Wall Street Journal: The Obama administration on Monday will name Iran, including its central bank, as a territory of “primary money laundering concern,” say senior U.S. officials, in an effort to further pressure Tehran after recent disclosures about its alleged role in terrorism and nuclear weapons proliferation.
The Wall Street Journal
By JAY SOLOMON
VIENNA—The Obama administration on Monday will name Iran, including its central bank, as a territory of “primary money laundering concern,” say senior U.S. officials, in an effort to further pressure Tehran after recent disclosures about its alleged role in terrorism and nuclear weapons proliferation.
The U.S. Treasury Department won’t formally sanction Iran’s central bank, Bank Markazi, as many Republican and Democratic lawmakers are demanding.
But U.S. officials said this new action would serve as a warning to governments and businesses in Europe, Asia and Latin America to wind down their ties to Bank Markazi and their purchases of Iranian crude oil, as even tougher actions likely will be coming down the road.
“This allows foreign countries to think about how to protect themselves and wean themselves off Iranian oil in a way that doesn’t disrupt the energy markets,” said a senior U.S. official briefed on the new action.
“This says: ‘You should be thinking quite seriously about cutting off your ties to the central bank,” the official said.
The Obama administration Monday will also sanction “dozens” of Iranian companies and organizations that are allegedly involved in supporting Tehran’s nuclear program, including its development of centrifuge machines and a plutonium-producing reactor in the city of Arak.
The U.S. will further announce new sanctions on the sales of goods and services utilized in both Iran’s production of petrochemicals and crude-oil exports.
The money laundering classification could carry sharp consequences. In recent years, Lebanese and North Korean banks named as “primary money laundering concerns” experienced an immediate run on their deposits.
Iran is the third-largest oil exporter among the Organization of Petroleum Exporting Countries and the majority of Tehran’s transactions are cleared through Bank Markazi, say U.S. officials. Iran imports roughly 40% of its gasoline due to insufficient refining capacity. U.S. officials believe Tehran’s already fragile economy is vulnerable to further shortages of gasoline.
Pressure has been mounting in recent weeks on President Barack Obama—both from Capitol Hill and key Middle East allies like Israel and Saudi Arabia—to raise financial pressure on Tehran as a result of new revelations concerning alleged Iranian activities.
In October, the Federal Bureau of Investigation revealed what it said was an Iranian plot to assassinate Saudi Arabia’s ambassador to Washington, a charge Iran has denied.
This month, the United Nations’ nuclear agency released a report detailing Tehran’s efforts to develop the technologies needed to produce atomic weapons. Iran has said the study was politicized and based on “falsified” information.
U.S. and European officials have discussed sanctioning Bank Markazi for more than three years, as the action is seen as having the potential to virtually freeze Tehran out of global commerce. But Washington and Brussels also have worried that a move to blacklist the central bank could lead to a surge in international oil prices that would further harm the global economy.
Monday’s action, U.S. officials, is a way to further isolate Bank Markazi without causing a sudden shock to oil prices. Major U.S. allies, such as Japan, South Korea and India, remain major buyers of Iranian crude and utilize Iran’s central bank to conduct trade, said these officials.
The U.S. action against Iran and Bank Markazi is being taken under Section 311 of the federal Patriot Act, the law established shortly after the Sept. 11 attacks.
It allows the Treasury Department to publish public notices concerning countries, banks or businesses that the U.S. believes are involved in supporting terrorism, weapons proliferation or money laundering. But it is not a formal U.S. sanction that carries mandatory penalties against entities doing business with the bank or with other Iranian institutions named in the finding.
The U.S. has also named countries, such as the Ukraine, Myanmar, and Nauru, under this provision in a bid to force them to clean up their financial sectors.
U.S. officials said Bank Markazi has been actively involved in money laundering and the support of terrorism. In 2011, these officials said, the central bank fraudulently facilitated transactions worth of “billions of dollars” on behalf of already sanctioned Iranian entities, such as Banks Saderat, Melli and Mellat.
They also said Bank Markazi has aided one of Iran’s largest business conglomerates, Khatem al-Anbyia Construction Holdings, in evading U.S. and U.N. sanctions.
Khatem al-Anbiya is controlled by Iran’s elite military unit, the Islamic Revolutionary Guard Corps, which the U.S. believes oversees Tehran’s nuclear and ballistic missile programs.
“[Bank Markazi] is trying to take advantage of international banks that are smaller or don’t understand the risks posed by dealing with Iran,” said the senior U.S. official.
U.S. allies are expected to take similar steps in the coming days to pressure Iran and Bank Markazi.
It’s unclear if the Obama administration’s new actions against Iran will be enough to satisfy Congress’s increasingly aggressive stance toward Tehran.
A coalition of Democrats and Republicans in both the Senate and House of Representatives have been moving to force the White House’s hand on Bank Markazi by offering legislation requiring sanctions.
U.S. officials said a downside of formally blacklisting Bank Markazi at this stage is that the Treasury would then be required to sanction any foreign government or conglomerate that continues to conduct business with the Iranian central bank.
Such actions could destabilize the American economy, U.S. officials said, as such economic powers as China, India and Russia are believed to regularly do business with Bank Markazi.