INU- It was reported on Tuesday that the United States was imposing yet another round of sanctions on individuals linked to the Iranian regime, specifically to the Iranian Revolutionary Guard Corps. The US special envoy for matters of Iran policy, Brian Hook, described the IRGC as being behind a large-scale sanctions evasion scheme, which relied on banks and front companies spanning at least three countries in order to gain illicit access to American and European currencies.

The new financial penalties from the Treasury Department seek to disrupt that network, targeted 25 different individuals and groups in Turkey, the United Arab Emirates, and the Islamic Republic of Iran itself. Any assets belonging to these entities that are currently held in American banks will be frozen, and those banks will be blocked from conducting any further transaction with the designated persons and businesses. Additionally, according to Voice of America News, the efforts could also result in the Treasury blacklisting any foreign entities that continue to engage in such transactions after the measures go into effect.

In this way, the US government could be seen as sending another message to European partners about the seriousness of the White House’s declared intention to exert maximum pressure on the Islamic Republic by isolating it to the greatest possible extent in international markets. Already, references to that goal have led to the withdrawal from Iran of would-be financial and business partners. In some cases, out of an abundance of caution, these businesses have reportedly disengaged to a greater extent than was actually required according to the US sanctions.

On the other hand, much of the European political establishment has been working to signal its ongoing disapproval of the re-imposition of US sanctions that were suspended under the terms of the Iran nuclear deal, or Joint Comprehensive Plan of Action in 2016. Last May, approximately sixteen months after taking office, US President Donald Trump announced his government’s withdrawal from the agreement, citing Iran’s violation of its “spirit” through activities such ballistic missile tests. This set the stage for renewed sanctions, but the European signatories – the United Kingdom, Germany, and France – have stood alongside China, Russia, and to a lesser extent Iran, in voicing commitment to the deal’s ongoing implementation.

This finally led, last month, to the launch of a special payment mechanism for evading US sanctions, called the Instrument in Support of Trade Exchanges, or INSTEX. But in contrast to the IRGC-led scheme that has come under fire from the Treasury, INSTEX is not intended to laundering Western currency but rather to facilitate transactions through a system that is roughly analogous to barter. Also unlike the IRGC scheme, INSTEX has not actually become operational.

In commenting upon the new sanctions measures, US officials have indicated that roughly a billion dollars are believed to have already passed through the designated network of front companies and into the hands of Iran’s hardline paramilitary institution. According to informed sources such as the National Council of Resistance of Iran, the IRGC already controls the majority of Iran’s gross domestic product, by way of its established front companies and its close partnerships with the hardline establishment in both the government and the private sector.

This situation reportedly allows the IRGC to channel a substantial portion of the Iranian nation’s wealth into paramilitary activities including the development of foreign militant proxies. These have proliferated in Iraq and Syria against the backdrops of civil war and conflicts against Sunni militants of the Islamic State group. And as those proxies have grown, they have drawn numerous comparisons to the Iran-backed Lebanese terrorist group, Hezbollah. Tehran’s financing of this group and of global terrorism in general was prominently highlighted in the US government’s explanation of the newly-imposed sanctions on supporters of the IRGC.

At the same time, Iran’s status as the world’s leading state sponsor of terrorism appears to be a major factor preventing the actual implementation of the INSTEX system. The European Union has established that as a prerequisite for that implementation, the Islamic Republic must come into compliance with the anti-money laundering standards of the Paris-based Financial Action Task Force. But hardline Iranian officials have staunchly opposed this compliance, specifically citing their concern about the likely effect on Hezbollah.
In February, Tehran surpassed a pre-set deadline for this compliance, but was then granted an extension until June. It remains uncertain whether legislative efforts will prevail over hardline clerical authorities including the supreme leader, who wields near-total power over all policy matters in the theocratic nation. Furthermore, the US Treasury’s references to one billion dollars’ worth of IRGC-laundered money underscores the fact that terrorist financing and defiance of FATF standards are very much ongoing.

