8th April 2019 – U.S. President Donald Trump designated the Islamic Revolutionary Guards Corps (IRGC) as a foreign terrorist organization (FTO) on April 8. The move marks the first time that the U.S. has labeled a military force in another country as a terrorist entity. Washington had already sanctioned around 30 individuals and organizations associated with the IRGC but not the entire force.

“This historic step will deprive the world’s leading state sponsor of terror the financial means to spread misery and death around the world,” U.S. Secretary of State Mike Pompeo told reporters at the U.S. State Department on April 8. “Businesses and banks around the world now have a clear duty to ensure that companies with which they conduct financial transactions are not connected to the IRGC in any material way. It also gives the U.S. government additional tools to counter Iranian-backed terrorism. This designation will take effect one week from today.”

Meanwhile, Tehran was quick to respond to the U.S. decision to blacklist the IRGC. Iran’s Supreme National Security Council retaliated by labeling American military forces in the Middle East as a “terrorist organization,” the Islamic Republic News Agency (IRNA) reported.

Speaking to Kayhan Life on condition of anonymity, an Iranian bank executive said: “Iranian banks have been uneasy about working with the IRGC for years. Many bankers have privately expressed their fear of being associated with the military. Stringent sanctions against Bank Sepah in 2006 for its support of Iran’s missile program worried all other financial institutions in the country. People and businesses were reluctant to work with domestic and foreign branches of Sepah Bank after that. The bank had lost all credibility.”

[aesop_image img=”https://kayhanlife.com/wp-content/uploads/2019/01/2015-09-23T120000Z_1219992082_GF10000216926_RTRMADP_3_IRAN-MILITARY.jpg” panorama=”off” align=”center” lightbox=”off” caption=”Iranian-made missiles are pictured at Holy Defence Museum in Tehran. REUTERS” captionposition=”left” revealfx=”off” overlay_revealfx=”off”]

The banker added: “Sanctions against Sepah Bank prompted the Iranian armed forces to create an independent banking system. Lifting the sanctions against Sepah Bank was part of the negotiations for the release of American-Iranian dual nationals held in Iran, which also coincided with the signing of the Joint Comprehensive Plan of Action (JCPOA), better known as the Iran nuclear deal, in 2015.”

[aesop_image img=”https://kayhanlife.com/wp-content/uploads/2019/04/Central_branch_of_Sepah_Bank.jpg” panorama=”off” credit=”Attribution-ShareAlike 4.0 International (CC BY-SA 4.0) ” align=”center” lightbox=”off” caption=”FILE PHOTO: Central branch of Sepah Bank in Imam Khomeini street in Tehran.Author: MRG90, Source: Wikimedia Commons. ” captionposition=”center” revealfx=”off” overlay_revealfx=”off”]

The U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctioned 25 individuals and entities on March 26, including Ansar Bank which, according to a European Union report, supported “Iran’s proliferation-sensitive nuclear activities or Iran’s development of nuclear weapon delivery.” Ansar Bank reportedly had close links to many currency exchange operations in Iran, Turkey and the United Arab Emirates (UAE).

“Besides all of its 50 branches, the US and the EU blacklisted many of Ansar Bank’s senior executives, and financial institutions with links to its operations,” the banker said. “Bank executives cared about their own plight more than the banks they worked for because they traveled abroad regularly. Most bank executives feared that European governments might seize their foreign assets, bank accounts, and investments.”

“The IRGC pressures banks into doing business with companies under its control,” the banker added. “However, fearing serious repercussions, many banks refuse to go along with the IRGC’s schemes, which place limitations on what the military can do in the financial sphere. Domestic banks have posed a serious challenge to the IRGC, particularly after the second set of U.S. sanction went into effect in November, targeting Iran’s banking, shipping, and ship-building sectors.”

“The IRGC relies heavily on SWIFT [Society for Worldwide Interbank Financial Telecommunication] for its financial survival. The system enables financial institutions worldwide to send and receive information about transactions in a secure, standardized and reliable environment,” the banker noted. “The IRGC views banks as a financial network which gives it access to the international monetary system. Senior IRGC commanders and officials have held many meetings with Iranian bank executives in recent months to devise a scheme for circumventing U.S. sanctions. They are reportedly sending suitcases stuffed with cash to Hezbollah in Lebanon, which is not sustainable in the long run.”

Meanwhile, the EU has set several preconditions for implementing the Instrument to Support Trade Exchanges (INSTEX), a special-purpose vehicle (SPV) established in January 2019 by France, Germany, and UK (E3) to facilitate non-dollar trade with Iran. Besides halting missile tests and curbing regional ambitions, European governments have also demanded that Iran sign onto the Financial Action Task Force on money laundering (FATF), and the United Nations Convention against Transnational Organized Crime (UNTOC), better known as the Palermo bill.

[aesop_image img=”https://kayhanlife.com/wp-content/uploads/2019/04/2007-11-26T120000Z_622231380_GM1DWRJSQTAA_RTRMADP_3_IRAN-PALESTINIANS.jpg” panorama=”off” align=”center” lightbox=”off” caption=”FILE PHOTO: Iran’s Supreme Leader Ayatollah Ali Khamenei (2nd L) inspects the parade by the members of Basij militia part of IRGC (paramilitary volunteer) during a ceremony to mark the Basij day in southern Tehran. Reuters” captionposition=”center” revealfx=”off” overlay_revealfx=”off”]

The banker said: “Designating the IRGC as a terrorist group would prevent Europeans from implementing the INSTEX. Iran cannot use the SPV to circumvent the U.S. sanctions. Bank Keshavarzi Iran, also known as Agribank, and Bank Maskan are the only ones that can use the SWIFT system at the moment. They facilitate imports of medicines and hospital equipment.

“As part of its banking reform, the government plans to set a new single rate of exchange for foreign currency in coming weeks. The government’s official rate of 42,000 rials to a dollar, set last year, did not help with the import of necessities of standard life. The move, therefore, would only raise the price of goods and the dollar, euro, and British pound exchange rate.”

The banker warned: “The government has no other option but to reform the banking system. However, we can expect a sharp drop in the value of Iranian rial against major foreign currencies, given the move to label the IRGC as a terrorist entity. The Islamic Republic of Iran Central Bank’s foreign currency reserves are severely depleted. The bank has stabilized prices by injecting cash into the economy in the past few months, which it cannot sustain for much longer.”

The banker pointed out: “The designation of the IRGC as a terrorist group would make it nearly impossible for the government to go ahead with its plan to merge six military banks with Sepah Bank, which is among many entities sanctioned by the U.S. Department of Treasury. Iranian banks are in a precarious position. By engaging with the IRGC, they would risk violating the sanctions and be held criminally liable for affiliating with a terrorist group. Bank presidents and senior executives will also be accountable for working with a terrorist entity. We have already seen the impact of the U.S. decision to designate the IRGC as a terrorist group on the foreign exchange and gold markets in Iran.”

Translated from Persian by Fardine Hamidi