IranSource | Understanding and Analyzing a Multifaceted Iran

In quitting the Iran nuclear deal and doubling down on traditional US alliances, the Trump administration has forfeited key leverage and reduced its ability to resolve conflicts in the Middle East.

Some readjustment in US policy after the Barack Obama administration was expected and potentially useful. Both Israel and Saudi Arabia felt that the US had slighted their interests in negotiating the Joint Comprehensive Plan of Action (JCPOA), which placed curbs on Iran’s nuclear program but did not address Iran’s military and political intervention in Arab states.

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Since the 1979 revolution, Azadi Square has been the beating heart for major demonstrations in Iran’s capital. So when the Iranian judiciary announced on September 24 that “financial corruptors” would be hung in the square—a first—it was seen as a dire warning to corrupt traders and government officials that they would be made an example of for the rest of the country.

Weeks later on October 1, three men were sentenced to death for financial corruption. They included a gold dealer nicknamed the “sultan of coins” by Iranian media for collecting two tons worth of gold coins and selling them at inflated rates. The men are currently appealing the sentences. Then on October 6, Interpol extradited to Tehran an Iranian businessman who fled after defrauding thousands of investors out of hundreds of millions of dollars after they purchased gold coins on a website.

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Since the Iranian regime seized power in 1979, its goal has been for Iran to become a regional power and to restore the Shias as the rulers of the Muslim world. A cornerstone of its strategy is to build and control a land corridor stretching from Iran to the Mediterranean Sea.

To extend its power and influence, Iran arms and supports proxies such as Hezbollah in Lebanon, Hamas and Islamic Jihad in the Gaza Strip, Houthi rebels in Yemen, as well as Shia militias in Iraq and Syria.

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The Iranian rial was traded at 150,000 against the US dollar on October 2, indicating a 12 percent appreciation in just one day. Bonbast, a website which tracks free market rates in Iran, stopped posting rates for the day, while state news agencies reported that the free market rial value kept appreciating as high as 80,000 rials.

The surprising trend of the rial recovery continued until Shargh Daily reported on October 4 about the re-emergence of a multi-tier foreign exchange market. This included an official rate of 42,000 rials, a secondary market rate of 90,000 rials, a Central Bank-enforced rate of 95,000 rials—which banks and currency exchange offices use to buy foreign currency from Iranians standing in queues—and a free market rate of about 145,000 rials.

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It’s hard to overstate the regional impact of the rivalry between Iran and several Gulf Arab states—most notably Saudi Arabia and the United Arab Emirates—bordering in recent years on enmity.

While these countries haven’t come close to direct warfare, tensions have impacted many regional conflicts in the Middle East including in Syria, Yemen, and Iraq, and festering instability in countries like Lebanon, Bahrain, and even among the Palestinians.

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An unusual strategic event took place this week in the Middle East. For the second time in over a year, Iran fired ballistic missiles on targets in Syria, a country that borders Israel.

Israeli Prime Minister Benjamin Netanyahu, who never misses an opportunity to respond in the strongest terms—usually within hours—to any Iranian testing of its ballistic missile capabilities, chose a relatively muted response.

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The Trump administration’s decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) in May has thrown a previously established, delicate geopolitical balance into disarray. The remaining signatories of the JCPOA—Britain, China, France, Germany, and Russia—are exploring options to circumvent the resumption of US sanctions on Tehran primarily by establishing a channel to allow financial transactions to cover exports from Iran.

But for all parties of the JCPOA, the key Iranian commodity of interest is crude oil, particularly for Beijing. In 2017, one-third of Iran’s oil exports were sold to China—more than any other country. This relationship between the two countries softens the blow of US sanctions on Iran by giving Tehran a lifeline when facing economic hardship, to an extent.

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“I really, really think someone set him up,” Iran’s deputy foreign minister said in an initial reaction to Israeli Prime Minister Benjamin Netanyahu’s speech at the United Nations General Assembly on September 27.

In an interview with state media, Abbas Araghchi and Iranian Foreign Minister Mohammad Javad Zarif, who is seated next to Araghchi, are both unable to control their laughter at Netanyahu’s latest accusation that Iran is housing a secret warehouse for a nuclear weapons program that Iran, according to the CIA and the International Atomic Energy Agency (IAEA), ended more than a decade ago.

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NEW YORK — Iran’s mellifluous foreign minister, Mohammad Javad Zarif, was in characteristic form Saturday afternoon as he sparred with a small group of journalists and US-Iran hands and fulminated against the policies of the Trump administration.

Iran would survive the latest barrage of US sanctions, Zarif insisted, noting President Donald Trump’s relative isolation at last week’s UN General Assembly and efforts by the Europeans and others to devise ways for Iran to continue to sell oil and be paid for it despite US pressure.

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Prompted by the United States’ unilateral withdrawal from the nuclear deal with Iran (the Joint Comprehensive Plan of Action or JCPOA), the remaining signatories are urgently seeking ways to maintain the agreement—both for strategic reasons and to preserve its trade benefits. A British, French, and German proposal to launch an independent channel for maintaining trade with Tehran, however, is unlikely to succeed and risks undermining the effectiveness of European economic sanctions. 

The three European countries (also known as the E3) are reportedly pursuing the establishment of a special purpose vehicle (SPV) to evade US sanctions and ostensibly maintain legitimate trade with Iran. The proposed SPV would essentially act as an accounting firm, tracking credits against imports and exports without the involvement of European commercial or central banks. For example, Iran could ship crude oil to a French firm, accumulating credit that could then be used to pay an Italian manufacturer for goods shipped the other way —without any funds traversing through Iranian hands. By using credits instead of cash, the SPV would not require any funds to transfer outside of the European Union (EU). Supporters of the proposal contend the SPV would keep such funds safe from the reach of US sanctions. 

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