China's Xi To Visit Iran, Calls For Lifting US Sanctions

According to a confidential letter addressed to First Vice-President Mohammad Mokhber by his advisor, Iran has $8.5 billion in funds from exports of gas and electricity that is frozen in Iraq as a result of US sanctions. 

In the letter, issued in early-February, the advisor, named Alavi, claimed that Iran is losing $5 million per month due to the “Negative Interest Rate.” He also added that the funds that are kept in Iraqi currency dinar are also losing their value. 

The letter also reveals that the Central Bank of Iran is printing money on the basis of the frozen funds without being able to receive the money to add it to its reserves. It means that the printed money has no real back-up and aggravates inflation and leads to the devaluation of the rial, which hit new lows almost every day this week. According to the letter, Iran is printing one million rials for each dollar blocked in Iraqi banks, although the real exchange rate of dollar in Tehran is about 470,000 rials. 

The biggest immediate reason for printing money is government borrowing from the Central Bank of Iran (CBI) to bridge its budget deficit estimated to be 50 percent. But the CBI has little gold or foreign currency reserves to back the rial banknotes it prints. The rial is not a fungible currency like the US dollar and no one invests in buying excess rials, the same way hard currencies function and maintain their value.

As Iran’s economic situation worsens, the Islamic Republic is printing money without backing and adds it to the money supply. Iran has been lavishly printing more money since 2018 when the United States imposed economic sanctions after it withdrew from the Obama-era nuclear accord known as the JCPOA.

The advisor also warned Mokhber about the funds that are spent on essential goods, which are not included in the US sanctions, saying that the money should be spent on other goods. He also said that some of the money is spent through trust funds that are under the audit by the US Office of Foreign Assets Control, and therefore can be tracked by the OFAC and put under further restrictions. 

Iraq is seeking accession to the Paris-based Financial Action Task Force (FATF), the money-laundering watchdog that has blacklisted Iran. The FATF blacklist carries with it no formal sanctions, but financial institutions shift their resources and services away from blacklisted countries so as not to risk legal complications. The leaked letter can be an indication that the Islamic Republic has to find new ways to transfer money across the region, especially to fund its proxy forces. 

On Saturday, February 11, Iraqi Foreign Minister Fuad Hussein -- accompanied by Central Bank of Iraq Governor Ali al-Allaq -- met with Secretary of State Antony Blinken, Deputy Secretary of the Treasury Wally Adeyemo, and other US officials and business leaders in Washington to discuss a host of economic issues. But an urgent issue was how to prevent Iran from using Iraq’s banking ties with the United States to launder US dollars and circumvent Washington’s sanctions.

In early February, Iran International obtained information that revealed some details about the inner workings of a Revolutionary Guard’s Quds force unit tasked with smuggling money from Iraq to Iran. According to the information, the IRGC and the Islamic Republic’s embassy in Iraq are involved in the money laundering operations that aim to funnel the regime’s revenues from oil and gas exports back to Iran. As per a repeatedly extended sanctions’ waiver by Washington, Tehran is only allowed to import medicine and some essential goods in exchange for its exports of gas and electricity to its neighboring country.

Earlier in the month, Abdol-Amir Rabihavi, the business adviser of the Islamic Republic in Iraq, claimed Iran’s exports to Iraq are on the rise approaching $10 billion despite pressure by the United States on Baghdad to stop the IRGC’s money smuggling from the Arab country.

According to an article by Forbes, Iran is thought to have well over $100 billion in funds trapped in banks in Iraq, South Korea, Japan, Canada and elsewhere.

These people are accused of hiding hundreds of millions of dollars in aid to the Islamic Republic to bypass US sanctions.

CBC News has introduced them as active businessmen in Canada who promote themselves as leaders in the world of real estate.

Salim Henareh promotes himself on his personal website as the CEO of a private mortgage corporation in Toronto and a “top name in his industry.”

Khalil Henareh, whose relationship to Salim has not been clarified, has identified himself on social media as a real estate broker based in Thornhill, Ontario.

The third one, Saeed (Sam) Tarab Abtahi, has been introduced on the company's website as the vice president of a private lending company tied to Salim Henareh.

“They are not accused of violating sanctions in Canada or of any illegal acts here. But all three men face felony charges in the US and up to 20 years in prison if they’re convicted,” wrote CBC News.

But Garry Clement, a former Royal Canadian Mounted Police superintendent said it appears to be a “classic example” of Canada acting as a “safe haven.”

Prime Minister Justin Trudeau has promised that Canada will no longer be a safe haven for people benefiting from “the corrupt and horrific regime in Iran.”

