Monday, July 27, 2015

Outstanding testimony by Mark Dubowitz on the Iran sanctions removal.

Outstanding testimony by Mark Dubowitz on the Iran sanctions removal. HT: Mark Dubowitz

Compromising the integrity of the U.S. and global financial system to conclude a limited agreement with North Korea neither sealed the deal nor protected the system. The JCPOA appears to repeat this same mistake by lifting financial restrictions on bad banks without certifications that Iran’s illicit finance activities have ceased.

The JCPOA stipulates that of the nearly 650 entities that have been designated by the U.S. Treasury for their role in Iran’s nuclear and missile programs or for being owned or controlled by the government of Iran, more than 67 percent will be delisted from Treasury’s blacklists within 6-12 months. This includes the Central Bank of Iran and most major Iranian financial institutions.

After eight years, only 25 percent of the entities that have been designated by Treasury over the past decade will remain sanctioned. Many IRGC businesses that were involved in the procurement of material for Iran’s nuclear and ballistic missile programs will be de-listed as will some of the worst actors involved in Iran’s nuclear weaponization activities.

Even worse, the EU* will lift all of its economic sanctions on Iran, which were all established only on nuclear grounds, including on the notorious Quds Force commander Qassem Soleimani. (MFS: The same people who removed HAMAS from terror list).

As discussed below, this will enable the IRGC to treat Europe as an economic free zone. What is especially notable about the lifting of designations is that the Obama administration has provided no evidence to suggest that these individuals, banks, and businesses are no longer engaging in the full range of illicit conduct on which the original designations were based. What evidence, for example, is there for the de-designation of the Central Bank of Iran, which is the main financial conduit for the full range of Iran’s illicit activities, and how does a nuclear agreement resolve its proven role in terrorism and ballistic missile financing, money laundering, deceptive financial activities, and sanctions evasion? In other words, with the dismantlement of much of the Iran sanctions architecture in the wake of a nuclear agreement, the principle upon which Treasury created the sanctions architecture—the protection of the global financial system—is no longer the standard.

The JCPOA obligates the United States, European Union, and United Nations to lift sanctions at two specific intervals: On “Implementation Day” when the IAEA verifies that Iran has implemented its nuclear commitments under the JCPOA to reduce its operating centrifuges, reduce its low-enriched uranium stockpile, and modify the Arak heavy-water reactor, among other requirements; and on “Transition Day” in eight years or when the IAEA has reached a “broader conclusion” that Iran’s nuclear program is entirely peaceful, whichever comes first.

This last clause is critical: Even if the IAEAcannot verify the peaceful nature of Iran’s program, Iran will receive additional sanctions relief.

The JCPOA will provide Iran with more than $100 billion in sanctions relief, if you include the funds reportedly tied up in oil escrow accounts, and as much as $150 billion based on figures quoted by President Obama, which presumably includes funds that are legally frozen and those to which banks have been unwilling to provide Iran free access, even though they weren’t under formal sanctions.

These funds could flow to the coffers of terrorist groups and rogue actors like Hezbollah, Hamas, Palestinian Islamic Jihad, Iraqi Shiite militias, the Houthis in Yemen, and Syrian President Bashar al-Assad’s regime in Damascus. President Obama has claimed the money would not be a “gamechanger” for Iran.

As Supreme Leader Ali Khamenei, however, stated in a speech less than one week after the JCPOA announcement, “We shall not stop supporting our friends in the region: The meek nation of Palestine, the nation and government of Syria … and the sincere holy warriors of the resistance in Lebanon and Palestine*.

This infusion of cash will relieve budgetary constraints for a country which had only an estimated $20 billion in fully accessible foreign exchange reserves prior to November 201315 but was spending at least $6 billion annually to support Assad.


As a result of restrictions that sunset on its nuclear program, ballistic missile program, access to heavy weaponry, and ballistic missile development, Iran over time will be permitted not only to maintain its current nuclear capacity, but also to develop it further to an industrial-sized nuclear program with a near-zero breakout time, an easier-to-hide and more efficient advanced-centrifuge-powered clandestine sneak-out pathway, and multiple heavy-water reactors.

Iran will be able to buy and sell heavy weaponry with the expiration of the arms embargo, bolstering IRGC military capabilities and arming the most destabilizing and dangerous regimes and terrorism organizations.

Iran will also be able to access key technologies to further develop its long-range ballistic missile program, including for the building of an ICBM that threatens the United States. At the same time, the JCPOA dismantles much of the international sanctions architecture, while abandoning the core principles of the conduct-based sanctions regime that the Obama and George W. Bush administrations built up over more than a decade.

The unraveling of the U.S. and EU sanctions regimes leaves Iran as a growing economy increasingly immunized against future economic sanctions snapbacks. It provides Iran with $150 billion in early sanctions relief and hundreds of billions of dollars in future relief with which the leading state of terrorism can continue to fund its dangerous activities. Of great concern, the JCPOA provides Iran with a “nuclear snapback” to intimidate Europe, the United States, and other countries, to refrain from using sanctions as an effective mechanism to enforce the nuclear agreement and to target the full range of its illicit conduct including its support for terrorism.

The JCPOA is a fundamentally flawed deal in its inherent design. Congress should require the Obama administration to renegotiate and fix the major flaws of the agreement and resubmit an amended JCPOA to Congress for review.

Simultaneously, Congress should defend the economic sanctions architecture it helped create and tie all future sanctions relief to verifiable changes in Iranian conduct that prompted the sanctions in the first place. Read the full report (Pdf) here.

* Highly respected figure such as EU High Representative for Foreign Affairs and Security Policy Federica Mogherini, who is widely admired by Palestinians in Gaza.

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