Sanctions to protests: A lose-lose situation for the Iranian regime

Al Arabiya English

As the world continues to assess US President Donald Trump’s decision to pull out of Syria and significantly decrease America’s foothold in Afghanistan, Iran has troubles kicking in from all corners.

With US sanctions beginning to bite significantly against the regime, the Iranian regime is finding it difficult on how to juggle these unprecedented and escalating measures, while demands of Tehran complying with international financial transparency regulations are hanging over the regime’s neck.

If Iran gives in to these global measures, their support for proxy groups across Syria, Lebanon, Iraq, Yemen and beyond will be severely tampered.

If the regime chooses to maintain its current stance, not only will the currently escalating economic embargoes expand, they will also gain a far more international image, with Europe, Russia and China having no choice but to distance from Iran.

‘Most powerful organization’

Following the US decision to pull out of the 2015 Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), the remaining members of the deal have emphasized on Tehran complying with standards set by the Financial Action Task Force (FATF), a Paris-based intergovernmental organization focusing on preventing money laundering and terrorism financing.

While most people may have never heard of the FATF, it is described by financial crime experts as “the most powerful organization” that has gone unnoticed by the commoners.

If the FATF finds a country in failure to abide by its standards, that country will face a blacklisting that has the watchdog urging members to carry out countermeasures – read sanctions – that can result in a complete prohibition of financial transactions.

Banks may be required to review and shut down correspondent accounts with Iranian banks, meaning they will be prohibited from launching overseas subsidiary branches, limiting business transactions, and going as far as imposing enhanced monitoring and reporting requirements on transactions in any way involving Iran.

Any hope?

It is certain that non-US banks and businesses exposed to the US financial system will not choose to defy Washington.

All the while, the European Union, in an effort by foreign policy chief Federica Mogherini, is pushing forward with a so-called special purpose vehicle. This payment system aims to shield European companies, and those from across the world, choosing to do business with Iran, from the damning effect of US sanctions.

The Iranian regime is disturbed by Europe’s delay in the SPV launching. All the while, it is hard to comprehend how this mechanism intends to work out if Tehran fails to bow before FATF demands.

Protests demanding water supplies have become a regular feature in Iran. (Supplied)

 

Different perspectives

Many in the West have been falsifying an image of Iran having two political factions of hardliners and reformists. In fact, their perspectives only differ over how to better preserve and guarantee the regime’s survival.

Back in October, Iranian Foreign Minister Mohammad Javad Zarif relayed a message from Russia and China that Tehran needs to comply with the FATF or else Moscow and Beijing will not be able to continue their business with Iran. His deputy, Abbas Araghchi, voiced the same assessment this month. This was a portrait of the so-called reformists’ viewpoint.

The hardliners, on the other hand, comprising of Revolutionary Guards (IRGC) members, the top army brass, the clerical establishment and the judiciary, are kicking the can down the road on the FATF standards adoption.

Fears exist that approving and implementing the FATF will unveil sensitive financial information and impede the drive to fund Iran’s proxies across the Middle East and maybe even chip the wings of the IRGC Quds Force, the unit in charge of Iran’s extraterritorial military activities.

Rest assured Zarif and other “reformists” in Iran are no fans of actual change, transparency and major shifts in policy for the Iranian regime. They are only playing their roles in the overall masquerade directed by Iranian Supreme Leader Ali Khamenei, all aiming to prolong the lifespan of this regime.

Lose-lose

Iran’s regime was never able to actually benefit from the JCPOA in the long term. With the US pullout, the Iranian regime is in turmoil and the economy is going down the drain.

Renewed FATF countermeasures would add insult to injury for Tehran and has the potential of fueling public protests, a phenomenon that is becoming increasingly common across Iran.

Each day people from all walks of life are protesting in cities throughout the country, including workers, teachers, truckers, students and so forth. The regime is quite vulnerable, concerned over the undeniable reality that all these protests have the potential of quickly evolving into scenes of political demands. Protesters are constantly chanting:

“Let of go Syria, think about us” … “Our enemy is right here, they lie in saying it’s America”

The senior elite sitting on the throne in Iran are going the limits to prevent the transformation of these chants into “Death to Khamenei,” as witnessed so vividly in the December/January uprising that shook the very pillars of this regime just a year ago.

At the end of the day, the Iranian regime is in fact suffering from a “lose-lose-lose” situation:
– The JCPOA never provided any benefits to brag about;
– FATF measures bear the potential of crippling the regime’s economy;
– Popular protests are on the rise, threatening the regime at its core.

The months ahead will be demanding and the regime will be weakening at an alarming and deadly rate. It would be naïve for any international entity, government or private, to invest in the Iranian regime overcoming these hurdles.

ANALYSIS: Iran and the Financial Action Task Force impasse

Al Arabiya

What is the FATF and why are we hearing such conflicting remarks from inside the Iranian regime in this regard?

