Institute for Contemporary Affairs
Founded jointly with the Wechsler Family Foundation
Vol. 17, No. 32
Giulio Maria Terzi, former Italian Foreign Minister
- The Trump Administration refusal to recertify the
Joint Comprehensive Plan of Action (JCPOA) and its condemnation of Iran
for financing terrorism, imprisoning dual-nationals, and fomenting civil
wars sent a clear signal to those in Europe considering doing business
with the Iranian regime: the United States will no longer tolerate
Tehran’s flagrant disregard for international law and norms.
- Many European countries remain resistant to challenging the Iranian regime, and some launched a concerted effort to urge Congress to use its authority to maintain the status quo.
- Iran’s activities include numerous human rights abuses and funding terrorist organizations like Hamas and Hizbullah.
- European companies remain interested in doing business with Iran
without consideration for the risks inherent in the Iranian economy,
particularly the imposition by the United States of terrorism sanctions
under Executive Order 13224 against the Islamic Revolutionary Guard
Corps (IRGC).
- European governments and institutions should take an
in-depth review of their approach toward Iran. Full transparency and
adequate information available to the public is an essential
requirement.
On October 13, 2017, the Trump Administration declined to recertify the Joint Comprehensive Plan of Action (JCPOA), and it
denounced Iran
for financing terrorism, imprisoning dual-nationals, and fomenting
civil wars. That decision sent a clear signal to those in Europe
considering doing business with the Iranian regime:
the United States will no longer tolerate Tehran’s flagrant disregard for international law and norms.
Despite multiple indications that Iran has been violating the letter
and the spirit of the JCPOA, many European countries remain resistant to
challenging the Iranian regime. In Washington, prior to the
decertification deadline, the European Union, Germany, France, and
Britain all launched a
concerted effort
to urge Congress to use its authority to maintain the status quo.
Immediately following the decertification, European leaders, in a
chorus,
stood by the regime.
Their calls came under the pretense of security, yet failed to
recognize Iran’s destabilizing aggression in the Middle East, the
refugee crisis it enabled in Syria, and its continued threat to
individual, regional, and global security.
At the October 3-4, 2017, “
Europe-Iran Forum”
held in Zurich, Switzerland, I witnessed first-hand European and
Iranian representatives laud the possibility of increased business
opportunities and investments in the Persian Gulf state. The forum’s
official website states that it is “a key venue for ‘business diplomacy’
between Iran and the international community” and that it offers a
“conversation about the challenges, opportunities, and broader social
responsibilities of commercial activity in Iran.”
1
What the Forum did not cover, however, was how business investments
and the tens of billions of dollars freed from crippling sanctions had
aided Iran’s numerous human rights abuses or funded terrorist
organizations like Hamas and Hizbullah. Further, several of the slated
speakers at the Forum had been sanctioned themselves, or formerly
sanctioned by U.S. and European governments, including the Iran Mines
and Mining Industry Development and Renovation Organization (IMIDRO) and
the Middle East Bank.
The abundance of mainly European companies in attendance laid bare
the unfortunate, yet prevalent climate, in which companies remain
interested in doing business with Iran without consideration for the
risks inherent in the Iranian economy. Moreover, the perils have only
multiplied due to President Trump’s new Iran strategy—particularly the
imposition of terrorism sanctions under Executive Order 13224 on the
Islamic Revolutionary Guard Corps (IRGC). Just ask U.S. Treasury
Secretary Steven Mnuchin, who made a public appeal to the private sector
last week “to recognize that the IRGC permeates much of the Iranian
economy and those who transact with IRGC-controlled companies do so at
great risk.”
In fact, while the Europe- Iran Forum was attended by more than 400
officials and businessmen who were there to promote market opportunities
in Iran, the conclusion went in the opposite direction. Two-third of
those interviewed underlined their increasing concerns and pessimism on
the way ahead. The main reasons were U.S. sanctions regimes, huge
problems in carrying out reliable “due diligence” in the Iranian market,
and the lack of compliance with international norms and standards by
Iranian banks. That was probably the main reason why major international
banks deserted the Forum.
