Time to get serious about sanctions on Iran, especially through Lebanese banks

Posted By Thomas E. Ricks Tuesday, January 17, 2012 - 7:40 AM Share

By David Asher

Best Defense department of non-kinetic actions 

U.S. Treasury Department sanctions against Iran are having a remarkable impact and much more is soon to come. In recent weeks the Iranian currency has crashed and the Iranian balance of payments, a close proxy measure for its oil revenue seems heading toward a deficit. Moreover, recently enacted legislation -- requiring banks to cease dealing with the Iranian Central Bank for oil imports within 60 days -- will soon be implemented. For Tehran, oil is money. Thus, cutting off oil revenue could soon bring the Iranian economy to its knees. Iran's threats to block the flow of oil via the Strait of Hormuz -- with the goal of sending oil prices skyrocketing -- is a sign that the Iranians are feeling pain. For Tehran it can only get worse. 

The problem with sanctions is that the longer they drag on, the more affected countries develop the means to skirt them. Saddam's Iraq came under the weight of a vast sanctions regime for over a decade and the government did not fall from power, let alone change course. Iran is a nation of sophisticated traders and we can expect it to undertake a web of evasive measures to struggle on. Moreover, even if the Iranian economy is brought to a halt, history shows that those in power will be the last to suffer. In fact, Iran's hardline Revolutionary Guards appear to be gaining power as the nation moves onto a quasi-wartime footing. 

To enforce sanctions and significantly enhance pressure directed against Iran's leadership (not just its people), the U.S. should consider an Iran-Hezbollah Illicit Activities Initiative similar to the one used against Kim Jong Il's regime, 2001-2006, and akin as well to the strategy applied successfully against Slobodan Milosevic and his cronies in the Balkans in the mid-90s (see the testimony). These previous interagency and international initiatives brought together U.S. and foreign government partners to apply a matrix of pressure strategies to directly effect the hold on power of the North Korean and Serbian regime leaders and coerce them to either give up global defiance or potentially fall from power. Notably, both initiatives incorporated domestic and international law enforcement against the illicit support networks and financial sanctuaries for regime leaders, in addition to the targeted and broader trade sanctions being applied currently against Iran. 

Pretty much every seriously sanctioned regime in history has gotten into illicit activity to offset the cost imposed by sanctions. Iran is no exception to the rule. It appears to have been quietly engaged in state directed illicit activities to benefit the Revolutionary Guard and their antecedents since the onset of the revolution (and accompanying sanctions) -- everything from illegal technology procurement and weapons smuggling to involvement in narcotics trafficking and money laundering. In the coming months, as sanctions bite harder and oil profits disappear, we can expect the scale and importance of these illicit activities for the IRGC (and Hezbollah) to increase dramatically. However, the more Tehran and its affiliates rely on illicit activity, the easier it will be to apply law enforcement and international law strategically to hold their leaders and their finances accountable. Provided a sufficient enforcement dragnet is created, Iran may fall into the same self-created trap as North Korea and Serbia. However, if an enforcement system is not rapidly assembled, we can safely assume that Iran -- particularly with the help of China and Russia -- will embrace the black economy as well as marshal sanctions workarounds that could enhance the power of the IRGC, speed up its nuclear timeline, and heighten the chances of conflict.

The groundwork for an illicit activities initiative already exist, thanks to the excellent work of U.S. law enforcement. In the last year, the findings of Operation Titan -- a massive Drug Enforcement Administration money laundering investigation into Iran's key affiliated terrorist organization, Lebanese Hezbollah -- have emerged in the public eye. As the New York Time details in a recent article, this investigation has documented billions of dollars of cocaine laced funds that have made their way from Hezbollah accounts in Lebanon into the US and European banking system over the last five years. A December 2011 asset forfeiture claim against Hezbollah financial fronts, including the Lebanese Canadian Bank, filed in the Southern District of New York (SDNY) spells out the case that for Hezbollah, Lebanon has become a veritable money laundering machine. 

Ironically, the data below, from the Lebanese Central bank website, plainly illustrates the scale of Hezbollah's money laundering activity. It is hiding in plain sight. As the data show, miraculously, Lebanese banks exploded in growth in the wake of Hezbollah's war with Israel in 2006 - with dollar-denominated deposits making up nearly 2/3 of the Lebanese banking system and over 50% of its growth. Until recently -- when DEA and Treasury began to crack down -- bank dollar and euro deposit growth has kept up a dramatic pace, despite Lebanon having large sovereign currency, economic, political, and security risk. This explosive growth makes no sense, unless Lebanon has become a major financial safe haven for drug trafficking organizations worldwide (and where the risk of moving so much foreign bulk cash and wire transfers is effectively offset by a highly complicit Lebanese government). As the risk of further U.S. actions has become clearer to bank depositors (bad guys included) and the Syria/Iran crisis expands, capital has started to flee Beirut en masse (see the balance of payments slide). Indeed, Lebanon is in the midst of a balance of payments crisis presently as a result.

