September 16, 2015 | House Committee on Foreign Affairs, Subcommittee on the Middle East and North Africa

The Iran Deal and its Impact on Iran’s Islamic Revolutionary Guard Corps

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Chairman Ros-Lehtinen, Ranking Member Deutch, members of the committee, on behalf of the Foundation for Defense of Democracies and its Center on Sanctions and Illicit Finance, I thank you for the opportunity to testify.

This testimony will focus on the impact of the Joint Comprehensive Plan of Action (JCPOA) on Iran’s Islamic Revolutionary Guard Corps (IRGC) and its dominant position in Iran’s economy.

The IRGC is the custodian of Iran’s best-kept military secrets, including its clandestine nuclear military program and ballistic missile program. As the regime’s Praetorian Guard, it is also charged with defending the Islamic Revolution from enemies at home and spreading the revolution abroad. Over the years, the IRGC has zealously fulfilled these tasks, quashing pro-democracy protesters inside Iran and sponsoring terrorism and Islamist movements abroad.

The JCPOA dismantles specific United Nations and European Union sanctions, and significantly diminishes the scope and reach of U.S. sanctions.

In doing so, the JCPOA creates a major “stimulus package” for Iran’s economy. The IRGC derives much of its domestic clout from its position of dominance within Iran’s economy. Thus, the IRGC and the supreme leader’s business empire will be the main beneficiaries. Their economic ascendance will fortify their domestic political influence.

As export and trade restrictions are lifted, previously prohibited Western technology will make its way back to Iran. The challenge of denying the IRGC access to banned technology – including dual-use technology and equipment for monitoring dissidents – will become even more arduous. The demise of sanctions will also facilitate the acquisition of advanced weaponry that will improve Tehran’s conventional military capabilities, as well as its support for the Bashar al-Assad regime in Syria, Hamas in the Gaza Strip, Hezbollah in Lebanon, and Houthi rebels in Yemen.

To be clear, the United States is set to maintain its sanctions on the IRGC. The JCPOA does not alter them. Moreover, the European Union will not delist most IRGC entities on its sanctions list until Transition Day, roughly eight years from now. But as this testimony explains, once the bulk of Iran sanctions are lifted, the remaining measures against the IRGC are insufficient. They will not isolate the Guards and the supreme leader’s business interests from the benefits that the JCPOA will generate.

First, on Implementation Day – likely several months from now – the JCPOA requires the European Union, United States, and United Nations to lift or suspend sanctions against entire sectors of the Iranian economy. The IRGC and the supreme leader’s business interests are active in many sectors – some of which they dominate almost completely. IRGC companies will get the lion’s share of public contracts and business opportunities.

Second, on Implementation Day, numerous companies will be delisted that have served as accessories to IRGC nuclear and ballistic missile programs, as well as support for the Assad regime and its crimes against humanity. This includes the entire network of companies and subsidiaries controlled by the supreme leader, as well as Iran’s aviation industry and state-owned shipping firms, and companies where the IRGC has a significant ownership interest.

The delisting is not the result of a demonstrable change in these entities’ patterns of behavior. Rather, they are being delisted because the JCPOA requires the wholesale lifting of sanctions on entire sectors. There are no guarantees these entities will, once delisted, cease the illicit conduct that caused them to be sanctioned in the first place – instead, there is ample reason to believe they will redouble that activity.

Third, companies owned or controlled by the IRGC that have until now eluded designation by the U.S., EU, or UN are now likely to benefit from the post-JCPOA windfall, as the business community will accept them as legitimate business partners. The same is true for IRGC senior executives that eluded sanctions until now.

Meanwhile, Tehran will challenge every attempt to impose new sanctions, as it did with designations announced by the U.S. Treasury following the November 2013 interim nuclear deal.1 New sanctions will trigger an Iranian request for consultation with the United States, potentially followed by a referral to the Joint Commission’s Working Group, as stipulated under section 7.3 of Annex IV of the JCPOA. Tehran may also challenge new sanctions under Section 2.1.14. This clause states that the Joint Commission (of which Iran is a member) will review “any issue that a JCPOA participant believes constitutes nonperformance by another JCPOA participant.”