Consortium Against Terrorist Finance Sep. 18, 2015, 4:36pm

Emanuele Ottolenghi, Matthew Levitt and Suzanne Maloney’s testimony before the U.S. House of Foreign Affairs Subcommittee on Middle East and North Africa yesterday made clear that the implications of the recent nuclear agreement compel a more thorough reflection. The experts stressed that the discussion should extend way beyond the risks of an even more relaxed approach to terror financing by Iran, to include domestic as well as regional implications.

Should Iran comply with the key nuclear commitments under the comprehensive nuclear accord (Joint Comprehensive Plan of action, or JCPOA), US, EU, and other multilateral sanctions on energy, financial, shipping, automotive, and other sectors will be suspended. Iran will be able to to freely export crude oil and to access almost $60 billion in hard currency held abroad. The broad sanction relief package subsumes three elements: “sanctioned companies will be delisted by both the EU and U.S.; the EU will allow economic activities with Iran; and U.S. secondary sanctions against these sectors will be removed, continuing only to affect U.S. persons as defined in the agreement.” The implications for Iran’s domestic economy, as both Ottolenghi and Maloney concluded, are hardly marginal.

The sanctions regime erected between 2006 and 2015 negatively impacted the “average Iranian” more than the “average beneficiary of Tehran’s terrorist subsidies.” In fact, Maloney contended that “it was the concerns about the long-term erosion of Iran’s economic base and the legitimacy of the ruling system that generated a consensus decision among the political elite to relinquish its longstanding nuclear recalcitrance, elevate a more pragmatic elective leadership, and engage in a serious and, eventually, successful process of negotiations to end the impasse and the sanctions.”

It is indisputable that Rouhani’s most appreciated domestic achievement since taking office in August 2013 was the drastic reduction of the inflation rate from 42% to the current figures of 15%. Reasonably, his administration is expected to seek to deploy the JCPOA economic boost toward job creation and sustainable growth, especially in the wake of the promised efforts to “generate growth, development and jobs.” If Iran proves capable to pursue economic reform, attract foreign investments and boost oil exports, it is plausibly expected to reach an “average growth of more than 4-5% in the three years starting [next year].”

Ottolenghi brought to Congress’ attention another major domestic implication of the nuclear agreement for Iran: the Islamic Revolutionary Guard Corps (IRGC) will be the main beneficiaries of the implementation of JCPOA at a domestic level. Being “the regime’s Praetorian Guard” and a dominant actor within Iran’s economy, the IRGC’s economic ascendance will fortify its domestic political influence. Once the bulk of the Iranian sanctions are lifted, the remaining measures against the IRGC will prove insufficient. In addition, it is likely to become immensely more complicated to isolate the Islamic revolutionary Guard Corps from banned technology which is expected to make its way back to Iran and to prevent them from acquiring advance weaponry. Therefore, Ottolenghi recommended that the U.S. Congress initiate legislation that would induce the State Department to designate the IRGC as a Foreign Terrorist Organization responsible for all of the activities of its subsidiaries and branches.

Among the political actors directly affected by JCPOA, Hezbollah deserves particular attention given its exclusive, privileged position as Iran’s protegé. Hezbollah receives from Iran “some $200 million a year in addition to weapons, training, intelligence, and logistical assistance.” Increased Iran’s funding as a consequence of the sanctions relief will especially benefit Hezbollah's regional and international operations, and allow the Lebanese political party and militant group to divert its focus from what has been so far its main mission (“jockeying for political power in Lebanon and fighting Israel”) and increase its presence on a number of foreign fronts. Levitt suggested that new funds made available by Iran could allow Hezbollah to reinforce its support to Shia militias in Iraq and Yemen in cooperation with Iran, expand its footprint in Yemen and even reconstitute its capabilities beyond the Middle East.

We are faced with the ironic situation in which Washington is being forced to give up “the most effective instrument in its policy toolbox” while Iran is almost certain to increase support for clandestine activity and proxies engaged in asymmetric warfare. More than ever - the experts underscored – it is crucial to identify and implement new mechanisms for addressing Iran’s problematic regional policies.

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