Can Abbas Araghchi Reshape Iran's Foreign Policy?

On August 21, Iranian lawmakers confirmed veteran diplomat Abbas Araghchi as the country’s new foreign minister. Araghchi secured the support of 247 out of 288 MPs in Iran’s parliament, the Majles. Despite the vote total, Araghchi’s nomination was fiercely contested by hardliners. His confirmation hearing reflected the ongoing struggle between pragmatism and hardline revolutionary ideals that continue to shape the country’s foreign policy, and previewed many pitfalls he will face as foreign minister.

To secure his confirmation, Araghchi, like all of President Masoud Pezeshkian’s cabinet nominees, reaffirmed his unwavering loyalty to revolutionary ideals of the Islamic Republic and the Supreme Leader’s directives. Araghchi was addressing a legislature dominated by hardliners. During the parliamentary elections in March, the Guardian Council, a vetting body, had disqualified many moderate candidates. Voters responded by boycotting the elections and hardliners solidified their hold on the legislature.

While many of Pezeshkian’s nominees faced resistance, Araghchi’s confirmation as foreign minister was especially fraught. The confirmation hearings also took place while Iranian officials await the outcome of the Gaza ceasefire negotiations and continue to warn they will hit back at Israel for the assassination of Hamas political leader Ismail Haniyeh in Tehran on July 30. In Iran’s current political climate, loyalty to the revolution is often measured by one’s stance on foreign policy issues, particularly regarding the U.S., Israel, and Iran’s support for “resistance front” groups such as Hezbollah and Hamas. Any deviation from the hardline position on these issues is characterized as betrayal.

Iran’s Supreme Leader, Ali Khamanei, sets the strategic framework, redlines, and priorities for foreign policy, as underscored during his endorsement of Masoud Pezeshkian’s election on July 28. While the foreign minister and president must operate within these parameters, they still hold a vote in the Supreme National Security Council and can use public statements to put pressure on unelected bodies in Iran. Additionally, their personal ties to other national security figures, such as senior leaders of the Islamic Revolutionary Guard Corps (IRGC), can enable them to influence policy.

Despite these means, the outgoing administration did not seek to actively shape Iran’s foreign policy. Neither President Ebrahim Raisi nor Foreign Minister Hossein Amir-Abdollahian, who were both killed in a helicopter accident in May, sought to advance a foreign policy that conflicted with the Supreme Leader’s redlines, the IRGC’s influence, or the parliament’s lawmaking. By contrast, the Rouhani administration, during which Araghchi was deputy foreign minister, publicly clashed with other power centers. This dynamic explains why Araghchi, like other nominees who served under Rouhani, drew sharp criticism from staunch hardliners.

Critics focused on Araghchi’s past as Iran’s lead nuclear negotiator, a role he held from 2013 to 2021. MPs like Mohammadreza Ahmadi Sangar and Mohammadreza Sabbaghian argued that the Joint Comprehensive Plan of Action (JCPOA), which Araghchi helped craft, was flawed from the start—a misguided deal that left Iran vulnerable to the whims of President Donald Trump, who withdrew from the agreement in 2018. Amirhossein Sabeti, a protégé of Saeid Jalili, who lost the presidential election to Pezeshkian, was perhaps Araghchi’s most vocal opponent. Sabeti argued that in the last months of the Rouhani administration, Araghchi was seeking a new nuclear deal that went beyond Khamanei’s redlines and would have effectively dismantled the resistance front. He also criticized the loss of nuclear capabilities that were key concessions of the JCPOA, including the decommissioning of the Arak reactor.

Iranian legislators have been seeking a greater role in defining Iran’s foreign policy. They want the kind of influence wielded by the U.S. Congress over international negotiations. In 2020, the Majles passed the Strategic Action Law, which effectively bars attempts to revive the JCPOA in its original form. The law, which was pushed by hardliners and endorsed by Khamenei, is as a double-edged sword—it provides leverage but also limits the flexibility needed to strike a deal that would relieve Iran’s economic woes.

