US commends FATF Iran blacklist

ERBIL Kurdistan Region – Secretary of State Mike Pompeo voiced US approval for a global financial watchdog’s decision yesterday to blacklist Iran. The Financial Action Task Force (FATF) decision to label Iran a “high risk jurisdiction” addresses the country’s failure to comply with international conventions to combat terrorism financing.

In an official State Department press release, Secretary of State Pompeo said the US government commended FATF efforts to protect the international system from terrorism financing and stated, “The regime must face consequences for its continued failure to abide by international norms, in particular its inaction in ratifying the Palermo and Terrorist Financing Conventions.”

The FATF, which is comprised of 39 member countries, called on members to “apply effective counter-measures” to pressure Iran, and offered a list of recommendations including prohibiting financial institutions from establishing branches in Iran, prohibiting financial institutions from relying on third parties located in Iran, and limiting business relationships or financial transactions with Iran institutions, companies and individuals.  

Majid Reza Hariri, head of Iran-China Chamber of Commerce, told semi-official news agency ILNA on Saturday that the Iranians abroad, including students and companies, are going to be the worst hit as a result of the FATF decision. "However it will not affect our foreign trade a lot because most of our trade is done through non-banking channels, therefore I believe it is not concerning in short-run.”

However, he went on to add, “We should not forget that this decision will have an extreme psychological impact…I mean the companies and the countries that were prepared to cooperate with us until now, they may reduce their dealing with us because of the increased level of risk."

The blacklist marks the latest development in a ruthless “maximum pressure” economic campaign by the US against Iran, and will apply pressure to an already suffocating Iranian economy. Secretary Pompeo concluded his press statement by saying, “Iran must cease its reckless behavior and act like a normal nation if it wants its isolation to end.” 

Relations between Washington and Tehran have deteriorated since US President Donald Trump withdrew in May 2018 from the landmark 2015 JCPOA nuclear deal and reimposed harsh economic sanctions on Iran. The Iranian people have experienced mass unemployment, severe currency devaluation, and shortages of essential medicines as a result.

Esfandyar Batmanghelidj, founder of an organization that promotes "business diplomacy" between the international community and Iran, thinks that the FATF decision will not directly impact the Iranian economy. Writing for the Quincy Institute, he pointed out that the increased oversight requirements requested of FATF members are already being implemented by the few financial institutions willing to risk the United States’ ire by continuing to do business with Iranian actors. 

He also stated, “European officials do not expect the FATF decision to interfere with the operationalization of INSTEX, the mechanism established to support European trade with Iran, given the longstanding policies of the banks on which INSTEX will rely.” INSTEX is a trade mechanism designed by European governments in an attempt to salvage the Nuclear Accords, which works as a clearinghouse to avoid direct transactions in US dollars that would violate US sanctions. 

Despite the establishment of INSTEX and statements of support for Iran’s reintegration into the global economy by European governments, most European banks and businesses have already cut ties with the increasingly isolated nation. This blacklist designation will serve to further isolate the Iranian economy and the Iranian people, in line with the intentions of Secretary Pompeo and the US government’s political goals.