August 3, 2018 | Policy Brief

Iran’s New Central Bank Governor Tied to Sanctioned Entities

August 3, 2018 | Policy Brief

Iran’s New Central Bank Governor Tied to Sanctioned Entities

On July 25, Abdolnasser Hemmati replaced Valiollah Seif as the governor of the Central Bank of Iran (CBI). Tehran’s latest iteration of musical chairs comes at a trying time for the Iranian economy. However, the regime cannot restore confidence in the CBI by swapping in another governor whose resume reads as a veritable “who’s who” of sanctioned entities and has ties to the supreme leader’s business empire. The CBI has long been involved in funding terrorism, subverting sanctions, and other illicit financial practices. Accordingly, transactions with the CBI will be sanctionable after November 4. But Hemmati’s resume suggests he will continue those traditions.

Iranian President Hassan Rouhani dismissed Seif after several failed attempts to stop the freefall of Iran’s official currency. The rial has depreciated almost 60 percent on the free market, from 37,860 rials to 93,000 rials per dollar, since the day President Trump took office to Seif’s last day on the job.  

While Rouhani likely hoped that a new governor could ameliorate the stigma attached to the CBI after the Treasury Department designated Seif for funding terrorist organizations, the move also aimed to send a signal from Iran to the foreign exchange market. It did, but not the signal Rouhani hoped. On July 30, one U.S. dollar was worth 118,000-119,000 rials, a loss of 20 percent for the rial in the five days since Seif’s departure. While the rial slightly recovered after President Trump’s recent comment that he would meet Iranian officials without preconditions, Iran’s currency remains in bad shape. 

The U.S. Treasury can send the same message as Iran’s own currency markets by designating Seif’s replacement.

Like his predecessor, Hemmati is a veteran of the business empire controlled by Iranian Supreme Leader Ali Khamenei, but with deeper ties. From 2006 to 2013, Hemmati was the CEO of Sina Bank, which Treasury designated in 2010 for being owned or controlled by the government of Iran. In 2011, the EU designated Hemmati for his leadership of Sina Bank, but ultimately annulled this penalty in 2014. Sina Bank is owned by the Mostazafan Foundation, a holding company controlled by Khamenei that manages billions of dollars of regime assets. 

But Hemmati’s ties to the supreme leader’s office go beyond Sina Bank. For more than a decade after the Islamic Revolution in 1979, he worked for the Islamic Republic of Iran Broadcasting (IRIB), the clerical regime’s main media outlet, which is also under the control of the supreme leader. Hemmati’s last position at the IRIB was the deputy head of the political office, a key position that helps direct the regime’s propaganda machine and broadcasts forced confessions of Iranian dissidents.

Hemmati’s resume also includes work for yet another designated entity, Bank Melli, where he served as CEO and managing director until 2016. According to the Treasury Department in 2007, Bank Melli “provides banking services to the IRGC and the Qods Force,” and uses “deceptive banking practices to obscure its involvement from the international banking system.”

Iran’s new CBI governor has a demonstrated track record of loyalty to the regime, having worked in a series of key Iranian financial institutions known to engage in dishonest financial practices. The U.S. should designate Hemmati as soon as possible. Sanctioning the man leading the Iranian government’s hub of illicit finance would signal the administration’s intent to put unprecedented pressure on Tehran that goes beyond  reinstating sanctions as a result of withdrawing from the 2015 nuclear deal.

Behnam Ben Taleblu and Saeed Ghasseminejad are research fellows focusing on Iran at the Foundation for Defense of Democracies.

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