For Araghchi, the JCPOA represented a calculated risk that preserved Iran’s position on the global stage, even as the Trump administration tried—and failed—to bury the deal at the United Nations Security Council. It is a legacy he has defended. During his hearing, Araghchi pointed out that the Raisi administration undertook its own nuclear negotiations. Even so, he indicated that he will take a fresh approach to any new talks and “strive to get the best agreement” in light of the Strategic Action Law. During his speech, he vowed to prioritize sanctions neutralization, a priority set forth by the Supreme Leader. But he also highlighted the necessity of lifting sanctions.

Araghchi understands that solving the nuclear issue is the key to addressing many of Iran’s economic challenges. The Pezeshkian administration aims to implement the ambitious 7th Development Plan, which targets an 8 percent annual growth rate—a goal that seems far-fetched given Iran’s economic isolation under sanctions. Iran needs around $60 billion in annual foreign direct investment. According to Hadi Ghavami, an MP who spoke in favor of Araghchi’s nomination, the country currently receives one-thirtieth of that amount.

During his confirmation hearing, Araghchi emphasized that while relations with the U.S. will continue to be defined by antagonism, his goal is to manage the rivalry and avoid escalation. This is part of the “heroic flexibility” needed to return back to the negotiating table. He also called upon Europe to enhance its ties with Tehran and to “return back to the list of areas of priorities for Iran.” The relationship with Europe remains fraught, clouded by the fallout from the JCPOA, the Woman, Life, Freedom protests, and Iran’s support for Russia in its war on Ukraine. Yet Araghchi emphasized that constructive global engagement is essential for any vision for development and managed to get hardliners to vote for him despite this vision.

Iranian officials have heavily invested in the country’s “Eastward turn” in recent years. The push for closer alignments with Russia and China began during the Rouhani administration but reached new heights under Raisi. But the strategy has not paid off. While Iran’s security relationship with Moscow is deeper than ever before, it has also become a liability, isolating Iran further from the international community. In a similar vein, China’s role as a key economic partner for Iran cannot be understated. Yet, there’s growing concern in Tehran that the relationship has become too one-sided, especially as Iran’s neighbors enjoy economic rewards from their trade with China.

At the same time, Tehran has recognized the opportunities presented by a shifting global landscape. Iran is looking to expand its influence into the Global South—Latin America, Africa, and East Asia. Through this understanding, multilateralism is a key factor in Iran’s core foreign policy strategy, reflected in the increasing involvement in platforms like BRICS, the Shanghai Cooperation Organization, and the Eurasian Economic Union. For Tehran, these alliances are more than symbolic; they are part of a broader effort to counterbalance sanctions pressure while positioning Iran as a significant player in a multipolar world. Pezeshkian has been invited to attend the upcoming BRICS summit in Russia in October, soon after he participates at the UN General Assembly in New York for the first time in September.

To secure the trust of the hardliners, Araghchi declared that “resistance diplomacy” is at “the foundation of Iran's foreign policy approach.” In this view, supporting groups like Hezbollah and Hamas is not just policy; it is a core principle of the revolution. Araghchi’s challenge is to convince the international community that Iran’s continued support for the resistance front is not an inherent threat to regional or global security. This is a difficult task when considering the fragility of the growing rapprochement and diplomatic engagements between Iran and the Arab states. There is considerable skepticism amongst Iran’s southern neighbors about the trajectory of the country’s foreign policy and whether deescalation can be sustained.

Ultimately, Araghchi will need to strike a balance when reshaping Iran’s foreign policy. He must find a way to pursue pragmatic diplomacy in a way that coheres with the ideas of resistance that hold sway over Iran’s hardline politicians. A cautionary tale can be seen in the legacy of Foreign Minister Javad Zarif, under whom Araghchi served as deputy foreign minister. Despite securing major concessions for Iran in various high-stakes negotiations, he failed to penetrate the conservative decision-making circles that ultimately dictate Iran’s broader foreign policy.

Araghchi may have more success. MPs appear encouraged by Pezeshkian’s effort to form a “unity cabinet” and seem to appreciate Araghchi’s closer alignment to key power centers. Iran’s new foreign minister has an opportunity to reshape the country’s foreign policy, cutting a creative path through the rigid confines of the political landscape. Whether he succeeds will depend on his ability to recast pragmatism as a tool of resistance.

