SANCTIONS and CORRUPTION

On 5 November 2018, international media reported that Iran vows to sell oil, bust US sanctions. When he was elected in 2013, Iran’s President Hassan Rouhani sharply criticised his predecessor President Mahmoud Ahmadinejad for widespread corruption, which was partly a result of an attempt from Iran to bypass United States and Un-imposed sanctions.

Before signing the Iran nuclear deal that eased these sanctions in 2015, Iran tried to bypass the United States and UN by selling its oil through undercover government and private channels. This strategy laid the groundwork for unprecedented corruption, which included Iran’s Revolutionary Guard, the police and even privates citizens who sold Iranian oil on the black market. This allowed sizeable fortunes to amass, with millions of US dollars never finding their way to Iran’s tax coffers.

But only two years latter, Rouhani came into office and promised to stop bypassing and establish transparency to fight massive corruption rooted at the heart of the government. Now it seems President Rouhani has forgotten his sharp criticism, which was welcomed by experts and voters. He admits that Iran will bypass sanctions once again “with great pride”. He omits the consequences for the Iranian economy, which is still suffering from the country’s former attempt at bypassing sanctions.

Back in 2007, an international commission of inquiry report revealed that international sanctions are an invitation to all manner of corruption, including money laundering siting Iraq a case in point. More than two decades ago, from 1995 to 2003, the United Nations ran an oil-for-food program for Iraq. The country was then under the iron fist of the then President Saddam Hussein.

What was true back then is just as true today. However, it appears that the United States

Treasury has learned from the past. For that reason, it has taken the extraordinary step of publicly detailing a brand new scheme of abuse by naming names.

The Iraq-related UN racket was exposed by a commission headed by former United States Central Bank Chief Paul Volcker. Volcker’s book exposed a scheme that could serve as the plot for a major movie. The central character is a Syrian national Mohammad Amer Alchwiki. He runs a company called Global Vision Group in Moscow. At the core of the scheme, stated the United States Treasury, are the Iranians who are breaking United States sanctions by shipping oil and helping the Syrians to pay for it.

The Global Vision Group has been arranging the shipment of millions of barrels of oil from the National Iranian Oil Company to the Syrian government using vessels insured by European companies. The United States Treasury said: “Since at least 2014, vessels carrying Iranian oil have switched off the Automatic Identification System (AIS) onboard before delivering oil to Syria, as a means of concealing the true destination and recipient of this Iranian oil.” Then, the Assad government uses the Global Vision Group to assist in moving hundreds of millions of dollars, which originated with the Central Bank of Iran, to the Islamic Revolutionary Guard which serves as paymaster to Hamas and Hizballah. Illustrative of how money laundering schemes operate, the participants in this racket used intermediary companies to hide their operations.

According to the United States Treasury dealings with the Iranians by Alchwiki’s group were managed through a Russian company Promsyrioimport, which is controlled by the Russian Ministry of Energy, and an Iranian pharmaceutical company, with funds coming from the Central Bank of Iran.

The United States Treasury has targeted nine individuals and organizations for sanctions in this scheme, but will this action make any difference? Peter Rudolf, Senior Researcher at German Institute for International and Security Affairs argued that it may well end up forcing the Iranians and Russians to establish new operations to achieve their purposes. But it seems unlikely that the United States action will diminish the determination of the Iranian and Russian governments to support the Syrian regime and to use Iranian oil in the process. Lain Cameron of Oxford University asserted that sanctions, as we have seen often, and as seen so clearly in this case, push the sanctioned groups and governments into operating schemes through intermediary companies to cover the illicit flows of goods and cash. Bribery becomes a standard part of the process. Cash transfers across borders are hidden as far as is possible, and often successfully.

Frank Vogl, Co-founder of Transparency International and author of a book entitled “Waging War on Corruption: Inside the Movement Fighting the Abuse of Power” underlined that sanctions could be more effective if a far tougher anti-money laundering set of measures were in place by the governments that control all important Western financial centers. According to Frank Vogl, it is ironic that the United States Treasury should be so vigilant and effective in investigating and exposing sanction-busting schemes, and so understaffed and ineffective in exposing illicit financial flows into the United States.

Lain Cameron noted that the United States does not have in place a system that requires the naming of the beneficial owners of shell companies that are controlled by foreign citizens and own investment assets in the United States. The U.K. has this, and it ought to be a model for all countries. Republican and Democrat leaders in both houses of the United States Congress have been giving increasing support to draft legislation that could to a degree resemble the approach that the British have taken.