Many informed observers are deeply skeptical about the prospect of Tehran turning away from its commitment to these sorts of activities. Indeed, many see the clerical regime going in exactly the opposite direction. For instance, Adam Ereli, a former US State Department employee, published an editorial at UPI on Tuesday that described the regime’s “tilt to the right” and its effects on domestic human rights trends and the nation’s international profile.

That article mentions the crackdown on widespread anti-government protests over the previous year, as well as the more recent appointment of noted human rights violator Ebrahim Raisi as head of the Iranian judiciary, and the passage of a new 33-year sentence on the political prisoner and human rights lawyer Nasrin Sotoudeh. All of these things have yielded global headlines and calls to action, though not all of the associated advocacy has risen to the level of urging support for the Iranian Resistance, as in the case of the Ereli article.

Even the ongoing imposition of sanctions by the comparatively assertive Trump administration has proven unsatisfying to some of the most committed opponents of the Iranian regime. Underlining that fact, NBC News issued a report on Sunday that said there is division both within the administration and among its allies about the extent to which the US ought to “squeeze Iran” in the short term.

The report identified a handful of concerns that seem to be holding pragmatic officials back from the rapid implementation of the declared strategy of “maximum pressure.” Among these are the perceived dangers of a spike in oil prices, backlash from the government of China, and the validation of Iranian propaganda in the form of sanctions that do not provide adequate exceptions for humanitarian goods.

In light of these concerns, it is widely expected that waivers for at least some of Iran’s eight largest oil importers will be extended before their expiration in May. But high-profile figures including former UN Ambassador Nikki Haley and Texas Senator Ted Cruz have flatly rejected pragmatic concerns, according to One American News Network, and have publicly insisting that all waivers should be halted and that maximum pressure should be adopted immediately.

Even if this recommendation gains sufficient traction to overcome the more cautious elements within the White House, it will be difficult for these and other advocates of maximum pressure to convince European partners to sign on. On the other hand, European policies toward the Islamic Republic have been gradually drifting in the direction of greater assertiveness in recent months, as when the entire European Union adopted sanctions on the Iranian intelligence service in connection with planned terror attacks on Western soil.

The perceived danger of such plots will no doubt intensify if Iran’s aforementioned “tilt to the right” continues and is more widely recognize in the days ahead. And this is arguably a likely outcome, considering that prominent Iranian officials have been less than shy about recently promoting even more conservative foreign policy views than what has been in the mainstream of Iranian politics since the implementation of the nuclear deal.

That deal stood virtually alone as a point of compromise between Iran and the international community, and now the Iranian supreme leader, the IRGC, and their allies appear poised to reject it in favor of more open antagonism of the US, Europe, and other declared “enemies” of the Islamic Republic. This was the message of Supreme Leader Khamenei’s speech to supporters last week, on the occasion of the Iranian New Year holiday Nowruz, according to Patrick Clawson of the Washington Institute.

Clawson explains that the greater part of Khamenei’s speech was squarely focused on stoking resentment toward Western powers, blaming them for domestic problems including the country’s worsening economic crisis, and portraying them as a monolith with no meaningful difference between the US and Europe. And although the supreme leader took no explicit position on the future of the JCPOA, he did repeat hardline talking points about the supposed untrustworthiness of Western interlocutors, thereby underlining his own previous rejection of the very concept of negotiation on the world stage.

On one hand, Khamenei’s Nowruz remarks may provide advance justification for foreign policy initiatives that include the continued promotion of anti-Western terrorism via Hezbollah and other proxies. And that perception was arguably backed up on Tuesday by the report that Iran had publicly committed to expanding its influence over Lebanon, in express defiance of US Secretary of State Mike Pompeo’s demand for separation of the two countries during his recent tour of the Middle East.

On the other hand, Clawson suggested that Khamenei’s speech also implied certain predictions about the future of Iranian-Western relations, and more specifically about the joint American and European reactions to Tehran’s implicit resistance to compromise or reform. “The picture he painted had no light on the horizon – indeed, little if any grounds for hope at all,” Clawson noted. “If that is the state of his thinking… then the Trump administration has had considerable success convincing Khamenei that the pressure will continue, and that Iran cannot count on outlasting U.S. hostility.”

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