Iranian economy due to get slammed by FATF

Iran's economy is expected to take a new major hit later this week when the Financial Action Task Force will likely return it to a blacklist of countries in bed with financing terror. The FATF moved the Islamic Republic from a blacklist to a sort of “gray list” in 2016, which meant much greater Iranian access to the international banking system, but also gave the country a ticking clock to come into compliance with anti-terrorism financial measures. After more than three years of Tehran ignoring threats that time was running short on its chance to come into compliance with combating terror financing, the FATF issued in October what was probably a last ultimatum. FATF told Iran that if it did not come into full compliance by its February 16-21 conference that it would be returned to blacklist. As the conference opened Sunday, the Islamic Republic was stuck in the same spot of partial compliance that it has been in for years. Although Iran has passed some laws, and moderates like Iran's President Hassan Rouhani and Iran's Central Bank Gov. Abdolnaser Hemmati have made public promises, the parliament has failed to pass key legislation. Within the parliament, many officials have blocked the new legislation for years, and as late as January, Chairman of the Expediency Council Ayatollah Sadeq Amoli Larijani called the new legislation “dangerous.” Hemmati explained in December that if Iran was placed back on the FATF blacklist, they would finally be somewhat separated from their key economic allies Russia and China. Though Russian and Chinese economic support have been a major reason why the ayatollahs running Iran have survived the US's “maximum pressure” campaign, Hemmati said those countries banks would have trouble working with Iran if there was an FATF ban. An FATF ban would also likely end talks between Iran and the EU about exploiting the INSTEX vehicle for promoting trade in a way that circumvents US sanctions. Finally, it would more generally widen the expanding chasm between Tehran and the EU, pushing Europe closer to the US in the standoff. Those like Larijani who oppose the legislation make multiple points. They say committing to the legislation would require Iran to expose how it is circumventing US sanctions. Since Iran views US sanctions as immoral, it does not feel the obligation to reveal this information, which is keeping its economy on life support. In addition, those opposing the legislation link the FATF's threats to the US, and say that such a move would be condoning (what they view as the unfair) US maximum pressure campaign. Finally, those against the legislation say that until US sanctions are removed, whether Iran is blacklisted or not is a secondary issue. They cite the fact that the Islamic Republic survived being blacklisted from around 2009-2016, with the point at which the country's economy really struggled being related to other global sanctions, not the FATF. Going into the conference, a leading Iranian parliamentary official who had supported passing the new legislation to help join the FATF was even disqualified from running, appearing to send a clear message that Tehran will not bend anymore at this time. Commentary on this week's conference has mostly centered around the question of whether the FATF will follow through on its ultimatum or balk as it has in the past, using the excuse of the elevated tensions between the US and Iran following the killing of Islamic Revolution Guard Corps Qasem Soleimani to give Iran more time. The Paris-based FATF, also known by its French name, Groupe d'Action Financière, is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. In 2001, its mandate expanded to include terrorism financing. After years of campaigning and modernizing its financial counterterrorism apparatus, Israel joined the FATF in December 2018. Friday is the latest day for the FATF to announce its decision. All of this follows in the shadow of new IAEA chief Rafael Grossi starting to press Iran harder about its failure to date to fully cooperate with the IAEA's investigation into processed uranium particles found at a site in Iran. At a November 7 meeting of the IAEA's Board of Governors, then acting-IAEA director-general Cornel Feruta publicly confirmed the presence of uranium. This IAEA confirmation came more than a year after Prime Minister Benjamin Netanyahu first revealed the Iranian violation at a Turquzabad warehouse during his September 2018 UN speech. Grossi publicly pressed Iran on the issue both on December 3, calling its answers to date unsatisfactory, and again on February 5, when he said that Iranian Deputy Foreign Minister Abbas Araghchi had not explained the violation. In his February 5 statement, Grossi hinted at confronting Iran soon, emphasized the need for states to provide “the necessary support when moments of difficulty come” since he soon “may have to ask Iran to do the right thing.” Grossi again pressed Iran in public statements on February 10, though he has poured cold water on taking punitive action against Iran such as snapback sanctions, as long as Iran keeps its nuclear violations down to a level that does not get too close to allowing it to develop a nuclear weapon.

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