For Iranian leadership, the Joint Comprehensive Plan of Action (JCPOA) was more about easing pressure on Iran’s economy and less about foreswearing an illegal nuclear program. Iran’s economy has always been the Islamic Republic’s Achilles’ heel. It was economic considerations, for example, that convinced revolutionary leader Ayatollah Khomeini to accept a ceasefire against Saddam Hussein’s Iraq in 1988, six years after he swore never to do so. It is not by coincidence that the most effective sanctions on Iran were those that targeted Iran’s banking system and, by extension, currency. These worried Iranian authorities far more than targeted sanctions limited to specific Iranian individuals.
President Hassan Rouhani and Foreign Minister Mohammad Javad Zarif have spoken out strongly against any new constraints upon the Iranian economy, even threatening to walk away from the nuclear deal. This is why Secretary of State John Kerry and his close aides have so often spoken out against new sanctions on Iran. The JCPOA is their legacy and, even if it was a deeply flawed deal based on a naïve reading of Iranian politics, they do not want it shredded by anyone—and especially their Iranian partners.
Those who advocate new sanctions do so because they wish to calibrate pressure on Iran to the reality of its behavior. One of the main problems with the JCPOA was that, far from setting Tehran on the course to better, more responsible international behavior, it infused cash into those elements of the Iranian power apparatus most responsible for international terrorism and military aggression.
On Thursday, rejecting Kerry’s obsequiousness, the Senate Foreign Relations Committee voted 18-3 to impose new sanctions on the Islamic Republic over its missile work and the worsening treatment of Iranian minorities and dissidents. The measure likely will become law.
Piecemeal sanctions have their place but, if both Democrats and Republicans wish to pressure Iran effectively, undermine Iran’s ability to evade sanctions, and prevent Western companies from aiding Iran’s military and terror apparatus, they might consider targeting the Tehran Stock Exchange (TSE).
The TSE is not an ordinary stock exchange; rather, it seems to serve as a platform by which the Revolutionary Guard launders money and evades sanctions. Firstly, listing on the exchange provide legitimacy to companies operating under the Islamic Revolutionary Guard Corps’ umbrella. The Islamic Revolutionary Guard Corps can pump money acquired from illicit means—for example, drug cultivation in Lebanon’s Bekaa Valley—and invest it in listed companies. The Revolutionary Guards can further utilize dividends and the sale of stock to then support its operations.
Secondly, the TSE may be an essential component to the IRGC’s ability to evade sanctions. The pattern is this: When the United Nations, U.S. Treasury Department, or other group designates a company as engaging in illicit activities, the Iranian government will often, under the guise of privatization, put a state-owned enterprise up for sale on the Tehran Stock Exchange. Usually, a Revolutionary Guard-owned business or bank then purchases the company, transferring operations from the sanctioned entity to the new firm. In effect, the Iranian government is playing anti-sanctions Three-Card Monte, and the Tehran Stock Exchange acts as the make-shift table making the game possible.
If Congress is serious about undercutting the mechanism by which the Islamic Revolutionary Guard Corps evades sanctions, it should consider targeting TSE and those companies trading on it. At the very least, Congress or the U.S. Treasury Department might try to prohibit U.S. companies or subsidiaries from doing business with any Iranian company which lists on the TSE. If the TSE wants to avoid the stigma attached to sanctions or designations, it could simply disassociate itself from any entity involved or controlled by the Islamic Revolutionary Guard Corps. Furthermore, it could institute some transparency to provide assurances that it accepts no money directly or indirectly from the IRGC. So why hasn’t it?