Central Bank of Iran Sanctions Expose New Signs of US Desperation

Governor of Central Bank of Iran Abdolnasser Hemmati  responded to the latest round of US animosity and said, “Iran’s economy has already demonstrated its resiliency against sanctions.”

The US Treasury’s Office of Foreign Assets Control (OFAC) on Friday announced new sanctions on the CBI, the National Development Fund of Iran - the country’s sovereign wealth fund - and Etemad Tejarate Pars Company under its so-called ‘counterterrorism authority.

The provocative move is seen as US retaliation for last weekend’s drone attacks on Saudi Arabian oil installations, for which Washington has blamed Iran, according to Financial Tribune.

“Reimposition of new sanctions shows to what extent  America’s hands are empty,” Hemmati wrote in a note published on the CBI website. 

“The US administration’s recurring failures show that sanctions now are more ineffective than any time in the past,” he said.  

In the same vein, Foreign Minister Mohammad Javad Zarif too described the US move as a sign of desperation. 

“What they are doing is sanctioning an entity, which has already been restricted, under a different disguise,” he was quoted as saying by IRIB news. 

In a Twitter post Saturday, the top diplomat referred to the latest hostile move as the failure of US "max pressure” and another attempt to block the Iranian people’s access to food and medicine. 

Turn for the Worse 

Tensions have taken a turn for the worse between the US and Iran since 2018, when the belligerent Trump abandoned the 2015 nuclear deal and re-imposed economic sanctions in a bid to impose maximum pressure on Tehran and force it back to the negotiating table for a new agreement.   

OFAC in its statement claimed that the NDFI was a major source of foreign currency and funding for the IRGC. The move is aimed partly at tying up any NDF money kept in overseas banks.

Commenting on the news, Mohammad Hossini, a trustee of the NDFI, said the new restrictions will not undermine the performance of the fund. 

“The fund has already been hit by sanctions on the oil and banking sectors in recent months. The new restrictions, which directly target the fund, will not have any major impact,” the state-run news outlet IRNA quoted him as saying. 

Pointing to the NDFI mandate to support production sectors, the official reassured businesses that they will have access to loans and credits as in the past. 

Independent of the government, NDFI was set up in 2011 to curb dependency on oil exports and save a percentage of the earnings from oil and gas exports for future generations. 

The fund lends to the nongovernment public sector, private firms and cooperatives when government revenues are low.  

In trying to add pressure in Iran’s economy the hostile US administration is struggling to clamp down on the remaining trade Tehran conducts with Europe and Asia. 

“Those involved in certain transactions with the entities designated today may themselves be exposed to designation,” the OFAC said in its statement. 

Moving On 

“Fortunately, our financial transactions are conducted in ways that are impossible to be sanctioned,” Hemmati said, adding that the country has “moved on from the era of evading sanctions to being non-sanctionable in foreign trade.”

“Now is the opportune time for the US to learn a lesson from realities,” the senior banker wrote. 

The US has previously targeted the central bank, sanctioning its former governor, Valiollah Seif, and another senior official in May 2018 for allegedly supporting terrorist activity. 

In a similar move, the international financial messaging service, SWIFT, decided to remove Iranian banks from its network last November, under mounting pressure from Washingtonian hawks. 

The Belgium-based SWIFT announced that it was severing ties with individual Iran-based banks for the sake of "global stability of the system."

According to Bloomberg, Friday’s action reflects a similar move under former US president George W. Bush.

The US administration designated IRGC in April as a foreign terrorist organization. “It is a controversial step, as sanctioning the central bank may also limit the ability to import humanitarian goods into the country,” the news outlet said. 

Impact on INSTEX 

The US move may also complicate a plan initiated by European countries to launch a mechanism, known officially as Instrument in Support of Trade Exchange, or INSTEX. 

The mechanism is designed by Germany, France and Britain to serve as a financial channel for humanitarian trade with Iran. 

Operation of the long-awaited mechanism could be overshadowed by the fact that its Iranian reciprocal entity is closely linked to the CBI.

Iran set up the corresponding financial mechanism in March, known as the Special Trade and Finance Institute (STFI) to facilitate barter trade through INSTEX.