Photo: IRNA

The Optimistic Case for Biden and Iran

“It’s over.”

So reads the November 8 headline of Hamshahri, one of the leading newspapers in Iran. The past four years have been brutal for ordinary Iranians. The Trump administration waged an economic war on Iran that exacerbated the political and social tensions endemic to the country. Iranians are hoping that the election of Joe Biden and Kamala Harris will enable a return to the optimism they experienced in the short period between the implementation of the Joint Comprehensive Plan of Action (JCPOA) in January 2016 and the dismaying election of Donald Trump in November of the same year.

In a CNN op-ed published in September, Biden made clear his intention to “rejoin the [JPCOA] as a starting point for follow-on negotiations” so long as “Iran returns to strict compliance with the nuclear deal.” Here, Biden is accepting the basic premise of “compliance-for-compliance.” In response to Trump’s withdrawal from the nuclear deal, Iran has reduced its own commitments to the deal, particularly by increasing its levels of uranium enrichment beyond what is permitted by the JCPOA. These moves, which have dismayed the remaining parties to the agreement—France, Germany, the United Kingdom, Russia, and China—are nonetheless perceived as tactical and reversible. The administration of Iranian president Hassan Rouhani remains committed to the JCPOA and appears ready to welcome the U.S. back into the deal so long as the U.S. policymakers accept “to be held responsible for damages” caused to “the people of Iran” as a result of Trump’s withdrawal, while also providing “guarantees” that such an event would not be repeated. Notably, Iranian foreign minister Javad Zarif has described the stance of the Biden administration as “promising.”  

Despite these encouraging statements by both the Biden camp and officials in the Rouhani administration, there is a remarkable degree of pessimism surrounding the prospect of a U.S. reentry to the JCPOA. These assessments highlight pressure, particularly from U.S. allies in the Middle East, to build on the nuclear deal and achieve diplomatic breakthroughs on issues such as regional security and Iran’s missile program. They also point to the ascendency of Iran’s hardliners, a loose coalition of politicians who savaged Rouhani and his moderate bloc as the nuclear deal faltered. The vocal anti-Americanism of these conservative politicians and their labeling of figures such as Rouhani and Zarif as either naïve or knowing traitors, has furnished dire predictions for the future of U.S.-Iran diplomacy under the hardline president expected to prevail in Iran’s elections next year. 

In a recent piece, Ariane Tabatabai and Henry Rome seek to account for the likely victory of a hardliner president, arguing that “the United States shouldn’t rush to secure a deal in the hopes of shaping Iran’s domestic politics, or for fear that the window of opportunity will close.” They observe astutely that “the new administration shouldn’t assume that without Rouhani, diplomacy wouldn’t stand a chance.” Tabatabai and Rome explain that the next Iranian president “will almost certainly be more conservative,” but note that the decision to engage in diplomacy with the United States will not be the prerogative of this hardline figure. Rather, such decisions require “buy-in from the whole system.” So long as Iran’s national security interests would be advanced by negotiations, it is reasonable to expect a receptiveness to talks, even with the U.S.

According to Tabatabai and Rome, it follows that the new Iranian administration will “have no choice but to negotiate” with the U.S. principally because of the country’s weak economic position. But this assessment likely underestimates the ability of the Iranian economy to limp along under sanctions pressure—even for four or more years. Before the COVID-19 pandemic hit the country, the Iranian economy was already returning to growth despite two years under Trump’s maximum pressure sanctions. High inflation has emerged as the single most significant challenge facing Iranian policymakers, but as the case of Venezuela shows, even the most extreme circumstances of hyperinflation can prove insufficient to coerce policymakers to the negotiating table.

Trump’s national security advisor, Robert O’Brien, recently conceded that the administration was seeing diminishing returns from economic coercion, having imposed “so many sanctions” that there was little pressure to add. This view reflects the assessments of the U.S. intelligence community, which is developing a more sophisticated understanding of the Iranian economy and its adaptability to sanctions pressure. The takeaway is that Trump’s sanctions offer Biden no real leverage on Iran and that it will not be possible to coerce Rouhani nor his successor into talks.

