US Doubts Iran’s Intentions As It Makes Secret Deals

This is the first time the two nations' military representatives have met since Riyadh and Tehran agreed to resume diplomatic relations.

According to an official announcement from the Ministry of Defense of Saudi Arabia, Talal bin Abdullah Al-Otaibi, the Deputy Minister of Defense, engaged in a productive discussion with Aziz Nasirzadeh, the Deputy Chief of Staff for the Armed Forces of Iran. This dialogue took place during the 11th Moscow International Security Conference, organized under the patronage of the Russian Ministry of Defense.

The IRNA state news agency reported that the primary focus of the meeting was to underscore the commitment of both nations to the China-brokered agreement that restored diplomatic relations between Iran and Saudi Arabia in March.

One of the significant outcomes of this meeting was the mutual decision to facilitate the expedited exchange of military affiliates between the two countries, added IRNA.

This thawing of relations comes against the backdrop of years of severed ties between Tehran and Riyadh, originating from the organized attack on Saudi Arabia's diplomatic installations in Tehran and Mashhad in 2016. Tensions escalated in the proceeding years, with notable incidents including the Houthi-led assault on Saudi oil facilities in September 2019. While Saudi Arabia attributed the attack and related maritime incidents to the Islamic Republic, Tehran consistently refuted these allegations.

In June, Saudi Arabian Foreign Minister Prince Faisal bin Farhan met with Iranian officials in Tehran on his first visit to the country after the resumption of diplomatic ties with the Islamic Republic in March.

The two countries had no diplomatic relations for seven years from January 2016 when government-backed Iranian mobs attacked and ransacked Saudi missions after Riyadh executed a pro-Iran Shiite cleric. Saudi Arabia cut diplomatic ties after the incidents.

In March, Iran and Saudi Arabia agreed in a China-brokered deal to end the diplomatic rift and reestablish relations following years of hostility that had endangered regional stability in the Persian Gulf, as well as in Yemen, Syria and Lebanon.

The official government news agency IRNA reported that Iran’s first ambassador in more than seven years accompanies the foreign minister. Earlier this week Amir-Abdollahian announced that the Saudi ambassador will soon arrive in Tehran and the two embassies are already staffed.

The United States has been engaged in an effort to normalize ties between Saudi Arabia and Israel to expand the Abraham Accords launched under the Trump administration in 2020, when the United Arab Emirates and Bahrain, close Saudi allies, established ties with Israel.

In a letter released on Wednesday, the bipartisan group of US lawmakers from the House and Senate have asked the Biden administration to address “unprecedented intimidation” tactics from Iran that have prevented the transfer of seized oil from Suez Rajan, a tanker anchored off the coast of Texas, near Galveston about 50 miles (80 km) from Houston.

The letter was organized by Senator Joni Ernst (R-IA) and Representative Elise Stefanik (R-NY) and signed by Sens. Richard Blumenthal (D-CT), Lindsay Graham (R-SC), Bill Hagerty (R-TN) and Kevin Cramer (R-ND) and Reps. Josh Gottheimer (D-NJ), Jim Banks (R-IN), Don Davis (D-NC) and Max Miller (R-OH).

The US seized the Iranian oil onboard the ship late in May in accordance with the US sanctions, but the oil has reportedly not yet been offloaded as US federal prosecutors have faced challenges in auctioning off the 800,000 barrels of oil aboard the Greek tanker. The lawmakers estimated the value of the oil to be $56 million. 

According to the Wall Street Journal, the US companies are reluctant to unload the oil due to concerns about potential Iranian reprisals, particularly threats of violence by Iran’s Revolutionary Guards. Iran's IRGC navy commander Alireza Tangsiri warned in July that Tehran would retaliate against any oil company involved in unloading the Iranian oil. 

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“Companies with any exposure whatsoever in the Persian Gulf are literally afraid to do it,” said a Houston-based energy executive involved in the matter in July. 

