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The United States has started to increase pressure on Iran over its activities in the region.

On May 15th, 2018, the U.S. Treasury Department issued sanctions on Valiollah Seif, the governor of the Iran's central bank, and designated him as a terrorist under Executive Order 13224. These new sanctions target Seif, along with three other individuals and the Al Bilad Islamic Bank - which is based in Iraq, for allegedly financing Hezbollah on the behalf of the Islamic Revolutionary Guard Corps' (IRGC) Quds Force, which is responsible for all actions outside Iran.

These newest sanctions are the second set to be implemented since the Trump administration's withdrawal from the Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran nuclear deal, on May 8th, 2018.

On May 10th, 2018, the US sanctioned three companies and six individuals for covertly moving money through Emirati banks for the Quds Force. Obviously, the Trump administration intends to continue working to uncovering the financial networks used by the IRGC to finance its operations and transfer money from Iran to financial institutions abroad.

The Quds Force and the IRGC are the cornerstone of Iran's defensive presence in the region and its defense posture against the United States, Saudi Arabia, and Israel. In addition to the Quds Force's actions outside of Iran, the IRGC's cyber and air units support Iran's cybersecurity and ballistic missile capabilities, while the IRGC navy — not the Iranian navy — is responsible for patrolling the Persian Gulf waters inside the Strait of Hormuz. The United States has made clear and repeated demands that Iran halt all actions associated with these IRGC groups. It really isn't much of a surprise that the recent sanctions focus almost exclusively on the IRGC, especially since the U.S. expanded its list of terrorist groups beyond just the Quds Force to include all of the IRGC in October 2017

Despite these efforts by the U.S., these latest sanctions really won't have much of an impact. While the Trump administration can apply sanctions to a wide range of individuals and financial institutions that move money around for the Quds Force, it can't freeze all of Iran's alternative means of obtaining financial resources. Furthermore, sanctions on individuals are generally meaningless in application. For example, Seif and other individuals who have been sanctioned by the U.S. are not permitted to travel to the United States, but as long as they stay in Iran, they will not be subjected to any asset freezes or travel restrictions.

Unfortunately, the deliberate targeting of Seif plays rather well politically for Iran's hardline political groups. Iran has been stuck in a currency crisis since September 2017, when it took 3,900 Iranian rials to equal 1 U.S. dollar. Since that time, the Iranian rial has repeatedly hit record lows, and finally bottomed out on the black market at around 7,000 rials to 1 U.S. dollar. The currency collapse pushed Iran to merge its market exchange rate with the official exchange rate and aggressively target foreign exchange traders — and Seif has been the face of the Iranian financial crisis. As of this week, over five dozen members of Iran's parliament have demanded that either Iranian President Hassan Rouhani fire him or that he resign. Now that Seif is formally sanctioned, Iran may move to replace him with a someone that more closely aligns with the government's new "resistance economy" model which seeks to insulate Iran from the impact of international sanctions and decreases Iran's economic engagements abroad.

Currently, the U.S. sanctions on Seif do not apply to Iran's central bank, but those are on the way. Starting August 7th, 2018, the U.S. will sanction businesses and individuals who purchase or sell U.S. dollar banknotes issued by Iran's central bank. On November 5th, 2018, the United States will sanction business and individuals who make transactions with the bank — without a waiver from their country — as well as those who provide financial messaging services for certain transactions with entities that have been sanctioned under the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010.

Ian Daniel

by Ian Daniel

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