Iran Makes the Graylist

The latest phase in the process of the re-assimilation of Iran into the family of nations came in a decision by the Financial Action Task Force (FATF), an international body dedicated to stopping money laundering and terror financing.

It is hard to know whether to condemn or commend the decision of the FATF regarding Iran. On the one hand, it resolved to keep Iran on its blacklist, which is reasonable, given that Iran remains an unreconstructed, unrepentant sponsor of terror. But, in the spirit of judging all men favorably, it also decided to give the Islamic Republic a year off from sanctions to prove its good intentions.

So Iran is neither on the blacklist nor off, but on a sort of graylist of its own, permitted to do business with the outside world again but remaining under a cloud of official suspicion and partial sanctions.

In practice, the FATF suspension may not matter very much. The organization itself continues to urge due diligence in ascertaining that monies going to Iran do not go into the coffers of evil, and will be watching for progress in Iran’s money-laundering reforms.

“Practically speaking, the FATF decision changes little, since global financial institutions will continue to voluntarily implement strict counter-measures given their serious concerns over Iran’s illicit financial conduct,” said sanctions expert Mark Dubowitz of the Foundation for Defense of Democracies.

Not everyone is so sanguine. In a letter to Treasury Secretary Jack Lew, Rep. Ed Royce, the House Foreign Affairs Committee chairman, urged the Obama administration to keep Iran on the blacklist, while its support for terrorism continues.

As part of an overall picture, it is not encouraging. Everyone knows that Iran continues its sponsorship of terrorist groups like Hizbullah, and that it will exploit every loophole to further its agenda.

The ban on ballistic missile testing is a case in point. The relevant U.N. Security Council resolution says that Iran is “called upon” to refrain from work on ballistic missiles designed to deliver nuclear weapons for up to eight years. This represents a softening of previous sanctions language, and Tehran’s interpretation that there is no prohibition should come as no surprise. Nor should it be surprising that when it resumed such testing recently, sanctions did not “snap back.” The world powers knew that this would happen and nobody even blinked.

Iran is on the U.S. graylist as well. Washington will no longer punish non-U.S. actors for carrying out transactions with Iran; but U.S. banks and corporations are still prohibited from trading with it. At the same time, however, the prohibition no longer applies to foreign subsidiaries of American companies.

The Treasury Department has decreed that American companies may sell commercial aircraft and spare parts to Iran and import Iranian carpets, caviar, pistachios and other foodstuffs into the United States, subject to federal approval.

So don’t blame Boeing for rushing to sell 100 planes for about $25 billion to the world’s leading state sponsor of terrorism. It does so with the blessings of the Treasury.

As Tim Keating, Boeing’s vice president of government operations, said, “We have a vigorous compliance mechanism at Boeing with regard to the screening of all parties with which we do business.” Furthermore, he said, “We could not, as a corporation, be reasonably expected to have better intelligence resources than that of the U.S. government. Therefore, we do rely upon the U.S. government to provide the information needed for us to remain compliant.”

Yes, one might object and say, “But just because it’s legal doesn’t mean it’s right!”

On the contrary, Boeing can point to the letter sent by the administration to the governors of all 50 states to “actively encourage” state and local governments to lift their own sanctions. And in mid-May, U.S. Secretary of State John Kerry met with European bankers in London to promote the “legitimate business, which is clear under the definition of the agreement.” Kerry noted that “they [the Iranians] have an expectation that the sanctions that are supposed to be lifted are, in fact, lifted,” and he wants to make sure they are not disappointed.

Of course, nothing short of utter, abject capitulation will satisfy the still-grumbling ayatollahs, even though the lifting of sanctions on oil exports and unfreezing billions in bank accounts has already breathed new life into the Iranian economy.

Before the lifting of sanctions, Iran was ranked 12th out of the 14 Middle East nations for foreign direct investment (FDI) from 2003 through 2015, a market share of 1.62 per cent. After sanctions were lifted, Iran climbed to number three in the rankings, with a market share of 11.11 per cent, with the United Arab Emirates and Saudi Arabia ahead of it, according to data published by The Financial Times.

But this has not been enough for the Islamic Republic. “On paper the United States allows foreign banks to deal with Iran, but in practice they create Iranophobia so no one does business with Iran,” complained Supreme Leader Ali Khamenei.

Apparently, the Supreme Leader is baffled by the ambiguities of graylisting. But we’re not. It’s good for Iran and bad for the rest of us.