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Tuesday, 02 October 2007 |
By STUART LEVEY
Source: The Wall Street Journal
Tehran's pursuit of nuclear weapons and its radical foreign policies have provoked international sanctions. Its financial subterfuge has led key banks and businesses world-wide to sever their Iranian business ties, and President Mahmoud Ahmadinejad's blunders are debilitating Iran's economy. As a result of the regime's choices, Iran is headed toward isolation and economic hardship.
Through intense diplomacy, the United States and its allies have built
a multilateral coalition resulting in two unanimous U.N. Security
Council sanctions resolutions that impose financial measures targeting
Iran's nuclear and ballistic-missile programs. Sustained international
pressure on Iran is having an impact. The Bush administration is
committed to continuing this diplomatic approach.
Voluntary actions by the private sector are reinforcing governmental
pressure. One year ago, U.S. Treasury Secretary Hank Paulson launched a
world-wide effort to inform the public, government partners and
private-sector leaders about the danger Iran's financial deception
poses to the international financial system. We have shared information
with these groups about how this deceptive conduct enables Iran to
support terrorism and its nuclear and missile programs, and about
Iran's attempts to lure reputable banks unwittingly into those
activities. We cautioned that, absent a change in course, the regime
would find it exceedingly difficult to locate partners among the
world's reputable banks. That prediction has become a reality.
Iran uses its state-owned banks to finance proliferation and terrorism:
The United Nations has blacklisted Bank Sepah for its role as the
financial linchpin of Iran's missile programs, and Bank Saderat has
been cut off from the U.S. financial system for financing terrorism.
Iranian banks, including its central bank, take special care to hide
their involvement in illicit business by asking other banks to remove
their names and all references to Iran from transactions -- a clear
acknowledgment of their wrongdoing. This routine practice is
specifically designed to deceive those who might reject the transaction
if they knew who, or what, was really involved.
Before the passage of U.N. Security Council Resolution 1747, which
imposed financial sanctions on Iran's nuclear and missile programs, the
Central Bank of Iran abused its relationships with upstanding financial
institutions to shield Bank Sepah's assets from the impact of impending
sanctions. Other Iranian banks also helped Sepah evade sanctions after
its Security Council designation.
As they become aware of this misconduct, more banks world-wide are
refusing to deal with Iran in any currency, determining the business is
too risky. Foreign-based branches and subsidiaries of Iran's
state-owned banks are increasingly isolated -- threatening their
viability -- as banks and companies resist dealing with them for fear
that their business will be disrupted by additional U.N. sanctions. And
there has been a devastating reduction in the foreign investment Iran
needs to develop its vast oil reserves. France has now asked its
largest firms not to bid for projects in Iran.
This financial pressure is amplified by the regime's economic
mismanagement. Despite Iran's increasing oil revenues, President
Ahmadinejad has failed to deliver on his promises to improve the lot of
average Iranians. Most independent experts estimate Iran's unemployment
rate to be double the regime's claim of "only" 11%. Similarly, Iran
admits its inflation rate is 17%; experts estimate the true figure is
even higher. Instead of trying to ease inflation, President Ahmadinejad
has thrown fuel onto the fire, ordering the central bank to cut
interest rates far below the inflation rate despite objections by the
bank's former governor -- an act of economic malpractice.
Corruption is widespread, depriving average Iranians of economic
opportunity. The Ahmadinejad regime awards lucrative "no-bid" contracts
to cronies in Iran's Revolutionary Guards Corps, whose leadership has
been sanctioned under U.N. resolutions.
Yet the regime continues to send hundreds of millions of dollars every
year to support deadly terrorist groups abroad while the population is
neglected. At a time of record oil prices, the country's oil revenue
reserve fund should be growing to benefit the future of the Iranian
people. Instead, it is being spent down to mask the effects of the
regime's misguided economic policies.
All of this has not gone unnoticed. The OECD recently increased Iran's
risk classification for the likelihood that the country will pay its
external debts to its second-worst rating -- equal to that of Gabon and
Swaziland -- thereby increasing the cost of financing for Iranian
companies.
Those who have dared to tell the truth about the pain these policies
are inflicting on the country have paid the price. President
Ahmadinejad just ousted the central bank governor who resisted cutting
interest rates in the face of persistent high inflation. He also sacked
Iran's oil minister, who acknowledged that Tehran was having difficulty
funding oil projects as a result of decreased cooperation from overseas
banks and financiers and who called Iran's energy problems a looming
"catastrophe."
Iran is experiencing the consequences of its deceptive financial
conduct and defiant policies. Its leaders are inflicting hardship on
the Iranian people and steadily turning their country into a financial
pariah. Whether to continue down this path of isolation is a choice
Iran must make.
Mr. Levey is undersecretary for terrorism and financial intelligence in the U.S. Treasury Department
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