Analysis: Crippling Iran’s Central Bank

The Obama administration would have to twist Europe’s economic arms to join in the sanctions against CBI.

Iranian Flag (R)_311 (photo credit: Reuters)
Iranian Flag (R)_311
(photo credit: Reuters)
David S. Cohen, the US Treasury department’s under secretary for terrorism and financial intelligence, took a whirlwind tour last week of Paris, London, Berlin and Rome in an effort to convince Europe to ratchet up the pressure on Iran.
The Iranian government’s plot to murder the Saudi ambassador in a high-end Washington restaurant, which could have caused the deaths of many Americans, has added fresh urgency to the next round of Iran sanctions.
The Obama administration might target the Central Bank of Iran (CBI), Cohen told Reuters.
“Iran needs to be held accountable for this plot,” he said. “We are going to continue to look at those financial institutions that are involved with proliferation activity for Iran, and continue to try to isolate them from the international financial sector.”
The US government will undoubtedly face an uphill mission to persuade the European Union’s 27 member states to turn the financial screws on the Central Bank. Take the example of the Revolutionary Guard Corps, which may control as much as 75 percent of Iran's economy and oversees Tehran’s illicit nuclear program. While the Bush administration sanctioned the IRGC in 2007 as a “global terrorist” entity, the EU, particularly Germany, has vehemently resisted penalizing the IRGC.
Dr. Wahied Wahdat-Hagh, an expert on Iran’s terror operations and a senior fellow at the Brusselsbased European Foundation for Democracy, told The Jerusalem Post on Sunday that “all state banks are involved with the nuclear business” in Iran. There “are no independent banks in Iran,” he said.
Sanctioned Iranian banks “fall under the Central Bank,” Wahdat- Hagh added. “The CBI cannot be clean when its children are not,” he said.
Europe and the United States have sanctioned a number of Iran’s banks — Melli, EIH and Saderat – because of their immersion in its nuclear weapons and ballistic missile programs.
Given Europe’s addiction to Iranian trade, and the crucial financial role of the Central Bank of Iran in conducting energy and non-oil transactions for the EU, the Obama administration will have to strongly twist Europe’s economic arms. The EU’s members’ trade with Iran exceeded 25 billion euros in 2010, making the EU as a whole Iran’s most important trade partner.
Roughly 90 percent of Europe’s imports from Iran are energyrelated, and payments for Iranian crude oil take place through the CBI.
The New York Times in 2007 reported on Nasrin Amirsedghi, a German-Iranian author and public intellectual, who was one of the first of a group of critics in the Federal Republic to expose how Germany’s business ties with Tehran are propping up its regime.
“The largest artery of the IRGC is Iran’s Central Bank,” Amirsedghi wrote in an e-mail to the Post on Sunday. “From day to day the financial power of the IRGC is enormously strengthened. Aside from the domestic and foreign terror conducted through this organization, according to intelligence information, Iran is experimenting with nuclear weapons technology.”
She said that “to stop the weapons program and the terror ambitions of Iran, you have to cut the artery. That can only happen through a ban of CBI’s financial transactions. Then we win twofold: The end of Islamic terrorism and the collapse of the regime.
Without these all of the sanctions up until now will be ineffective.”
All this explains why The Wall Street Journal wrote that “many US officials view the imposition of sanctions on Iran’s central bank, Bank Markazi, as the ‘nuclear option’ in its financial war against Tehran, with the potential to freeze Iran out of the global monetary system.”
The sanctions writing is plainly on the wall in Washington, and Iran’s Foreign Minister Ali Akbar Salehi sensed earlier this month that a shot of economic pain is on its way. “Iran is facing the toughest political and economic sanctions in the past 32 years,” said Salehi.
The influential US senator and Iran expert Mark Kirk (R-Illinois) told Foreign Policy’s website The Cable that “What the administration should do is prepare to move against Bank Markazi in response to the bomb plot.”
The knotty problem remains Europe’s economic ties with Iran.
The EU refuses to sanction the IRGC. Can the US influence a dramatic change in the EU’s posture toward the IRGC and the Central Bank of Iran? Wahdat-Hagh said the IRGC is involved in terrorism in Afghanistan and Iraq and against NATO troops. He cited the running list of IRGC attacks against Kurdish dissidents in Berlin and Vienna, Argentineans, Israelis and Americans, and Western troops in the Afghanistan and Iraqi war theaters.
Wahdat-Hagh sees the flourishing trade relations between Europe and the Islamic Republic as blocking meaningful and robust sanctions targeting Iran’s core financial interests.
The advocates of pulling the plug on Iran’s financial oxygen to the IRGC understand the conflict being waged by Iran against the West. The question is, will Europe and the Obama administration flex their financial muscles and shut down Iran’s terror lifeblood, the IRGC and the Central Bank of Iran?