The Financial Action Task Force is a non-governmental organization established by the G7 back in 1979 to tackle money-laundering. In 2001, the initiative was expanded to also target terrorism financing.

The FATF secretariat is based in the Organization for Security and Co-Operation in Europe, located in Paris. In 2012, the task of confronting financing any terrorism-promoting activities was added to the FATF’s responsibilities.

FATF, in charge of supervising financial cross-border transactions, provided an October deadline to the Iranian regime to join two international conventions and reform two domestic laws. This body is holding its plenary meeting in Paris this week to discuss “a range of important issues to protect the integrity of the financial system and contribute to global safety and security.”

In response, the cabinet of Iranian President Hassan Rouhani presented four bills to the regime’s Majlis (parliament):
– The Anti-Money Laundering Law Reform Bill
– The Anti-Terrorism Financing Law Reform Bill
– The International Convention for the Suppression of the Financing of Terrorism Supplementary Bill
– The Convention against Transnational Organized Crime Supplementary Bill

History

Following a four month-long delay, the Iranian regime parliament finally approved a bill agreeing to adopt the Combating the Financing of Terrorism standards. This is considered the most important step for Tehran in the path of eventually joining the FATF.

Many voices from inside the Iranian regime launched a major brouhaha after these developments. Foreign Minister Mohammad Javad Zarif described it a historical decision.

Hamid Aboutalebi, an advisor to Rouhani, praised the parliament and said members showed the country’s national security and the Iranian people’s interests are their primary priorities.

Khamenei opposition

The CFT approval, however, came despite the fact that Supreme Leader Ali Khamenei had specifically said he opposes this law. Meeting members of parliament back in June, Khamenei specifically voiced his opposition to joining any international conventions.

“These accords are actually cooked up in one specific place… If an independent government is found somewhere, such as the Islamic republic, who for example says we don’t accept these conventions and international accords… They attack them with harsh rhetoric demanding they join… That’s what these conventions are all about. Now, what do we do?… I said the parliament should pass a law. For example, on the issue of combating terrorism or money-laundering… the members should sit down and pass their own law,” he said.

Khamenei had described the FATF as an “endless pit” in his social media page. And at a recent state-launched rally in Tehran’s Azadi Stadium, Khamenei delivered a speech covering a variety of subjects.

“As long as I’m alive I will not allow the country to surrender,” he said. However, word inside Iran indicates that all parties are awaiting his signal to do exactly that.

It is common knowledge that whenever Khamenei emphasizes on standing firm, he is signaling to the regime’s depleting social base he will be heading the opposite route.

Iran’s Foreign Minister Mohammad Javad Zarif at the parliament in Tehran on October 7, 2018, during a meeting over the a bill to counter terrorist financing. (AFP)

 

A step back

Parliament speaker Ali Larijani made everything clear reading Khamenei’s letter to Majlis members.

“What I said during our meeting with the members in regards to the four bills and conventions was related to the very principle of these conventions, and not a particular convention. Therefore, I have no objection with these bills being evaluated in the parliament, in order to follow through with the legal procedures,” the letter read in part.

Through such remarks Khamenei took back his own words and threw the ball into the parliament’s court.

Why the predicament?

Why can’t anyone in the Iranian regime, even Khamenei himself, put their foot down and finalize the issue. The answer can be found in Zarif’s remarks to the Majlis members.

“China’s international policies are very similar to that of the Islamic republic. China is our strategic partner. We are also strategic partners with Russia. However, the Russian Central Bank chief told Dr. Hemmati [his Iranian counterpart) we will not be able to conduct business without the FATF. The Chinese had also made similar remarks time and again,” he explained.

“Neither I, nor the president, we cannot guarantee all our problems will be resolved by joining the FATF. However, we can guarantee that by not joining this bill the US will find a very important pretext to increase its pressures against us,” Zarif added.

The Iranian regime has been weighing this issue since 2011, enjoying the appeasement approach practiced by the Obama administration to buy time.

Shooting in the foot

Tehran is also very concerned, understanding the severe consequences of joining the FATF. The clerical regime will no longer be able to funnel money to terrorist groups such as the Lebanese Hezbollah, Hamas, Shiite proxies in Iraq, and the Houthis in Yemen. This means shooting yourself in the foot for Tehran.

All the while, if the Iranian regime fails to approve the FATF conventions, its banking transactions with Europe, Russia and China will face extreme difficulties. This gains significant proportions when we take into consideration the November 5th return of US sanctions targeting Iran’s oil/banking/shipping sectors. This will have a crippling impact on the Iranian regime, to say the least, especially considering the increasing protests and strikes across the country.

The current circumstances were best explained by the Iranian regime’s own members of parliament: committing suicide in fear of death. This is the very telling indication and interpretation of a regime facing a critical impasse.