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How Iran circumvents US sanctions, three ways exposed

Iranian President Hassan Rouhani speaks during a ceremony marking national Workers' Week in Tehran, Iran April 30, 2019. Official Iranian President website/Handout via REUTERS ATTENTION EDITORS
Observers of the international scene have warned that Iran is finding its ways to circumvent US sanctions through its relationship with some countries with deep political ties, especially after President Hassan Rouhani’s remarks about six ways that Tehran could export oil without the US administration knowing.

Iran and Malaysia

Former Israeli politician Danny Yaton, who served as head of the Mossad security service and between 1999 and 2001, warned in a Jerusalem Post article that Some of Tehran’s methods to try to circumvent US sanctions, which are enabled by China and Russia, have gotten more attention – but some smaller countries like Malaysia can also play a big factor and may become more important at this new stage.

Regarding the Iran-Malaysia connection, in November 2018, the British media reported that British businessman Alexander George was sentenced to two-and-a-half years in prison for smuggling military hardware, including Russian MiG and US F4 Phantom parts to Iran via companies he owned in Malaysia.

Past reports by the US government have indicated extensive relations between Iran and Malaysia’s government-owned national oil company, Petronas, to jointly explore gas fields.

Last week, Haaretz reported that Western intelligence sources have said that Iran and Malaysia have woven an alliance which enables Tehran to evade economic sanctions. Oil tankers seen sailing in atypical numbers between the two countries was given as an example.

Dating back to 2011, Time magazine had reported that there were 60,000 Iranians studying, working or waiting for visas in Malaysia. This volume of population exchange means it is easy for Iranian intelligence operatives to find undercover reasons for traveling between Iran and Malaysia to carry out clandestine activities.

With Iran and Hamas often working together, there is also a potential Iran-Malaysia-Hamas connection.

As of 2015, the Meir Amit Intelligence and Terrorism Information Center had highlighted two instances of Hamas’ military-terrorist wing activity in Malaysia.

In one instance, the indictment of Wasim Qawasmeh of Hebron led to the revelation that he was recruited by Hamas’ Izz al-Din al-Qassam Brigades in Malaysia, along with other Palestinians from the West Bank studying there.

Iran and Russia

In February, Russian Foreign Ministry spokeswoman Maria Zakharova said Moscow will continue all-out cooperation with Iran, including in the area of nuclear energy, despite all the pressures from the United States.

Steven Mnuchin, Trump’s treasury secretary, recently confirmed that Russia, Syria, and Iran were involved in a highly intricate operation to launder money in and out of Syria in order to generate funds for Iran’s continued pursuit of military and political hegemony in the Middle East, with Mnuchin admitting that “a complex scheme between Iran and Russia has been used to bolster the (Bashar al-) Assad regime  (in Syria) to generate funds for Iranian malign activity,”

The scheme begins with a Soviet-era entity known as Promsyryoimport, a trading company controlled by Russia’s economy ministry which largely inactive since the Soviet Union’s 1991 collapse until it began helping Iran illegally ship its oil and gas.

Much of the revenue makes its way into Syria and neighboring Lebanon, where Iran’s close ally, the Shiite terrorist organization Hezbollah, has access to the international offshore banks. Some of the income from the transfer of oil returns to Iran via the import of goods that would otherwise be subject to the current sanctions.

What’s far more lucrative for the Iranian regime, however, is the oil-for-goods scheme that channels capital from the Central Bank of Iran to a Kremlin-controlled Russian pharmaceutical company and bank. What this has done is allow Iran’s Revolutionary Guard Corps to use the trade as a way to gain access to Russian goods and services, including such generation, railway infrastructure, and agricultural products, while at the same time generate revenue to continue funding their activities in the region, including providing support to Hezbollah and Hamas in the Gaza Strip.

Moscow has neither confirmed nor denied the scheme, but the Kremlin openly declared its intention to help Iran counter the US’ attempt to isolate Tehran economically when the sanctions went into effect, with Putin’s own press secretary, Dmitry Peskov, and Russia’s energy minister, Alexander Novak,  admitting to Western publications that Moscow had no intention of ending its oil-for-goods programme with Iran. 

Iran and Iraq

In March, Brian Hook, the State Department's special representative on Iran, made references to Iran's President Hassan Rouhani's recent visit to Iraq, saying, "When President Rouhani comes into Iraq promising a lot of benefits for the people, you should look to see how the Iranian people have been doing under President Rouhani. They have lost ground by every economic indicator." Hook stressed, " This is a regime that does not invest in its own people. So we shouldn't expect them to be supporting or helping the Iraqi people in any way. They are pawns in a larger foreign policy game."

He also made it clear that Iran is not likely to stand by promises made by Rouhani during his visit to Iraq. "I would point you to the way President Rouhani has delivered on his economic promises that he made in 2013. He has failed to deliver on those promises to the Iranian people. The Iraqis should not expect any different results for them," Hook said.

Meanwhile he warned Iraq to be mindful of U.S. sanctions. "We do expect them to comply with U.S. Sanctions. We think it is very much in Iraq's interest. Because the more we deny this regime revenues that it uses to destabilize Iraq and the Middle East, through funding the IRGC and its Qods Force, the better it is for the Iraqi people."

"We have a much different approach than President Rouhani takes to Iraq," said Hook, adding "What he says publicly, no matter what agreement he signs, we have to look at the underlying motives, which is to dominate Iraq. That is their intention. They are certainly trying to create this Shiite corridor of power across the Middle East."

The U.S. diplomat reiterated: "The United States very much wants a strong and sovereign Iraq. We want the Iraqi people to have freedom to make their own decision without interference by President Rouhani and Qassem Suleimani."

He further warned Iraqis against working with Iranian banks. "The United States designated many dozens of Iranian banks that are dirty banks. They are deeply corrupt banks that serve only the regime. So we have made it very clear to banks around the world that we will sanction any sanctionable activity. I think the Iraqi banks certainly know that there are banks that we have designated as such. These are the same bank that the SWIFT financial system also took out of its financial network because these banks are not in compliance with SWIFT standards."

Hook reminded that the Iranian financial system is deliberately dark and opaque. "It does not comply with those standards because the regime does not want people to know where the money goes. Because if people could see that they would see that the money is spent all around the Middle East, Iraq, Syria, Lebanon, Yemen and Bahrain in order to achieve its ambitions to dominate the middle East," said Hook.

In may, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on the Governor and a senior official of the Central Bank of Iran, an Iraq-based bank and its chairman, and a key Hizballah official, all of whom have moved millions of dollars on behalf of the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) to Hizballah.  They were designated as Specially Designated Global Terrorists (SDGTs) pursuant to Executive Order (E.O.) 13224, which targets terrorists and those providing support to terrorists or acts of terrorism.

OFAC has designated  Aras Habib, the Chairman and Chief Executive of Al-Bilad Islamic Bank, for assisting, sponsoring, or providing financial, material, or technological support for, or financial or other services to or in support of, the IRGC-QF.  Aras Habib enabled the IRGC-QF’s exploitation of Iraq’s banking sector to move funds from Tehran to Hizballah, jeopardizing the integrity of the Iraqi financial system.  Habib, who has a history of serving as a conduit for financial disbursements from the IRGC-QF to Iranian-backed Iraqi groups, has also helped provide IRGC-QF financial support to Lebanese Hizballah.  Al-Bilad Islamic Bank is being designated for being owned or controlled by Aras Habib.

Starting today, China, India, South Korea, Turkey, Japan, Taiwan, Italy and Greece will face US sanctions if they continue to buy Iranian oil.