Despite this, Tabatabai and Rome are still correct to claim that Biden will have a shot at diplomacy—a very good one at that. To understand why, it is important to look beyond Trump’s withdrawal from the nuclear deal as the critical political act of the last three years. Far more significant is the fact that Iran remains in the agreement. Sure, Iran has reduced its compliance with key aspects of the deal. But the extraordinary political price paid by the Rouhani administration, spurred by a creditable commitment to diplomacy for its own sake and also by the strategic considerations of the wider Iranian “system,” suggests that understanding the logic of Iran’s persistence with the deal is the key to understanding the prospects for U.S.-Iran talks.  

Back in 2018, on the eve of John Bolton’s appointment to lead the National Security Council, it appeared that the writing was on the wall for the Iran deal. As I wrote at the time, “by any conventional assessment, then, the Iran deal is dead.” Implementation of the deal was already faltering, and Bolton was hellbent on killing the agreement outright. But I foresaw a different outcome, arguing that “the Iran deal cannot be killed” because of a set of “several undeniable truths about Iran and its place in the world.” My argument focused on three structural factors that underpin Iran’s diplomatic engagement: the geopolitical influence of Iran, the demographic and economic drivers of the Iranian policy of engagement, and the fact that the United States has limited leverage because there is no credible or affordable military threat behind diminishing sanctions pressure.  

Each of these structural factors is even more pronounced today. The Islamic Republic is less isolated diplomatically than ever before because it opted to remain in the JCPOA following the U.S. withdrawal. In the face of reduced oil revenues, the Iranian economy is more dependent on economic diversification, including in its trade partnerships. The combination of sanctions overuse and the American public’s calls for a pullback from the Middle East will leave Biden with less scope to coerce or threaten Iran.  

The notion that Iran’s commitment to engagement (and the nuclear deal) is structural was underscored in a November 3 speech by Iran’s Supreme Leader, Ali Khamenei. Addressing the possible impact of U.S. elections on U.S.-Iran relations, Khamenei stated, “We follow a sensible, calculated policy which cannot be affected by changes of personnel.” Many took the statement to be Khamenei’s way of pouring cold water on the prospect of a Biden victory revitalizing the JCPOA. But again, in the Iranian assessment, the deal is not yet dead. The calculated policy to which Khamenei is referring is the policy of keeping the nuclear deal alive in accordance with Iran’s strategic interests.

This structural commitment means that the Biden administration does not need to rush to make a deal with Iran—the window of opportunity will not close when Iran elects a new president next summer. However, that does not mean Biden will not need to make some early gestures to signal the depth of his own commitment to diplomacy. In an excellent report envisioning a roadmap for the Biden administration’s reengagement of Iran, Ilan Goldenberg, Elisa Catalano Ewers, and Kaleigh Thomas, point to the importance of an early “de-escalation” phase, stating that the Biden administration “should start with immediate, modest unilateral confidence-building measures” in order to achieve both compliance-for-compliance on the nuclear file and “calm-for-calm” when it comes to regional tensions.

As Edoardo Saravalle has convincingly argued, the Biden administration can use executive orders to implement its sanctions relief commitments under a compliance-for-compliance framework in under sixty days. These moves can be made tangible by coordinating moves with European allies and international bodies to deliver tangible economic benefits to Iran. For example, this coordination can ensure that sanctions relief enables the unfreezing of foreign exchange reserves and the provision of Iran’s requested COVID-19 relief loan by the International Monetary Fund—moves that would ease inflation, delivering appreciable economic relief for ordinary Iranians. Should the Biden administration choose incentivization over coercion and thereby prove itself a credible counterparty for follow-on negotiations by the time of the Iranian election in the early summer of 2021, it is more than likely that any Iranian president elected—even a so-called hardliner—will take up the mantle of new talks.

