June 1, 2018 | Policy Brief

Gulf States Crack Down on Iran’s Illicit Finance

Sixty members of the Iranian parliament sent President Hassan Rouhani a letter last week demanding that the Islamic Republic reconsider its ties with the United Arab Emirates due to what they deemed a hostile stance towards Tehran. Iran has reason to be nervous about its financial relations not only with the UAE, but also with the rest of the Arab Gulf. The members of the Gulf Cooperation Council (GCC) – a body made up of Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain – are opposing more assertively both Iranian regional meddling and illicit finance, and are cracking down on Iran’s top terrorist proxy, Hezbollah. 

In early May, the UAE – in coordination with the U.S. Treasury – shut down a Dubai-based illicit finance network that funneled millions in cash to the Islamic Revolutionary Guard Corps (IRGC) Quds Force. One month prior, Bahrain revealed details about its investigation into Iranian-owned Future Bank, which Bahraini authorities closed in 2016 for participating in a sanctions-evasion scheme totaling at least $7 billion from 2004 to 2015. According to reports this week, Saudi Arabia is forcing Germany to choose between new business with the kingdom and its trade with Iran.

All of this takes place amidst a shift in official GCC policy, as well. In mid-May, the Gulf states unanimously sanctioned Hezbollah’s top leadership, including Secretary General Hassan Nasrallah and his deputy, Naim Qassem, freezing their assets and bank accounts. The sanctions, applied in concert with Washington, follow the GCC’s March 2016 designation of Hezbollah as a terrorist group for its actions in Syria and “hostile acts” toward GCC nations.

Members of the GCC have divergent stances on the Islamic Republic. Saudi Arabia, the UAE, and Bahrain have been hawkish about checking Tehran’s regional ambitions. Oman and Kuwait have remained neutral. Qatar, meanwhile, is reportedly deepening its relations with Iran as a means to break out of the isolation imposed by the other GCC members amidst a year-long, and increasingly bitter, political spat.

Despite these differences, the GCC unanimously designated the Hezbollah leadership, demonstrating a rare and powerful example of Gulf unity against Iran-backed terrorism.

With this consensus holding, U.S. and Gulf pressure on Hezbollah is likely to only increase. Less than a week after designating Iran’s UAE network, the U.S. Treasury sanctioned an Iraq-based financial network supporting the Quds Force and Hezbollah. This time, Washington took aim at the governor of Iran’s central bank, who was operating a financial network to “enrich and support the violent and radical agenda of Hizballah.” Designations like this can help to build unity amongst Gulf partners and project a united front against a key component of Iran’s regional aggression.

Annie Fixler is a policy analyst at FDD’s Center on Sanctions and Illicit Finance. Varsha Koduvayur is a senior research analyst at the Foundation for Defense of Democracies, where she focuses on the Gulf. Follow them on Twitter @afixler and @varshakoduvayur.

FDD is a Washington-based, nonpartisan research institute focusing on national security and foreign policy. Follow us on Twitter @FDD.


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