September 28, 2016 | Foreign Policy

The U.S. Is Helping Iran Fund Chaos in the Middle East

Would the White House knowingly transfer tens of billions of dollars to the Iranian Revolutionary Guard Corps and Hezbollah in Lebanon to finance the slaughter of Syrians or the next war against Israel? In theory, the Iran nuclear deal wasn’t supposed to fuel Iran’s imperialism and its ardent anti-Semitism. And yet President Barack Obama appears to have done exactly what he and Secretary of State John Kerry promised not to do: They are directly financing the Syrian horror show and terrorists on America’s watch lists.

During the nuclear negotiations and since reaching the agreement with Iran, the administration has strenuously rejected congressional concerns that sanctions relief would fund the mullahs’ malign activities. CIA Director John Brennan said again this July that Iran has used much of the sanctions relief for development projects: “The money, the revenue that’s flowing into Iran is being used to support its currency, to provide monies to the departments and agencies, build up its infrastructure.”

The administration’s assurances are undercut by Iran’s own behavior since July 2015. Gen. Joseph Votel, commander of U.S. Central Command, said that Iran has become “more aggressive in the days since the [nuclear] agreement.” The regime is keeping Bashar al-Assad afloat in Syria and actively supports Lebanese Hezbollah, which has a 150,000 rocket stockpile with only one target: Israel. Tehran has expanded its efforts to create Shiite militias in the Middle East and has continued to send aid, including weaponry, to radical Palestinian groups.

For all of these endeavors, the regime needs money — liquid, untraceable, convertible, and easy to transfer. According to the global anti-money laundering Financial Action Task Force, cross-border cash transfers are “one of the main methods used to move illicit funds … and finance terrorism.” The mullahs have been hungry for cash after American and European sanctions drastically curtailed the regime’s access to hard currency.

In three shipments in January and February, the United States transferred$1.7 billion in cash to Iran, ostensibly to settle a thirty-year military claim before the Iran-United States Claims Tribunal. As the administration was finally forced to acknowledge under intense congressional and media scrutiny, the first installment of $400 million was part of a “tightly scripted exchange timed to the release of American hostages.” In rejecting congressional accusations that he had authorized a ransom payment, Obamajustified the transfer by citing the severity of remaining sanctions. “The reason that we had to give them cash,” Obama argued, “is precisely because we are so strict in maintaining sanctions … we could not wire the money.”

The president, however, is wrong: U.S. regulations permit all transactions between the American and Iranian financial systems related to Tribunal settlements. Moreover, Washington wired payments to Iran in July 2015 and again in April 2016, further disproving the president’s statement.

It is certainly possible that banks were unwilling to wire the $1.7 billion no matter what guarantees they got from the administration. Banks have a healthy fear of sanctions and their penalties. If so, it raises a troubling question: How did Tehran receive the billions of dollars in sanctions relief released under both the interim and final nuclear agreements?

During the nuclear negotiations, the clerical regime received access to about $700 million per month, totaling $11.9 billion between January 2014 and July 2015, from its restricted, foreign oil escrow accounts. If no mechanism existed to transfer the Tribunal funds through the formal financial system, what mechanism was used to transfer the $11.9 billion? A senior officialadmitted that “some” of this money was sent in cash, and that “we had to find all these strange ways of delivering the monthly allotment.” Did these “strange ways” include the transfer of gold or through some other financial mechanism, and how much was transferred in cash? The administration is not saying.

And it doesn’t end there. In July 2016, U.S. officials estimated that Iran had repatriated “less than $20 billion” from previously frozen, overseas assets of $100 to $125 billion released as part of the final nuclear accord. Were these funds repatriated in cash and gold? Was this in addition to the $11.9 billion? The administration is silent.

If the White House could only authorize sanctions relief in the form of cash, that could amount to, including the Tribunal payment, $33.6 billion. Even a portion of that in cash would be an astounding amount of money.

Alternatively, if this money went through the formal financial system, the administration is not being truthful about why it had to send the $1.7 billion in cash. If formal channels were used for the other $31.9 billion, why not wire transfer the Tribunal money to an official Iranian account at a European central bank, where Tehran could access the funds to pay for current European imports or other legitimate economic needs? With financial controls to minimize the risks of money laundering and terror financing, these formal channels would be more difficult for the Revolutionary Guard to subvert.

In recent testimony, a State Department official claimed that the $1.7 billion cash payment was necessary because Iran needed cash to address its “critical economic needs.” The Iranian parliament, however, already allocated the $1.7 billion to its Revolutionary Guard-dominated defense budget, which nearly doubled this year. Calling the allocation “troubling,” Chairman of the Joint Chiefs Gen. Joseph Dunford noted that the more money Iran’s military has, “the more effective they’ll be in spreading malign influence.”

The State Department official also said that only a cash payment, not a seconds-long electronic transfer, would meet Iran’s immediate need. However, in February 2014, the Bank of Japan reportedly wired $550 million to an Iranian central bank account at a Swiss bank as part of the interim-deal relief. Why couldn’t the administration use this formal financial channel?

But perhaps Brennan is correct: U.S. intelligence on Iranian money flows is so good that the United States know that the funds were used for economic development. If so, intelligence capabilities have improved dramatically: It took the U.S. government about eight years to account for a missing $6.6 billion in banknotes sent to Iraq between 2003 and 2004 for American soldiers, spies, and diplomats to buy influence and reward good behavior. Is the U.S. government better at tracking how Iran spends its cash than our own fellow Americans?

Pallets of cash to close a thirty-year military sales dispute, arriving with the release of U.S. hostages. Refusals to answer congressional questions about billions in cash going to the leading state sponsor of terrorism. Implausible claims that Iran is using this money for domestic concerns.

The White House refuses to acknowledge the obvious: The nuclear deal has already led the United States to fund terrorists, sectarian warfare, and chaos in the Middle East.

Mark Dubowitz is executive director of the Foundation for Defense of Democracies, where he focuses on Iran and directs its Center on Sanctions and Illicit Finance. Follow him on Twitter @mdubowitz.

Annie Fixler is a policy analyst at FDD's Center on Sanctions and Illicit Finance. Find her on Twitter: @afixler.


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