Trump Admin to Sanction Iran’s Last European Lifeline

The Trump administration is considering new sanctions on Iran to stop it from using backdoor financial methods as a means to skirt U.S. economic sanctions on its business dealings with leading European nations, according to multiple U.S. officials who told the Free Beacon that Tehran is operating a “nuclear racket.”

The new sanctions would directly target Iran’s Special Trade and Finance Institute (STFI), an alternate financial body established by Tehran to ensure it can continue engaging in lucrative trade deals with Europe in the face of heavy U.S. sanctions. The STFI was meant to replace the Instrument in Support of Trade Exchanges (ISTEX), which France, Germany, and the United Kingdom created in January to facilitate trade with Iran.

The Trump administration is already said to be examining sanctioning the STFI, which it views as a front for the Central Bank of Iran, an entity sanctioned by the United States for its role in Iran’s nuclear program and the funding of regional terror operations, according to multiple sources familiar with the matter.

Administration allies in Congress are working toward a similar goal, with Sen. Ted Cruz (R., Texas) having already filed a new measure that would, in addition to any potential White House action, formally sanction the STFI vehicle and make it impossible for Europe to continue engaging in business with Iran, congressional sources confirmed to the Free Beacon.

The issue of these financial bodies has emerged as a crucial tension point in the debate over Iran, as traditional American allies such as Germany, France, and Britain seek to use the STFI to skirt Trump’s sanctions. With Iran giving Europe a 10-day deadline provide it with cash windfalls from the landmark nuclear deal or face increased uranium enrichment, any new sanctions would disrupt Europe’s efforts to keep the door open to future business with Tehran.

“The Iranians are running a nuclear racket: Iran threatens to expand its nuclear program unless Europe pays it not to,” according to one U.S. official, who would only speak about the new sanctions on background. “INSTEX is supposed to be how Europe pays the racket, but who’s going to get involved in a scheme like that and likely face U.S. sanctions?”

Cruz’s new measure, which was viewed by the Free Beacon, would complement any new Trump administration sanctions, according to the senator’s office.

“Sen. Cruz has been explicit that the U.S. should use every tool available to protect the integrity of our sanctions regime and our maximum pressure campaign against the Ayatollahs, including from the INSTEX and STFI vehicles,” a Cruz spokesman said. “The administration and Congress have a range of options, from visa denials, to outright terror designation of the vehicles. Sen. Cruz will continue to work with the Trump administration and his colleagues to ensure that the right options are selected and used.”

One senior Republican congressional aide who works on Iran issues said Europe will find itself subject to biting sanctions if it goes along with Iran’s demands to use the STFI for banned transactions.

“The Europeans should get back onside and stop trying to undermine American pressure on Iran, which is a state sponsor of terrorism that in the last few years has violated every international norm, from attacking embassies to blowing up ships in international waters,” said the official, who would speak only on background when discussing ongoing deliberations. “If the Europeans won’t do the right thing for the right reason, we’ll have to act to ensure that they halt their efforts to float the Iranian regime.”

U.S. officials see it as only a matter of time before the STFI is targeted with sanctions due to its ties to Iran’s Central Bank.

“The Iranian counterpart to INSTEX, which is called STFI, is basically a front for the CBI,” said one source familiar with the Treasury Department’s thinking on the matter. “It’s going to get put on the SDN list at some point; the open source evidence alone is overwhelming. So if you’re a prospective European investor or participant in INSTEX, run away as fast you can or else get trapped in a web of US sanctions.”

The STFI has openly acted to help Europe skirt U.S. sanctions, according to regional experts.

“Set up by Germany, France, and the UK, INSTEX would avoid U.S. sanctions by enabling trade without using the U.S. dollar or going through U.S. banks,” the Foundation For Defense of Democracies, a think-tank closely aligned with the Trump administration, wrote in a recent policy alert.

“The seven banks that hold shares in the STFI have deep ties to regime-controlled entities, in addition to being on the [terror designations] list,” according to FDD.

One of the banks, Karafarin Bank, “is effectively part of Supreme Leader Ali Khamenei’s $95 billion economic empire, the Headquarters for the Execution of Imam Khomeini’s Order (EIKO),” according to the policy alert. “Among Karafarin’s main shareholders are Tadbir Investment and its subsidiaries; Tadbir itself is a subsidiary of EIKO. Both Tadbir and EIKO are on the SDN list and subject to secondary sanctions.”

Secretary of State Mike Pompeo has maintained the United States will uphold its sanctions on Iran, particular if any banned transactions are conducted through INSTEX, the STFI, or any other body.

“There are items that are sanctioned and there are items that are not,” Pompeo said in late May. “Those items that are subject to sanctions, we will do our best to enforce the American sanctions regime that is put in—has been put in place. But for those that aren’t—for humanitarian goods, things that are permitted to move, whether they move through INSTEX or through another mechanism—those are lawful and appropriate and are permitted to continue under the sanctions laws that we’ve put in place. And so when we think about INSTEX, if it is aimed at facilitating the movement of goods that are authorized to move, it’s unproblematic.”

Iranian leaders have already lashed out at the U.S. over its efforts to cut off the STFI and on Monday issued a series of threats to restart its most contested nuclear work, including enriching uranium—the key component in a nuclear weapons—to levels prohibited under international regulations.

Iran says that it will blow past these caps in less than a week.

“Production of 3.67 percent (enriched) uranium has increased since the capacity was quadrupled. We will cross the 300-kg limit in 10 days from now,” Behrouz Kamalvandi, a spokesman for Iran’s Atomic Energy Organization of Iran, said on Monday.

Iranian President Hassan Rouhani also warned European nations still party to the nuclear deal that time is running out as Tehran demands continued cash windfalls and business perks for its ailing economy.

“The current conditions are sensitive and France, along with other members of the nuclear deal, still have the opportunity to play their historical role, in the very short time left (before the deadline arrives), to keep the nuclear deal because undoubtedly, annihilation of the nuclear deal will not benefit Iran, France, the region and the world,” Rouhani was quoted as saying on Monday during a press conference with his French counterpart.

The post Trump Admin to Sanction Iran’s Last European Lifeline appeared first on Washington Free Beacon.

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