The fierce opposition of hardliners to the nuclear deal was far more about the stakes of domestic politics than the terms of the deal itself. Even before talks had concluded, hardline politicians were gripped by anxiety that the successful implementation of the nuclear deal would grant Rouhani, a savvy political operator, a diplomatic and economic triumph that would consolidate the dominance of reformist politics in Iran for a generation. The opposition to the nuclear deal, which extended to efforts to undermine the deal itself, was intended to take Rouhani from the heights of popularity—he won two stunning mandates in high-turnout elections—to the depths of disgrace. The hardliners succeeded in this cynical mission and Rouhani was battered. But tellingly, the nuclear deal, as a product of Iran’s largely apolitical strategic decision-making, has survived.

A hardline president in Iran can be confident of his ability to run the country for an initial four-year term without needing a détente with Biden. The economy will limp along, regional tensions will remain high, and domestic unrest will simmer. But the presidential administration will be able to coordinate with state organs to keep Iran resilient to external and internal pressure—even as the Iranian people continue to suffer from the country’s stagnation.

But what president would choose to preside over a constant slow-moving crisis, particularly one that was not of his own making? For hardliners, 2021 represents an extraordinary political opportunity. For the first time since 1989, Iran and the United States will have first-term presidents at the same time. Meanwhile, Iran’s conservative politicians are increasingly concerned about the political legacy and legitimacy of the Islamic Revolution as it enters its fifth decade. Negotiations with the Biden administration offer Iran’s next president, and his political backers, the opportunity to give to the Iranian people that long-awaited gift—a robust, transformational deal with the world powers, chief among them the United States.   

The impact of Biden’s election on U.S.-Iran relations has been the subject of strategizing for months. Today, what was once a hypothetical has become a reality. The impetus for U.S.-Iran talks arises from both an emergent political opportunity and the unchanged structural factors that push both sides towards engagement. The mechanics and sequencing of an American reentry into the JCPOA remain to be determined, but it will not be harder than when the deal was originally struck, when taboos needed to be broken in Tehran and Washington alike. Much has been learned over the last four years about what it takes to implement an “Iran Deal” successfully. We ought to be optimistic about comes next.

It’s a beginning.

Photo: Wikicommons

Iran Trade Deal with Russia-Led Bloc Warrants Cautious Optimism

On September 30, Iranian President Hassan Rouhani arrived in Yerevan, Armenia to attend the Eurasian Economic Union (EAEU) Summit. A free trade agreement (FTA) between Iran and the EAEU will come into force on October 27, creating conditions for preferential trade between Iran and the current EEAU members: Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. The FTA will give Iran access to a single market comprised of 183 million people and with an aggregate GDP of USD 4 trillion.

Iranian policymakers have welcomed the FTA with cautious optimism. With parliamentary elections fast approaching, the Rouhani administration and parliamentarians alike are eager to implement policies that may help bolster Iran’s economy as sanctions cause a sharp recession. Reza Rahmani, Iran’s industry minister has stated that the FTA could help counteract Iran’s isolation in the face of U.S. sanctions. Mohammadreza Jahanbiglari, an economist and member Iran’s Chamber of Commerce, has predicted that if properly implemented, the FTA could see Iran’s trade turnover with EAEU member states quadruple to reach USD 10 billion within one year—a view echoed by Mehdi Mirashrafi, the head of Iran’s customs administration. The Iran Chamber of Commerce has been invited to establish a specific body to support exchanges with EAEU counterparts.

However, the highly regarded Islamic Parliament Research Center, the research arm of the country’s legislative assembly, has issued a more conservative assessment, outlining in a June 2019 report that the “low level of Iran’s commercial complimentary” with EAEU member states will result in a “minor impact from the FTA on the country's economy.”

The Parliament Research Center nonetheless concluded that the FTA could help Iran develop its non-oil exports, a central aim of the doctrine behind the “Economy of Resistance” called for by the Supreme Leader, Ali Khamenei. Under the FTA, a list of 502 goods will enjoy preferential tariffs when exported to the EAEU. 

