ECONOMY

‘No on-off switch’ to Iran sanctions, cautions U.S. expert

Iran’s ambassador to the International Atomic Energy Agency (IAEA) Reza Najafi. (File photo: Reuters)

The lack of an “on-off” switch for sanctions stands to complicate negotiations between Iran and the West, according to a U.S. expert who was involved in forming U.S. financial policies on Tehran.

On Nov. 24 an interim agreement was reached in Geneva under which Tehran agreed to limit uranium enrichment in return for an easing of international sanctions.

But unraveling such financial measures is not a simple process, cautioned Juan Zarate, a senior adviser at the Center for Strategic and International Studies (CSIS).

“This is going to be much more complicated than simply an on/off switch to sanctions,” he told Al Arabiya News.

Zarate served as deputy assistant to the U.S. President and deputy national security adviser for combating terrorism from 2005 to 2009. He was the first ever assistant secretary of the treasury for terrorist financing and financial crimes.

You cannot put a simple stop to sanctions, Zarate said. “It doesn’t work that way… The very nature of the financial measures tells that it is going to be much more complicated.”

Further complications come because the sanctions on Iran were designed with more than just Tehran’s disputed nuclear program in mind. That “will create inherent tension and confusion”, Zarate said.

While wary of potential complications over the deal with Tehran, Zarate did not rule out a normalization of relations in the future.

“Fundamentally if the Iranians are willing to talk through those issues, there’s no reason why you can’t have normalization with any country,” he said.

“There is a halfway house here that may be acceptable to both sides – but they just have to realize that it may be a halfway house.”

Zarate is the author of the recently published Treasury’s War: The Unleashing of a New Era of Financial Warfare (PublicAffairs, 2013).

The book tells the story of how measures such as sanctions and the freezing of assets can be used in a way akin to warfare.

“You’re never going to stop every last dollar that gets into a terrorist’s hands or into a criminal’s hands. But any group or rogue regime that has wild imaginings and wants global reach needs access to the global financial system. And if you can constrict that, you begin to affect their strategic outlook and reach.

Zarate, who is also the senior national security analyst for CBS News and visiting lecturer at the Harvard Law School, gave his views on the financial measures against Iran.

Q&A with Juan Zarate, senior adviser at the Center for Strategic and International Studies

Juan Zarate, senior adviser at the Center for Strategic and International Studies. (Image provided)

 

Q. What’s your view on the loosening of sanctions on Iran?

Even in the best-case scenario, the loosening of financial pressure and sanctions is going to be complicated and very difficult, in large part because of how the sanctions have been built. They’ve been built over time as a constriction campaign, not as a classic trade-embargo regime. So the layers of sanctions and pressure have been built upon themselves. It’s not just about the nuclear program. The isolation actually was about illicit financial activity that the Iranians, and in particular the Revolutionary Guard, were engaged in. It included the nuclear program… but it also included support to groups that the United States considers to be terrorists, support to militias, and increasingly over the past couple of years support to President Assad of Syria. So there’s a full suite of issues that make doing business with Iran risky for banks, insurance companies, transport companies, that go well beyond the binary nature of the nuclear negotiations.

Q. Do you think the deal between the world powers and Iran is realistic?

That’s a broader question about whether or not, in the first instance, the parties can trust each other, and in particular whether or not the West can trust Iran and any commitments it gives on the nuclear file, especially given what appear to be a continued public and political commitment to a nuclear program that would allow what appears to be a nuclear-weapons breakout capability.

I’m not sure that the trust exists. And I’m not sure – whatever the final comprehensive solution looks like – I’m not sure that we’re ever going to be able to be fully confident that we understand what’s happening in Iran vis-à-vis the nuclear program.

We’ve seen, post the interim deal in Geneva, that we already have different interpretations of even what the short-term deal means. It’s to be expected coming out of a diplomatic process like the one we saw. But it’s also very dangerous because it raises the possibility that the parties may appear to be agreeing on paper but may not really have a meeting of the minds. And that leads to even more dangerous possibilities, because you have a mismatch of expectations and understanding of what is to happen as a result of this deal.

Q. You seem skeptical of this deal

A bit. And I think part of this is the varying interpretations given after the fact. But I also don’t think there’s resolution yet on the American side as to what the end-state actually is, or should be. And that’s problematic, because though this deal seems to have a framework in mind for a comprehensive deal, it really didn’t resolve the fundamental question of what happens to the Iranian nuclear program.

Q. What impact would a deal on Iran have on the UAE?

In terms of the future, I think Dubai and the UAE are poised to benefit greatly if there’s an opening of trade and commerce with Iran. The real challenge though is, if as I postulate, we’re never going to be in a period of free and open trade with Iran, then that’s going to put a lot of pressure on Dubai and Abu Dhabi. Because there’s going to have to be continued vigilance with respect to financial-commercial activities with elements of the Iranian economy. And the tendency is going to be to want to open up aggressively to trade and economic flows.

Q. Is there a possibility that the UAE would be overlooked, and Iran would start dealing directly with big trade exporters?

I don’t think so. Given the nature of Dubai itself, it’s important to the region, particularly as a banking center. There’s no question that, if there’s an opening with Iran, then that opening would have to involve Dubai. The real question is what that financial engagement looks like at the end of the day, vis-à-vis whatever the comprehensive deal looks like. So much of the last eight, nine years has been about disengaging financially from Iran.

Q. How confident are you that the U.S. will normalize its relations with Iran?

I don’t think you’ll see full-scale normalization in the short term. I think there are too many complicated issues. Even if the Iranians are willing to negotiate around the nuclear file, there’s absolutely no evidence that the Iranians are going to end the practices that the U.S. considers to be dangerous and antithetical to U.S. interests. A good deal at the table in Geneva is not going to end Iranian support for Assad, for example, or support for Hezbollah. Those are realities that suggest you are not going to see normalization in the near term.

Q. What are the financial tools of ‘war’ you describe in your book?

These were campaigns and tools born out of the response to 9/11 but expanded well beyond dealing just with terrorist financing. In that regard, these are campaigns built on a notion of using American financial power proactively and preventively to isolate rogue actors or America’s enemies from the financial system. It was very much an offensive, proactive, preventative tool. The word ‘war’ is strong, but I think that those that have been impacted by the measures understand that it’s a new brand of conflict in the financial space.

Q. What are the limitations to this ‘war’?

There are obvious limitations to this. But these tools were never designed to be the all-encompassing solution to every criminal act or every drug deal or every terrorist activity. These are tools that work best when you are trying to impact groups or networks that are gaining global reach via the financial system.

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Last Update: Monday, 13 January 2014 KSA 09:18 - GMT 06:18
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‘No on-off switch’ to Iran sanctions, cautions U.S. expert
Juan Zarafe was the first ever assistant secretary of the treasury for terrorist financing and financial crimes
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