Bottom line: (undoubtedly with Tehran's consent) the Hezbollah criminal terrorist organization -- as the SDNY Civil action shows convincingly -- established a world class money laundering mechanism out of Beirut at the end of 2006 to help the organization survive amidst the economic fallout of a financially ruinous war with Israel (where Iran didn't seem to want to fill the whole financial void). Through its law enforcement investigations, the U.S. is now well positioned to hold Hezbollah and Iran accountable for using Beirut as an illicit venue. Moreover, cracking down on Hezbollah's illicit finances is one of the only things that can save the Lebanese banking system and economy from unraveling further. The predominant risk to the Lebanese banking system and the Lebanese economy today is born from Hezbollah's domineering illicit activities and their infiltration into the entire Lebanese financial system and economy (real estate is infiltrated at least as much as banking). If the cost of survival for Lebanese banking is punishing Hezbollah, then the Lebanese need to turn on Hezbollah (and curtail Iran's access in the process). Strategic law enforcement against Hezbollah, could serve as a key element to an counter-Iranian illicit activities strategy in the weeks and months to come.

David Asher is a non-resident senior fellow at the Center for a New American Security. He served as the architect of the Bush administration's global campaign against the finances of the Kim Jong Il regime and has long served as expert on counter-threat finance programs and issues for the government and the private sector.

EXPLORE:ARAB WORLD, IRAN
 

KUNINO

3:21 PM ET

January 17, 2012

Another Bush failure pops up, mysteriously

Having failed to bring the Kim regime in North Korea to its knees by sanctions during the GWB years -- and indeed bringing that regime instead into understanding that its welfare probably involved the need for nuclear weapons -- Mr Asher now claims to know everything about Iran present and future. It's an unconvincing idea and it's not entirely clear that Mr Asher wants us to understand that what he's talking about is squeezing the entire world in the hope that this will squeeze Tehran exactly as he and presumably his fellow GWB veterans would like that to happen. Nothing will go wrong so long as his proffered program is installed.

Ha.

Who else is being squeezed? Elsewhere in foreignpolicy.com today, we see that Washington is threatening to squeeze its ally South Korea, which has relied for years on imports of Iranian oil, to abandon that needed product.

Saudi Arabia -- a great Bush ally in recent years -- supposedly promises to supply oil to any nation that, in fear of American pressures, abandons the Iranian stuff. This offer seems to come with no guarantee of permanent support for the lucky customers who turn off the Iran tap, and none of permanent price protection once they abandon Iranian oil.

Leering through Asher's strange piece is his smug assurance that Washington now has the power to "bring Iran to its knees," and this would be a good thing. He wants a process that should lead to starving Iranian citizens and dying Iranian children, horrors experienced over the border in Iraq under an earlier US-led set of embargoes designed to being that country to its knees, too. Advocates claimed at the time that the sanctions had caused half a million Iraqi juvenile deaths. As Asher points out, they produced nothing of benefit to America and world peace.

Failed in Korea, pointing out that sanctions failed in Iraq, he now promises that they'll work in Iran, exactly as he would like them to. Of course, he offers no assurance that this will be so. Nobody can. The proposition is this: think of Iran as an antheap. I have a great stick for you.

In considering this proposition and wondering why Best Defense was the chosen theater for its presentation, keep in mind Asher's mighty works when directing the North Korea Activities Group at the National Security Council, overseeing the Bush administration’s strategy against the Kim Jong Il regime’s illicit activities and finances. The Kim family's personal collection of nuclear bombs is his legacy from that program. It seems likely that they had none at all when Asher became an NSC director.

Also keep in mind that Asher is just one more of those ragtag GWB veterans who apparently sprang into human form the day they enrolled at some American college. A strange crew.

 

BEARCAT

3:57 PM ET

January 17, 2012

We Will Bury Us!?!?

Jacking with the world-wide oil supply has the potential to bury a lot more than the Iranian economy. It will destroy the fragile US recovery and bury any chance for EU recovery.

I am a little ambivalent about the President/CinC. If I was strongly AGAINST him I'd advocate jacking with the Iranians, Straights of Hormuz, and world-wide oil supply because the resulting economic dislocation will ensure BHO is looking for another job in JAN 2013.

 

TOM KENNEDY

4:17 PM ET

January 17, 2012

Evidence?

If we're going to use a law enforcement approach, shouldn't we have some concrete evidence of IRGC direct involvement with illegal drug sales and money laundering? The financial footprint Asher shows in Beirut fits, but it's circumstantial.

If it were I making a decision, like on a jury, I'd want to have some info available that shows a direct link between the accused (Iran) and the crime (money laundering). I'd like it to be specific, available at a low level of classification, and not a 'slam-dunk.'

If we have that, this approach is worth a shot. I don't see any harm that could come of prosecuting the money men for Hezbollah or drug dealers. The worst that could happen is that the Iranian leadership isn't affected and Hezbollah loses some clout.

 

TYRTAIOS

5:17 PM ET

January 17, 2012

Evidence indeed!