Utilization of the so-called “soft infrastructure” represented by the FTA may also spur the development of Iran’s geo-economic position in the Middle East through the creation of new “hard infrastructure.” Russian leadership of the EAEU is complimentary with its “Pivot to the East” strategy. In this context, Iran can provide the shortest, safest, and cheapest route for Russian goods to the Indian Ocean as envisioned in the International North–South Transport Corridor (INSTC). During the Yerevan summit, Iranian foreign minister, Mohammad Javad Zarif highlighted the pivotal role Iran can play in these plans, tweeting, “With parallel work on North-South & South-West Transit Corridors, ground paved for expansion in regional trade & cementing of our role as vital transit hub.”

Despite practical concerns about the facilitation of trade in the face of US secondary sanctions, Iran will also likely find a sympathetic group of countries among the EAEU, which has an anti-sanctions outlook. The EAEU Treaty was signed on May 29, 2014, after the first round of sanctions were imposed against Russia. Like Iran, Russia has seen the expansion of trade among the countries of the former Soviet Union as a possible bulwark against sanctions.

Before leaving Iran for the Yerevan summit, President Rouhani highlighted the potential for the FTA with the EAEU to help Iran mitigate the effects of U.S. sanctions. One of the key issues barriers for Iran’s cross-border trade is the absence of reliable banking channels. Iran and Russia have been exploring the use of local currencies in bilateral trade as well as the use of a new Russian bank messaging system called SPFS, which is intended as an alternative to SWIFT. Abdolnasser Hemmati, the governor of Iran’s central bank, has stated that Russia has agreed to Iran’s proposal to expand SPFS to the countries of the EEAU. 

Beyond banking, Iranian business leaders are concerned about the harmonization of the trading regimes. For example, while EEAU countries use the more detailed 10-digit “Harmonized System” (HS), Iran uses the 8-digit version. Proper harmonization will require input from a wide range of Iranian regulatory bodies, including the customs administration, the National Standard Organization, the Veterinary Organization, and the Food and Drugs Administration. Aside from the administrative challenges on the Iranian side, there are also concerns around the internal dynamics of the EAEU, in which economic ambitious have not been matched with the kind of political frameworks that have made the European Union customs union so successful. The FTA between Iran and the EAEU is an interim agreement that will remain in force for three years—a short period to overcome a wide range of bureaucratic hurdles.

While Iran might not find drastic gains by joining the EAEU, it certainly has nothing to lose. Over time, if enabled by the creation of more robust banking channels and investment in new transport infrastructure, Iran’s non-oil trade with the EAEU could prove a real boon for the economy.

Photo: Kremlin.ru

Parsian Bank CEO: US Treasury Made ‘Mistake’ in Iran Sanctions Designation

The CEO of Iran’s Parsian Bank, which was sanctioned last week by the US Treasury, has described the designation of the bank as a Specially Designated Global Terrorist (SDGT) a “mistake.” The unprecedented move against one of Iran’s leading private sector banks by US authorities has many in Iran’s banking sector worried, especially with regards to the ongoing viability of humanitarian trade.

On October 16, the US Treasury Office of Foreign Assets Control (OFAC) designated twenty Iranian entities as SDGTs for allegedly providing support to Bonyad Taavon Basij, a holding company associated with Iran’s Basij paramilitary force. Several banks and financial institutions were among the targeted entities—the most prominent among them was Parsian Bank, a private sector financial institution.

Parsian was designated "for assisting, sponsoring, or providing financial, material, or technological support for, or financial or other services to or in support of, Andisheh Mehvaran Investment Company", itself one of several intermediaries ultimately linked back to Bonyad Taavon Basij.

The designation of Parsian seemed to confirm growing concerns that the Trump administration intends to target Iranian banks previously exempt from secondary sanctions as part of its “maximum pressure” policy on Iran.

According to Parsian Bank’s CEO, Kourosh Parvizian, US authorities have exaggerated a financial link in order to designate the bank. "Parsian was sanctioned because one company, Andisheh Mevaran, bought and sold less than 0.3 percent of the total shares of the bank in the stock market," Parvizian told Bourse & Bazaar, adding that such a small shareholder would have no influence over the management or operations of the bank, meaning that any financial link fell well below OFAC’s typical concern with the “control” of Iranian companies by sanctioned entities.

