TEHRAN, Sep. 24 (MNA) – In a statement on September 20, the US Treasury Department said its Office of Foreign Assets Control (OFAC) took action against the CBI, the National Development Fund of Iran (NDFI), and Etemad Tejarate Pars Co. under its counterterrorism authority.
"Iran’s NDF, which is Iran’s sovereign wealth fund and whose board of trustees include Iran’s president, oil minister, and the governor of the Central Bank, has been a major source of foreign currency and funding for the IRGC-QF and Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL)," the Treasury said in its statement.
"Etemad Tejarate Pars, also designated, is an Iran-based company that is used to conceal financial transfers for MODAFL’s military purchases, including funds originating from the NDF," the same statement added.
Iran’s reaction
Reacting to the new embargo, Iran Foreign Ministry Spokesperson Seyyed Abbas Mousavi said “Americans should acknowledge that imposition of sanctions is a failed policy and the excessive use of this trick and wielding dollar like a weapon have called the US credibility and economy into question. The era of recognizing America as a credible economic partner has long passed.”
As Iranian officials and experts believe, the announced sanctions are not new; rather a paraphrase of the old ones. Thanks to previous sanctions, which were among the toughest, Iran has had the chance to learn how to construct its survival road relying on domestic capabilities and cooperation with foreign partners.
“America’s foreign policy is a frustrated and confused one, which has no basis other than bullying, unilateralism, and conducting economic terrorism against others, and it lacks the required capability to offer any rational and dynamic diplomatic initiative for peaceful settlement of its differences with other countries,” Mousavi added.
CBI Governor Abdolnaser Hemmati said Friday that the US re-imposition of sanctions on CBI revealed just how ‘empty-handed’ the US is in pursuing the pressure campaign against Iran.
“If such measures had any effect in advancing their unjust demands, Iran's economic situation would have been different from what it is now,” Hemmati noted.
Iranian FM Mohammad Javad Zarif also reacted to the United States' CBI designation, saying the move clearly shows Washington’s “desperate approach” toward the Islamic Republic. “The Americans have imposed any sanctions they could on the Islamic Republic. What they are doing now is sanctioning an entity which has been sanctioned before under a different pretext,” he added. “The new sanctions are aimed at blocking Iran’s international transactions and its access to food and medicine. This move is unacceptable and dangerous.”
Sanctions in practice
The question is now about the impacts of this new round of sanctions on the international transactions of CBI and NDFI, which are intended to safeguard the welfare of the Iranian people as main state-run bodies.
As discussed, sanctions are not new since CBI has been subject to US sanctions for a while, including under the National Defense Authorization Act (NDAA). The sanctions may not put the European created financial mechanism for trade with Tehran, known as INSTEX, into trouble, because the European mechanism has been created to circumvent the US sanctions. However, the new embargo is able to target transaction of humanitarian goods including food and medicine, some express worry.
NDFI had also been severely affected by the US sanctions imposed on Iran’s oil and banking sectors over the past months and new US sanctions are believed to have not significant influence on the performance of the Fund.
Iranian financial and banking system have gained favorable achievements and experiences in the sanctions era.
For example, Iran has learnt how to skirt SWIFT and US dollar in its financial transactions with some specific countries.
Governor Hemmati said in a statement on 18 September that the country is ‘planning to evade American economic sanctions by switching entirely away from the dollar to national currencies in mutual trade and by bypassing SWIFT. Such steps have been discussed with Turkey and Russia.’
In an interview with Mehr news agency Iranian banking expert, Bahaoddin Hosseini Hashemi said “we cannot deny the impacts of the sanctions at any level, they will fortify the previous embargoes and will create some difficulties, for sure. They will increase Iran’s costs of having its international financial transactions.”
“About the recent sanctions, I can say that, since CBI and Melli Bank of Iran had been put under sanctions by the US previously, the main consequences of the sanctions had already been witnessed and the recent embargo is not new, in practice. The deadlocks for the CBI had been previously created,” Hosseini Hashemi told Mehr news, “By the way, no one can ignore the probable influence of the recent designation of CBI since it can put monetary transactions in new challenges or put CBI foreign assets at risk of getting blocked.”
“Since the sanctions target dollar-based transactions, Iran has been seeking new financial channels during the past recent years such as replacing dollar and in some cases euro with other currencies, including Rupiah, Yuan, Lira, Dirham and Ruble, in its transactions with foreign partners in a bid to prevent OFAC from imposing sanctions,” Hosseini Hashemi explained.
In addition, by putting sanctions on CBI, the US has sought to expand US’ restriction to a wider range on financial entities who cooperate with the Iranian central bank. However, in practice, sanctioning trade banks of a country is more practical than its central one because, for example, punishing central bank of Turkey for its cooperation with CBI would be much more difficult than putting restrictions on private Turkish banks.
It is worth noting that as of CBI designation, Iran’s forex market has witnessed no fluctuations, which can be a proof for inefficiency of the new sanctions.
War of words, futile restrictions
Iran and US are in a cold war and president Trump is using economic tools to put political pressure against Iran.
New round of sanctions on CBI is more of a propaganda, which will for sure reinforce the previous sanctions and will act as an option for taking advantage from Iran in case of any future negotiations.
Iran has called on the international community to consider establishing a new economic system, which would minimize the effects of US hostile policies on international free trade.
The country officials urge the US to understand that it is no longer the sole economic superpower in the world and as they announced, there are many countries, which are interested in Iran’s market and in the opportunities of establishing good economic ties with Iran.
HJ/