Noting that the enforcement of sanctions will become irrelevant if American citizens and companies involved constantly live in fear of Iranian retaliation, the letter reads, “The ability for a designated Foreign Terrorist Organization (FTO) to prevent the transfer of seized assets within US territorial waters is an unprecedented intimidation effort that threatens to undermine our Nation’s security.”

“Current public reporting that such an operation cannot be completed due to Iranian threats against US companies and persons undermines the success of this seizure and imperils the US government’s ability to successfully complete future seizures,” added the lawmakers. "It is imperative that the Administration make clear that Iran and designated Foreign Terrorist Organizations cannot prevent our government from carrying out legitimate law enforcement operations."

US seizures of Iranian oil contribute money to the US Victims of State Sponsored Terrorism Fund (USVSST Fund), which compensates victims of attacks. The current interagency counter-IRGC petroleum seizure program requires 75 percent of the seized profits to be transferred to the fund, which according to an unnamed official, has insufficient assets for a round of payments next year to the nearly 16,000 Americans. 

The program is most effective when properly resourced and enforced, the lawmakers said, noting that “Since 2019, the program has seized over $200 million in Iranian oil. This program, which has also generated over $41 million for the US government's Treasury Forfeiture Fund, is depriving the IRGC of significant resources, which it uses to engage in terrorism targeting American citizens and our allies and partners around the world." 

The call for action to liquidate the confiscated oil came against the backdrop of Washington agreeing to release $6 billion in Iranian funds frozen in South Korea in exchange for five US citizens taken hostage by Tehran. The deal, which is rumored to have other secret aspects, may end up releasing at least $13 billion more in the future.

"It is really a battle, because the people benefiting from this situation and those harmed (by the new measures) will try in various ways to continue their illegal activities," Allaq told Reuters, referring to implementing US dollar supply restrictions on Iraq to prevent smuggling of banknotes to Iran.

Allaq did not mention Iran by name and said he did not have data on how much of Iraq's dollars has been smuggled to Iran or other neighboring countries, including Turkey and Syria, before the United States tightened regulations in November.

Muhammad Nuri Aziz, a member of the Iraqi parliament, said on a television show last week that Iraqi Prime Minister Mohammed Shia al-Sudani and the country’s central bank are aware of the schemes Iran uses to get hold of US dollars it desperately needs amid US sanctions. The lawmaker noted that the smuggling started during Mustafa Al-Kadhimi's term as prime minister and still continues. Without providing any context or details, the Iraqi lawmaker alleged that Iran prints Iraqi dinars in Argentina, exchanges the money to US dollars in Iraq, from where it is smuggled to Iran by trucks.

Reuters’ Timour Azhari said in a report, “Iraq's government is reliant on Washington's continued goodwill to ensure oil revenues and finances do not face US censure, but it came to power with the support of powerful, Tehran-backed groups and so cannot afford to alienate Iran. The latter groups have accused the US of meddling in Iraq's internal affairs and creating a currency crisis, as businesses either struggling or unwilling to abide by the new measures sourced dollars from exchange shops, driving down the value of the Iraqi dinar.”

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Iraq has more than $100 billion dollars in reserves, Allaq said, but could not freely intervene in the market to bring the rate down due to the restrictions.

Late in July, 14 Iraqi private banks sanctioned by Washington as part of a wider crackdown over helping to siphon US dollars to Iran said they were ready to challenge the measures and face audits and called on Iraqi authorities to provide assistance. The credibility of the Iraqi banking system has been tarnished due to the Islamic Republic's influence, and US financial restrictions have tightened on Baghdad because evidently all Iraqi banks have had interactions with the Islamic Republic.

The US barred the Iraqi banks from conducting dollar transactions as part of a wider crackdown on dollar smuggling to Iran. The latest sanctions, along with earlier ones, have left nearly a third of Iraq's 72 banks blacklisted, two Iraqi central bank officials said. The dinar has been falling against the dollar since the New York Federal Reserve imposed tighter controls on international dollar transactions by commercial Iraqi banks in November to halt the illegal siphoning of dollars to Iran.

Allaq said that action related to transfers from 2022, before a new platform that aimed to improve transparency went live. He said the central bank was undertaking a review of the banking sector and introducing new regulations that he said would likely see some banks close.