The number of shares purchased by Andisheh Mehvaran even falls below the normal threshold for regulatory oversight by the Central Bank of Iran. The markets regulator only requires approval for share purchases when real or legal persons are seeking to purchase more than 5 or 10 percent of the firm's total outstanding shares respectively. Parsian Bank has 23.7 billion shares currently outstanding on the Tehran Stock Exchange and counts over 70,000 shareholders.

By either deliberately or negligently misconstruing the bank as beholden to Andisheh Mehvaran, US treasury officials made a “mistake at the expense of over 70,000 shareholders and 6.5 million customers of a bank that handles the transactions behind the majority of imports of foodstuffs, medicine and other humanitarian trade items for the Iranian people," Parvizian said.

The belief that Parsian Bank’s designation is a result of a "mistake" runs counter to the views of many sanctions attorneys, who believe that the Trump administration is trying to send signal of zero-tolerance to Iranians banks and their international partners.

Adam Smith, of law firm Gibson Dunn & Crutcher, told the Wall Street Journal’s Samuel Rubenfeld that the designation of Parsian Bank “will make it more difficult to get financing for humanitarian projects.” Smith, a former Treasury Department official, is “very nervous” about how a more hardline sanctions policy from the Trump administration could impact humanitarian trade.  

Iran's Foreign Minister Javad Zarif seemingly agrees that the designation of Parsian Bank was intended to send a signal, slamming the Trump administration’s “addiction to sanctions” in a tweet. Zarif specifically pointed to the eight degrees of separation between Parsian Bank and Bonyad Taavon Basij, the primary target of the sanctions action.

Iran’s foreign minister also decried the disregard for the ruling earlier this month from the International Court of Justice (ICJ) which called on the US to lift restrictions on humanitarian trade. Likewise, Parvizian stated, “The designation [of Parsian] runs counter to remarks made by senior US officials that foodstuffs and medicines will not be targeted by sanctions.”

In the aftermath of the designation, Parsian Bank has sought to reassure its customers and shareholders. Shortly after Parsian was added to the SDGTs list, the bank released statements both for the general public and for its shareholders declaring that operations will not be significantly impacted since the bank had already halted all dollar-denominated transactions years ago due to sanctions. Parvizian added, "I cannot say the sanctions won't have any effects, but those effects won't be what the US wants.”

But in some respects, the damage has already been done. Parvizian is understandably upset that his customers and shareholders will bear the brunt of the designation. They had put their trust in the bank being spared from the full extent of sanctions since Parsian was among the Iranian banks that enjoyed a favorable position relative to the wider Iranian financial system prior to the JCPOA nuclear deal. "On top of everything, the designation has considerably increased our reputational risk," he said.

Over the years, the bank’s reputation has benefited from its investments in raising managerial standards, including improving anti-money laundering (AML) and combating financing of terrorism (CFT) compliance procedures as well as know your customer (KYC) due diligence. Parvizian believes that US authorities are fully aware of Parsian’s efforts in these areas.

"For instance, during our non-dollar dealings with Iraq, even the Central Bank of Iraq made an inquiry with US authorities about Parsian and they had answered positively," he said.  

That Parsian serves as an example for other banks in compliance standards is especially important given the intense debate that has surrounded Iran’s progress on instituting the reforms required by the Financial Action Task Force (FATF) action plan.

Last Friday, the global standard-setting body extended Iran's deadline to complete its action plan until February, a victory over US and several of its allies have long sought to blacklist the Islamic Republic. The push for financial reforms will be harder to justify if banks like Parsian, which are among the closest to meeting FATF standards in their international operations, will nonetheless be targeted with new US sanctions.   

As relayed by Parvizian, the history of private sector banking in Iran is a story of overcoming adversity. This episode is no different. The bank, which had not been contacted or otherwise informed by the OFAC prior to its designation, is now working through "defined channels" to explore whether it can appeal to have the designation reversed.

Photo Credit: Ibena.ir