One company attending the forum was Air France, which last year
resumed flights
to Iran. Since the JCPOA’s implementation, others in the airline and
transportation industry have joined as well. Airbus and Boeing have
signed deals that could collectively bring “
300 planes worth $40 billion”
to Iran. However, these large-scale business deals are instrumental in
Iran’s efforts to fuel ongoing conflicts, including the war in Syria.
According to research published by the U.S. Department of the
Treasury, the regime in Iran has been using commercial flights to
fund militant groups since at least 2000. More recently, it has been
ferrying troops and weapons to Bashar al-Assad’s regime in Syria and lending military support to Hizbullah.
Iranian fighters on board Iranian commercial flights heading to the Syrian front.
Another participant, Germany’s Siemens, recently signed a
$1.6 billion agreement to build trains and upgrade tracks in Iran. The agreement was not its first; in 2008, the company
partnered with an IRGC-controlled telecom monopoly
to build technological capabilities for Iran to monitor and censor the
Internet. During the unrest following its 2009 election, Iran used the
technology to thwart protests by blocking communications, collecting
information on individual users, obstructing access to social media, and
ultimately threatening bloggers and detaining journalists.
Not to be left off of Iran’s financial deals, oil and gas ventures
are among Iran’s and the Western world’s biggest transactions. Other
major European attendees at the Forum, such as Royal Dutch Shell and
Italy’s ENI, have each submitted applications for projects with the
National Iranian Oil Company,
a front group for the IRGC
that has been linked to human rights violations, Iran’s nuclear
program, and support of terrorism. Undoubtedly, these oil and gas
projects could add up to
$200 billion in investments and would feed the IRGC’s coffers and facilitate the group’s continued abuses.
A Necessary American Action
The Trump Administration’s decision, though unpopular with those in
Europe seeking to do business with Iran, was a necessary step toward
curbing a regime that fails to comply with the letter and the spirit of
the JCPOA. Furthermore, it should serve as a reality check to
businesses seeking to engage Iran, sending a clear message that doing so
aids and abets the world’s leading state sponsor of terrorism and risks
isolation from the American market.
Given those concerns, the United Against Nuclear Iran (UANI)
organization made demarches to Italian companies and administrations
which have signed deals with Mahan Air to make them better acquainted
with the risks of secondary U.S. sanctions and application of U.S.
Presidential Executive Order 13224. Furthermore, UANI has drawn the
attention of dozens of Italian companies reportedly active in critical
sectors of the Iranian economy that expose them to investigations and
sanctions. Major Italian banks were contacted by UANI; the same was done
with the Bank of Italy. In most of these cases, lack of adequate
information was evident at every level about legal and business risks of
dealing with Iranian entities.
Similar considerations apply to the Budget Law just tabled by Italian
Prime Minister Paolo Gentiloni. The new law includes a specific clause
(article 32) aimed at promoting Italian export and investment in
countries classified by the international Financial Action Task Force
(FATF) with a high degree of risk. The proposal allocates to a National
Agency – Invitalia – funding up to 1 billion Euros in export guarantees
and insurance available for the Iranian market.
The Italian Government has emphasized that the new measures are
intended to boost Italian companies’ presence in the Iranian market. The
Italian taxpayers and individual investors will bear the burden of an
ill-advised policy that encourages companies to take enormous risks in
an “Iranian Eldorado” which doesn’t exist. To mention just some
examples, in December 2016 – as reported by the
Wall Street Journal–
New York’s top banking regulator fined the largest Italian Bank, Intesa
San Paolo SpA and its New York branch, $235 million for violation of
the state’s law prohibiting money laundering and bank secrecy, including
the masking of transactions involving Iran. According to the New York
State Department of Financial Services, the bank “specifically trained
certain employees” to obscure money-processing activities involving
Iran.
Earlier, in 2014, another Italian company, Dettin S.p.A., active in
the petrochemical business, was listed by the U.S. Treasury among the
companies not in compliance with the sanctions regime.
It would be wise for European governments and institutions to
undertake an in-depth review of their approach toward Iran. Full
transparency and adequate information made available to the public is an
essential requirement.
* * *
Note
is a senior adviser to United Against Nuclear Iran (UANI). He
previously served as Foreign Minister of Italy, Permanent Representative
of Italy to the United Nations, and Italian Ambassador to the United
States and Israel.
- Original materials copyright (c) by the authors.
