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Tuesday 20th March 2018

Iran Slapped with US Sanctions on Central Bank, Experts Say

Politics

7Dnews London

Sat, 21 Sep 2019 23:25 GMT

The recent attack against Saudi Arabia's oil infrastructure has caused US President Donald Trump to draw a new round of sanctions against the Central Bank of Iran (CBI) and its sovereign wealth fund on Friday September 20th.

The sanctions from the Office of Foreign Assets Control affect the Central Bank of Iran, the National Development Fund of Iran and another Iran-based company under its counterterrorism authority, according to a press release from the US Department of the Treasury. The sanctions were described by Trump as "the highest ever imposed on a country".

The Treasury Department said that sanctions would address financial transfers for purchases by Iran's defence ministry. "This will mean no more funds going to the Revolutionary Guards Corps or to fund terror, and this is on top of our oil sanctions and our financial institution sanctions," Treasury Secretary Steven Mnuchin said while Trump was announcing the new sanctions.

The move adds to the already crippling sanctions on the Middle Eastern country, stripping Iran of its oil income by drying up most of its buyers and "denying Iran the wealth to create their terror campaign around the world," US Secretary of State Mike Pompeo said in August.

Stratfor, an American intelligence platform, assessed the US decision saying, "the new measures are unlikely to have an outsized effect on the country's economy due to the extensive sanctions already in place against Iran". However, the sanctions still sever the connection between Iran's Central Bank and the global financial system.

"The sanctions Trump just slapped on Iran are actually rather strenuous," Security Studies Group senior fellow Matt Brodsky tweeted. The Middle East and Geopolitical analyst expects that "a forensic investigation into the recent attack in Saudi Arabia" would provide potential options to deal with Iran.

The sanctions will dry up Iran's resources but are not a guarantee to change regime's behaviour, Brodsky said.

The US sanctions started in 1979 due to the Iranian nuclear program and its poor human rights record. However, the new sanctions are predicted to "undermine European mechanisms for trade with Iran," Brian O'Toole, a non-resident senior fellow at the Atlantic Council and a former Office of Foreign Assets Control (OFAC) senior advisor told the National Emirati newspaper.

According to O'Toole, the US decision on CBI will "cut off actions above board facilitating transactions to Hezbollah and IRGC" and negate "any exemptions under OFAC for humanitarian goods since the CBI holds the funds for those imports."

Analysts have argued over the sustainability of sanctions under the new US president. Mark Dubowitz, CEO of the Foundation for Defense of Democracies, recently tweeted: "A new president could try and lift the designation of the central bank to reenter the JCPOA, but the market would remain hesitant to engage with a bank still financing terrorism, proliferation etc. Market deterrence is the key driver."

Although Dubowitz has argued that a Democratic president might potentially ease the sanctions, he said that the latest central-bank sanctions would be more difficult to remove.

Behnam Ben Taleblu of the Foundation for Defense of Democracies pointed out that the new sanctions being categorised as counterterrorism has made it more likely that they will stay in place, regardless of who controls the White House, the National reported.

"To relieve those sanctions, any administration will have to cite evidence that Iran's central bank isn't involved in funding terror," Taleblu added.

Additionally, Iraq may also face some obstacles like the "natural gas purchase issue with Iran," Richard Nephew, a non-resident senior fellow at the Brookings Institution said.

The latest US sanctions come amid sharp tensions in the Arabian Gulf following the September 14th attack on the world's biggest crude oil-processing plant in Saudi Arabia. Yemen's Iranian-backed Houthi militias said they were behind the attacks.

Middle East