US imposes new sanctions on Iran’s financial system

What happened: The US stepped up its “maximum pressure” campaign against Iran yesterday by announcing new sanctions on the country’s global financing system.

  • The Office of Foreign Assets Control at US Treasury imposed sanctions on 18 Iranian banks that were identified by the US as being sources of “additional avenue that funds the Iranian government’s malign activities”.
  • Steven Mnuchin, US Treasury secretary, said the US sanctions programme “will continue until Iran stops its support of terrorist activities and ends its nuclear programmes,” adding that the administration wanted to cut off Iran’s “illicit access to US dollars”.
  • Secretary of State Mike Pompeo said the sanctions “are directed at the regime and its corrupt officials that have used the wealth of the Iranian people to fuel a radical, revolutionary cause that has brought untold suffering across the Middle East and beyond.”
  • Iranian Foreign Minister Mohammad Javad Zarif tweeted after the announcement: “Amid Covid19 pandemic, U.S. regime wants to blow up our remaining channels to pay for food & medicine. Iranians WILL survive this latest of cruelties. But conspiring to starve a population is a crime against humanity. Culprits & enablers—who block our money—WILL face justice.”
  • Iran’s central bank governor, Abdolnaser Hemmati, said the US move was “propaganda” for domestic purposes and that it would have little impact on imports of essential commodities. He said some of the sanctioned banks were handling imports of food and medicine and worked with foreign banks which still hold all the necessary waivers from the US government.

Context: The Trump administration has accelerated sanctions on Iran in the lead-up to the 3 November US presidential election.

  • President Donald Trump pulled the US out of the Joint Comprehensive Plan of Action (JCPOA)  in May 2018 and offered to hold talks with Tehran’s leaders for a new, broader agreement.  
  • Since then, the US has reverted to a maximum pressure campaign by reinstating its sanctions on Iran, and last month it unliterally declared the reimposition of all UN sanctions on Iran which had ended with the signing of the JCPOA in 2015. In parallel, Iran began increasing uranium enrichment and modernising its nuclear infrastructure in violation of its commitments to the JCPOA. The Trump administration is isolated in its position against Iran, and recently failed to secure the extension of a UN arms embargo against the country.
  • According to a new BICOM briefing, published yesterday, the standoff between the US and its European allies (plus Russia and China) on the issue of snapback sanctions, and between the JCPOA participants and Iran, has serious implications for the survival of the nuclear deal itself.
  • In an exclusive interview in Yedioth Ahronot, IDF intelligence analysis chief Brig-Gen Dror Shalom has claimed that Iran is still two years away from developing a nuclear bomb if it decides to do so. Brig-Gen Shalom added that leaving the Iran nuclear deal and the maximum pressure campaign have not slowed Tehran’s drive toward a bomb.
  • Last month Prime Minister Netanyahu warned the UNSC that because of Iranian violations, “Iran will have enough enriched uranium in a few months for two nuclear bombs. And Iran has been working on a new generation of centrifuges, it’s called the IR9, which will multiply Iran’s enrichment capability fifty-fold.”

Looking ahead: The European participants of the JCPOA seemingly prefer a wait and see what happens in the US Presidential elections in November before taking specific action.

  • However, the BICOM briefing says that neither Biden nor Trump see the JCPOA as sustainable in the long run and both want a new agreement with Iran, although their strategies are very different.
  • After the expiration of the UN arms embargo on 18 October, the US believes Iran will look to buy fighter jets, weaponry, and helicopters. These might include the Russian Sukhoi fighter jet or the Chinese JF-17, as well as new radar-guided air-to-air missiles, such as the Russian R-77-1 or the Chinese PL-15. Iran has also expressed interest in the Russian T-90 main battle tank.

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