"For the first time we are also proposing to sanction Iranian entities including those linked to Iran's Revolutionary Guard," Von der Leyen told European lawmakers in Strasbourg on Wednesday.

Von der Leyen said the 10th package of sanctions, worth a total of 11 billion euros ($11.79 billion), would target new trade bans and technology export controls, including drones, helicopters and missiles.

Iran has been supplying Shahed kamikaze drones to Russia since mid-2022 that have been used in large numbers against Ukrainian infrastructure targets and also to swamp air defenses during massive Russian missile strikes.

At the same time, the brutal suppression of protesters in Iran has angered European politicians, who are contemplating to list the Revolutionary Guard as a terrorist organization.

There are also reports that the Islamic Republic might export ballistic missiles to Russia to make up for a shortfall Moscow faces as it has used hundreds in its stockpile against Ukraine.

Iran initially denied supplying drones to Russia, but as physical evidence of their use in Ukraine built up foreign minister Hossein Amir-Abdollahian admitted the transfer, claiming that drones were sent before the Ukraine war.

With reporting by Reuters

The department spokesperson Ned Price was asked on Tuesday to comment on Chinese President XI Jinping’s remark earlier in the day that the Iranian nuclear issue should be resolved as soon as possible.

In response he said that the United States has engaged with China and other global stakeholders to encourage them to counter Iran’s policies “that destabilize the region and threaten our partners and our allies. Iran’s nuclear program, its ballistic missile program, its other malign activities and influence, are profoundly destabilizing in the region.”

Ned Price drew attention to Chinese cooperation in pressuring Iran in the early 2010s regarding its nuclear program. Presumably, he said, that’s why “the PRC came together with us the better part of a decade ago by now in the original configuration of the P5+1 to work with us to ultimately negotiate what became known as the Joint Comprehensive Plan of Action [JCPOA].”

However, China has been violating US oil export sanctions imposed on Iran on a large scale since the Biden administration came into office. Industry observers believe that Beijing is allowing at least 700,000 barrels of Iranian crude oil to be imported by its refineries, which provides a financial lifeline to the regime in Tehran.

But Price also reiterated the administration’s new policy of not pursuing the nuclear talks unless Tehran meets a number of demands. The spokesman said, “the JCPOA has not been on the agenda for some time. We continue to discount, if not dismiss repeated claims from Iranian officials that we are eager to go back to the JCPOA, we’re calling for a return to JCPOA negotiations. We’re not. We’re sending very clear messages to the Iranian regime. Those messages are: Stop killing your own people, stop sending UAV technology to Russia, and free those wrongfully detained American citizens.”

Critics have repeatedly accused the administration of not sufficiently enforcing sanctions the US imposed in 2018, when former President Donald Trump withdrew from the JCPOA. The main loophole is the oil exports to China that can generate more than $20 billion a year for the Islamic Republic.

Price continued the administration’s rhetoric demanding that Beijing should act responsibly. “My point is that the PRC has a role to play in very clearly signaling to Iran that its destabilizing activities, that its brinksmanship is not going to be rewarded. It’s not going to be countenanced. It is not something that the international community is prepared to sit idly by and watch.”

Not only China supports the Islamic Republic by buying its illicit oil shipments, but inviting Raisi at a time when the regime stands accused of gross human rights violations against protesters, is a clear attempt to support the rulers in Tehran.

The Islamic Republic is facing isolation also because of its drone deliveries to Russia and Beijing’s invitation to Raisi partially mollifies that isolation.

Judging from numerous social media posts by Iranian critics of the regime, it appears that their anti-China sentiment has increased because of this latest lifeline thrown to the Islamic Republic.

Mehdi Karami Pour told Shargh daily that he has been in Iraq last week and even had trouble getting a taxi.

A Shargh reporter also wrote on twitter that a number of Iranian travelers in Iraq said that due to the imposition of US restrictions on dollar transactions by Iraqi banks, exchange offices do not sell foreign currency to travelers.

Ali Shariati, a member of the Chamber of Commerce and a businessman, has also confirmed the news, saying that in Iraqi media Iran has been introduced as the main cause of inflation in the country and its dollar crisis.

According to reports many Iranian companies in Iraq do not have a clear identity and after Iraq joins the Financial Action Task Force (FATF) the activity of these firms would become even more difficult.

Washington has imposed new restrictions on dollar transfers to Iraq as the Arab country’s banking officials believe there is widespread money laundering for the purpose of sending funds to Iran and Syria, both under US banking sanctions.

Iraq is now feeling the result, with an unprecedented drop in the value of its currency.

Hundreds of people demonstrated near the central bank headquarters in Baghdad to protest the devaluation of the Iraqi dinar against the dollar, which has triggered a rise in prices of imported consumer goods.