UAE Restricting Money Transfer To And From Iran – Report
Following restrictions on the Islamic Republic’s financial operations in Iraq, available information indicates that the UAE is also limiting money transfers to and from Iran.
Following restrictions on the Islamic Republic’s financial operations in Iraq, available information indicates that the UAE is also limiting money transfers to and from Iran.
According to information obtained by Iran International, it has become more difficult for Iranian businesspeople in the United Arab Emirates to transfer money in dirhams, and merchants do not have the leeway they used to have to transfer funds between the two countries.
According to an exchange office in Dubai, well-known merchants and those working in the food industry have faced fewer problems, but large exchange offices and banks are acting more cautiously when it comes to Iranian customers. The source added that some of them have completely stopped working with Iranians.
The development revelation comes one day after Iran International leaked a letter revealing that the Islamic Republic is suffering from heavy financial losses because a huge amount of its money is blocked in Iraq. According to a confidential letter addressed to First Vice-President Mohammad Mokhber by his advisor, Iran has $8.5 billion in funds from exports of gas and electricity that is frozen in Iraq as a result of US sanctions. In early February, Iran International obtained information that revealed some details about the inner workings of a Revolutionary Guard’s Quds force unit tasked with smuggling money from Iraq to Iran.
The Islamic Republic has a vast network of cover companies and businesses to transfer money in the region without the restrictions put in place due to the US sanctions. However, more and more regional countries have started direct coordination with the US that would eventually prevent Iran from circumventing the sanctions.
In a top-secret letter addressed to First Vice-President Mohammad Mokhber, Deputy Foreign Minister for Economic Diplomacy Mehdi Safari said that many development projects that were supposed to be carried out by Chinese and Russian companies have been stopped, calling on the government to take measures to re-start the projects.
In his letter, Safari mentioned the South Pars/North Dome Gas-Condensate field, Azar Oil Field in Ilam Province, Changouleh oil fields in West Karoun region and Darkhovein oil field and Mansouri Oil Field in Khuzestan and several others in which the Russians had planned to invest but refrained to do so. The Shadegan and Kupal oil fields were also mentioned in the letter, adding that the government has not issued the needed permits for the Russian investors to continue their planned projects.
The letter called on the administration to provide incentives for the Russians who are reluctant to implement the projects, especially on the South Pars field. He said further negotiations or inviting delegations from Russia may help speed up the implementation of the projects.
The South Pars gas field in the Persian Gulf waters adjacent to Qatari fields is specially important for Iran as production has been steadily declining due to lack of technology to compensate for the fall in natural pressure. Under sanctions, Iran is not able to sign contracts with major Western oil companies who can build larger platforms and use more powerful pumps. Oil minister Javad Owji has said that Iran also needs to invest $40 billion in its gas industry – money it currently does not have.
Safari said that Chinese companies may be good alternatives for the Russian companies, but another leaked document has revealed that Chinese firms are not so willing to invest in Iran either. President Ebrahim Raisi visited China this week to persuade Beijing to operationalize a 25-year cooperation agreement with the Islamic Republic, but China is probably reluctant to violate US sanctions and is not certain about the future of the regime in Tehran. It has only expressed readiness to help in the revival of the 2015 nuclear deal.
The last chance Iran had for collaboration with a Western energy giant was a $5 billion deal it had struck with Total in 2016 to develop the South Pars gas fields, which fell apart in 2018 when former US president Donald Trump withdrew from the Iran nuclear deal and began imposing sanctions.
No substantial investment has been made since. Even the Chinese have not been active despite repeated claims that they would develop the country’s energy sector. Without a comprehensive deal with the United States to resolve differences, no serious international investor would commit to the Iranian market.
In October, a top oil official in Iran said that if new investments are not made in natural gas industry, the country will become a net importer in the next few years. Iran has the second largest natural gas reserves in the world, holding more than 17 percent of global discovered gas fields, but the government had to implement power cuts this winter, as it could not supply enough gas to power plants that have to switch to dirty liquid fuels.
Iran’s gas fields, like any other in the world and similar to Qatar’s, have a natural production curve and underground pressure that pushes the gas out declines over time, needing modern technology to maintain production level. Qatar has invested in 20,000-ton production platforms, not only maintaining output but even increasing production.
According to a confidential letter addressed to First Vice-President Mohammad Mokhber by his advisor, Iran has $8.5 billion in funds from exports of gas and electricity that is frozen in Iraq as a result of US sanctions.
In the letter, issued in early-February, the advisor, named Alavi, claimed that Iran is losing $5 million per month due to the “Negative Interest Rate.” He also added that the funds that are kept in Iraqi currency dinar are also losing their value.
The letter also reveals that the Central Bank of Iran is printing money on the basis of the frozen funds without being able to receive the money to add it to its reserves. It means that the printed money has no real back-up and aggravates inflation and leads to the devaluation of the rial, which hit new lows almost every day this week. According to the letter, Iran is printing one million rials for each dollar blocked in Iraqi banks, although the real exchange rate of dollar in Tehran is about 470,000 rials.
The biggest immediate reason for printing money is government borrowing from the Central Bank of Iran (CBI) to bridge its budget deficit estimated to be 50 percent. But the CBI has little gold or foreign currency reserves to back the rial banknotes it prints. The rial is not a fungible currency like the US dollar and no one invests in buying excess rials, the same way hard currencies function and maintain their value.
As Iran’s economic situation worsens, the Islamic Republic is printing money without backing and adds it to the money supply. Iran has been lavishly printing more money since 2018 when the United States imposed economic sanctions after it withdrew from the Obama-era nuclear accord known as the JCPOA.
The advisor also warned Mokhber about the funds that are spent on essential goods, which are not included in the US sanctions, saying that the money should be spent on other goods. He also said that some of the money is spent through trust funds that are under the audit by the US Office of Foreign Assets Control, and therefore can be tracked by the OFAC and put under further restrictions.
Iraq is seeking accession to the Paris-based Financial Action Task Force (FATF), the money-laundering watchdog that has blacklisted Iran. The FATF blacklist carries with it no formal sanctions, but financial institutions shift their resources and services away from blacklisted countries so as not to risk legal complications. The leaked letter can be an indication that the Islamic Republic has to find new ways to transfer money across the region, especially to fund its proxy forces.
On Saturday, February 11, Iraqi Foreign Minister Fuad Hussein -- accompanied by Central Bank of Iraq Governor Ali al-Allaq -- met with Secretary of State Antony Blinken, Deputy Secretary of the Treasury Wally Adeyemo, and other US officials and business leaders in Washington to discuss a host of economic issues. But an urgent issue was how to prevent Iran from using Iraq’s banking ties with the United States to launder US dollars and circumvent Washington’s sanctions.
In early February, Iran International obtained information that revealed some details about the inner workings of a Revolutionary Guard’s Quds force unit tasked with smuggling money from Iraq to Iran. According to the information, the IRGC and the Islamic Republic’s embassy in Iraq are involved in the money laundering operations that aim to funnel the regime’s revenues from oil and gas exports back to Iran. As per a repeatedly extended sanctions’ waiver by Washington, Tehran is only allowed to import medicine and some essential goods in exchange for its exports of gas and electricity to its neighboring country.
Earlier in the month, Abdol-Amir Rabihavi, the business adviser of the Islamic Republic in Iraq, claimed Iran’s exports to Iraq are on the rise approaching $10 billion despite pressure by the United States on Baghdad to stop the IRGC’s money smuggling from the Arab country.
According to an article by Forbes, Iran is thought to have well over $100 billion in funds trapped in banks in Iraq, South Korea, Japan, Canada and elsewhere.
