Iran’s illicit activities and the Sanctions against it
Iran is no stranger to sanctions and has been the subject of many trade and financial restrictions from as far back as 1979. The reason behind these sanctions is Iran’s open show of support for terrorist activities, their illicit development of nuclear weapons, and the rampant money laundering and corruption prevalent in the country.
Some of the more serious sanctions that Iran is subject to are:
The United States has placed many sanctions on Iran to date, including banning all weapon sales and military aid to the country.
The relationship between Iran and the European Union has been tense due to Iran’s various nuclear activities. Though Iran claims that it conducts nuclear experiments to find alternatives for energy and power, its claims are treated with suspicion and are most likely a cover-up for the development of military weapons.
In response to Iran being a potential nuclear threat, the EU placed an embargo on all oil exports from Iran and restricted trade on commodities, energy, and even financial services between Iran and EU countries. Iran is known for its oil and gas sectors, hence most sanctioning counties placed restrictions that would hurt the country
The financial communication platform SWIFT removed all Iranian banks from its network due to breaching existing European Union sanctions.
The Financial Action Task Force (FATF) also placed Iran on its blacklist due to the extensive money laundering operations taking place in the country and the government’s negligence in taking steps to solve the issue.
The UN also placed an arms embargo on the country, which prevented them from importing any foreign military equipment. However, this expired in 2020.
Many other countries have followed suit and placed their own sanctions on Iran, with most of them being unhappy with the country’s unwillingness to clearly state the purpose behind their extensive nuclear activities.
The slow downfall of Iran’s economy
Iran’s economy has taken a serious hit due to the heavy-hitting sanctions placed on it by the US and EU. Asides from the restrictions placed on trading industrial metals and oil, which are one of Iran’s most valued natural resources, the US also banned Iran from collecting the money earnt from the sale of energy, which is collecting dust in banks all over the world. These sanctions have caused Iran’s economy to slowly crumble, with inflation increasing day by day and causing distress to the Iranian government and citizens.
Iran initially agreed to pull back on its nuclear activities as part of a 2015 agreement (the Joint Comprehensive Plan of Action) because of pressure from world superpowers like the EU, the UN, and the US. However, former US president Donald Trump pulled out of the JCPOA, causing International havoc and causing Iran to retaliate by resuming its nuclear activities in full swing. Current President Joe Biden has called for revisiting the 2015 deal, but only if Iran agrees to comply with restrictions on its nuclear activities once again. Though talks are in place, the two countries are still yet to reach a final agreement on the matter.
How is Iran using cryptocurrency to bypass these Sanctions?
However, it seems that the Iranian government has found a way to circumvent US sanctions and engage in trade with the help of none other than cryptocurrency. Iran’s Trade Minister, Alireza Peyman Pak recently tweeted about the success of Iran’s first International transaction made using the virtual currency, which amounted to $10 million.
The use of cryptocurrency aided Iran in making large transactions by trading around the established dollar-centric system, and also trade with similarly sanctioned countries like North Korea and Russia in the process.
Though Iran is still new to the cryptocurrency game and relies on older methods to conduct foreign trade, it is home to around 4.5% of the world’s Bitcoin mining activities, thanks to its importance in the energy sector- resulting in cheap electricity.
Though cryptocurrency isn’t seen as the best way to make large transactions due to its volatility and constant change in value, the success of Iran’s first import using cryptocurrency may help spell a new future for its economy and help the government slowly rebuild the country’s financial stability. However, it will also result in the country collecting more money to fund its nuclear activities, which could become an international level threat and increase hostility between Iran and the rest of the world.
Many countries are slowly adapting to cryptocurrency and making changes to their policies to accommodate it as legal tender and comply with AML and KYC rules. Cryptocurrency is slowly taking over the world and becoming a part of daily life rather than just being seen as an investment opportunity or a get-rich-quick scheme. However, the volatility and enhanced anonymity aspects of cryptocurrency are still a matter of concern, and many strides are yet to be made before cryptocurrency can completely replace fiat money and other legal tenders as a safe and reliable form of currency.
Conclusion
Due to its hyper-focus on its nuclear program, Iran has become the target of many sanctions by countries who fear that it may use it to disrupt International peace. Though Iran insists that its nuclear program aims to create cleaner and sustainable energy to supplement the country’s already energy-rich economy, tensions are on the rise as whispers of the development of devastating nuclear weapons continue to float.
Major sanctions on Iran’s most important sanctions i.e. oil and gas have left its economy reeling, and have caused financial distress to its financial sectors and ultimately its citizens. Caught in a bind, the Iranian government recently made its first cross-border transaction using cryptocurrency, which bypassed sanctions related to dollar-centric trade.
Though using cryptocurrency is an extremely unconventional method of making large transactions, money launderers and other illicit actors are known to use it to cover up their tracks and escape detection from law enforcement. Iran seems to be taking a similar route, and its success with the $10 million import order could create a new future for its economy. However, it could also spell trouble for the rest of the world, especially for the sanctioning entities as it would inadvertently help Iran feed its nuclear program and conduct the very activities because of which it was sanctioned in the first place.