"It would be very normal in the coming period to see a reduction in the (number of private banks)," he said. "There are always side-effects, but at the same time we have a responsibility to protect the country's interests by trying to find the necessary means for monitoring and oversight so as not to expose the country to any issues on this front," he said.

'TRANSFORMATION'

The US measures have targeted Iraq's so-called dollar auction, where the central bank requests dollars from the US Federal Reserve before selling them to commercial banks, which in turn sell the funds to businesses in the highly import-dependent economy.

US and Iraqi officials have said the auction allowed large sums of money to be illegitimately acquired by groups who would provide fake invoices and then either transfer or physically smuggle the funds to neighboring countries, chiefly Iran.

A feature of a highly informal economy, the system was also used by thousands of small businesses that are not registered with the state, Allaq said, a widespread phenomenon in Iraq that allows them to dodge taxes and customs fees.

Since January the central bank has asked banks to provide detailed information on senders and recipients of transfers via an online platform.

When companies began trying to use the platform in January, less than 20% of requests were approved by US authorities, Allaq said. That number had now risen to around 85 percent, signaling growing ease with the new regulations, he said.

"It is not just an electronic platform, it will lead to a total reorganization of trade and the movement of money, and control on a lot of avenues for suspicious activity."

(With Reporting by Reuters)

Tehran has managed to increase its oil trade with China to the highest level in at least a decade as rising global prices make the discounted crude more attractive, Bloomberg cited information from data intelligence firm Kpler on Wednesday, a claim that regime officials have been boasting about for the past few months. A question still stands that if Iran is making more money despite the US sanctions, how come the country is suffering from such ever-growing economic woes. 

However, Iranian analysts who see the regime as incapable of spending oil revenues in a wise manner doubt that any additional income can mitigate the current economic crisis.

Economist Ali Saadvandi told Ruydad24 Wednesday that the regime has wasted approximately $1.5 trillion of its oil revenues over the past 20 years, implying that the funds blocked in foreign banks due to US sanctions will be squandered upon release to Iranian authorities. 

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Last week, Iran and Washington reached an agreement whereby five US citizens detained in Iran would be released while $6 billion of Iranian assets in South Korea would be unfrozen and sent to accounts in Qatar that Iran could access to purchase humanitarian needs.

Saadvandi believes that instead of investment in infrastructure, the $6 billion will reach the coffers of the regime in about a month will be spent on food “as it has been the case for the past 40 years.” 

President Ebrahim Raisi also said on Wednesday that Iran's released assets abroad will be used to enhance domestic production. US officials have said Iranian funds will be put in restricted accounts and used for humanitarian purposes such as buying food or medicine, but US officials remain tight-lipped on whether “ordinary people” will see any benefit of the released funds, or will it simply get channeled into the regime’s military machine. 

Meanwhile, as Iran International reported this week, additional media reports suggest not only a $6 billion release from South Korean banks, but also the unlocking of frozen funds in Iraq (estimated between $11-12 billion) and over $3 billion from Japan. These funds will be held in Qatar and Oman. 

Economist Hossein Raghfar told Fararu, a moderate website, that the regime does not have a good track record of investment in different sectors. A major part of the economy is based on selling natural resources very cheap – or in some cases free – through connections with senior officials, masquerading as privatization. “Since the ninth government (the administration of President Mahmoud Ahmadinejad in 2005), we have been witnessing the pillaging of national resources and the outflow of the country's main capital,” he said.

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"The outflow of the country's capital, which includes assets earned from oil and gas revenues as well as natural resources is an example of this trend,” he underlined. “Since 2011, the net investment has been negative.”

“Turkey has borrowed over $400 million from the European Union and also generates revenue from tourism and energy transfers..."

He argued that "Saudi Arabia and other countries in the southern Persian Gulf region have also succeeded in making significant investments in various sectors, including emerging fields like artificial intelligence due to substantial revenues from oil exports, commodity sales, trade, and relatively small populations, ” Raghfar added.