Well Tom, there is evidence that Hizbollah has had a connection to the Iranian Abadan drug trafficking network and since narco profits are great, it stands to reason that someone in the IRGC is getting rich, since nothing goes down in Iran that they don't?

Further, worth noting is that Hizbollah's financial structure is also drawn-up along family/clan lines, which sees the Lebanese dispora on several continents (Shi'a, and through intimidation often Sunni, Christian, as well) to include especially the tri-border areas of S. America, allow for profits from narcotics and other illegal activities to take on a different dynamic called trade based money laundering.

This is done in a variety of ways, such as over invoicing merchandise/commodities that have been traded for narcotics, that can than be further manipulated into currency, that in turn is run through many different banks, and then further sent back to Lebanon in small, but continuously numerous electronic money transfers in the form of donations, which is practically, if not actually, improvable as ill-gotten.

Additionally, Hizballah is for all practical purposes today, with last summer’s cabinet and legislature reshuffle, the de-facto government in Lebanon, which gives them access to the Lebanese banking system, as well as diplomatic pouch transfers from Lebanon’s mission’s abroad, to smuggle money.

I suspect w/o presenting classified sources for evidence, bringing an air-tight case against Hizbollah and their collusion with the Banque du Liban could be problematic in an international court of law. . .And now that Hizbollah essentially rolled-up our foreign agent network earlier last December, I doubt we'd want to expose anything we still have operational in Lebanon?

 

LITTLEMANTATE

6:03 PM ET

January 17, 2012

Considering the Afghan opium trade,

bringing such charges would be extremely hypocritical, even for the US. But what am I saying? Hypocrisy and cognitive dissonance are DC's bread and butter.

Regarding the bigger picture, as a simple-minded, "unserious" person who doesn't understand the motivations of the great and good,, who have only everyone's best interest and safety at heart it still seems to me that all of this is about provoking a fight with Iran.

 

TARQUINIS

11:34 AM ET

January 18, 2012

One more rational for war

Is it unfair or politically incorrect to wonder if David Asher is Jewish? He certainly makes the implicit case for a war that would result in chaos from Lebanon to Pakistan, and global economic tumult. Steps of economic strangulation are preliminary steps for an inevitable military clash.

He states that Hezbollah is a criminal terrorist organization. And why is that? After the repeated Israeli devastation of Lebanon, is it not reasonable that there would be a militant resistance group? Cause and effect?

Fact is, Iran is fully within their legal rights under the NPT, which in fact grants them the "inalienable" right to generation and production of civilian nuclear technology:

Article IV, Nuclear Non-Proliferation Treaty:

1. Nothing in this Treaty shall be interpreted as affecting the inalienable right of all the Parties to the Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with Articles I and II of this Treaty.

2. All the Parties to the Treaty undertake to facilitate, and have the right to participate in, the fullest possible exchange of equipment, materials and scientific and technological information for the peaceful uses of nuclear energy. Parties to the Treaty in a position to do so shall also co-operate in contributing alone or together with other States or international organizations to the further development of the applications of nuclear energy for peaceful purposes, especially in the territories of non-nuclear-weapon States Party to the Treaty, with due consideration for the needs of the developing areas of the world...

Iran is no existential threat to nuclear superpower Israel, in possession of hundreds of warheads and with the most advanced delivery systems in the world, including nuclear powered ballistic missile firing submarines. And state with one or two warheads does not attack another with hundreds.

And as the Palestinian people are intertwined with the Israeli Jews, an attack could only destroy both, which is NOT Iran's policy intent.

Which is NOT per many pernicious mis-translations to "wipe Israel off the map" . I would wish it more widely known what in fact is their true policy intent vis a vie Israel.

Iranian Supreme Leader Ayatollah Ali Khamenei, October 2, 2011:
 
“The Islamic Republic’s proposal to help resolve the Palestinian issue and heal this old wound is a clear and logical initiative based on political concepts accepted by world public opinion, which has already been presented in detail."  
 
"We do not suggest launching a classic war by the armies of Muslim countries, or throwing immigrant Jews into the sea, or mediation by the UN and other international organizations. We propose holding a referendum with the participation of the Palestinian nation. The Palestinian nation, like any other nation, has the right to determine their own destiny and elect the governing system of the country.”

http://www.washingtonpost.com/blogs/fact-checker/post/did-ahmadinejad-really-say-israel-should-be-wiped-off-the-map/2011/10/04/gIQABJIKML_blog.html

If America gets jacked into another war, it is our ruin.

 

RONSONDRISCOLL

3:57 AM ET

February 13, 2012

Saudi Arabia -- a great Bush

Saudi Arabia -- a great Bush ally in recent years -- supposedly promises to supply oil to any nation that, in fear of American pressures, abandons the Iranian stuff. This offer seems to come with no guarantee of permanent support homeimprovementblog for the lucky customers who turn off the Iran tap, and none of permanent price protection once they abandon Iranian oil.

 

Thomas E. Ricks covered the U.S. military for the Washington Post from 2000 through 2008.

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