The US Treasury Department building in Washington.. (AFP)

July 18, 2019

A group of 35 policy experts and former U.S. officials – including two former senators, four former officials with rank of ambassador, and a former Attorney General – asks the Treasury Department to examine whether Iran’s counterpart to a new European trade vehicle formed to circumvent U.S. sanctions on Iran should be subject to U.S sanctions.

In a letter delivered to Treasury Secretary Steven Mnuchin Monday, the signatories detail the ownership connections between Iran’s Special Trade and Financial Instrument (STFI) and Iranian entities included on the Specially Designated Nationals (SDN) list.

“We are writing to respectfully request that you examine whether Iran’s counterpart to a new European trade vehicle formed to evade U.S. sanctions on Iran meets the criteria either for designation for being owned or controlled by designated Iranian entities subject to U.S sanctions, or for designation under Executive Order 13846. We believe it does,” the letter states.

The letter comes as policy makers and experts across the political spectrum are concerned about Iran’s exploitation of the global financial system to fund its malign activities ranging from nuclear proliferation to terrorism to systemic human rights abuses. “Designating STFI would send an important enforcement message that actors cannot evade U.S. financial sanctions,” said FDD chief executive Mark Dubowitz, one of the signatories of the letter.

The STFI is the counterpart to Europe’s Instrument for the Support of Trade Exchanges (INSTEX). Germany, France, and the UK established INSTEX to avoid U.S. sanctions by enabling trade with Iran without using the U.S. dollar or going through U.S. banks.

The largest shareholder of Iran’s STFI is Faradis Gostar Kish, which is linked to Iran’s National Informatics Service Corporation, which is owned by four major Iranian banks on Treasury’s SDN List and subject to secondary sanctions. The four banks are the Central Bank of Iran (CBI), with 48.5 percent of the shares; Bank Melli, with 21.75 percent; Bank Saderat, with 21 percent; and Bank of Industry and Mine (BIM), with 4.75 percent.

“Since Faradis Gostar Kish is fully owned by sanctioned entities, it too should be designated as an SDN,” the letter states.

The remaining STFI shares are equally divided among seven Iranian banks, all of which are on the SDN List: Karafarin, Refah, Keshavrazi, Eghtesad Novin, Pasargad, Saman, and Middle East. Finally, the STFI has four board members, three of whom represent firms controlled by the government of Iran. In other words, the government dominates the board.

“Given that 100 percent of STFI’s shares are owned by persons specifically designated by the Treasury Department or by persons who are Specially Designated Nationals by operation of law, we respectfully request that you consider the designation of the STFI for being owned or controlled by designated persons,” the letter states.

Among the signatories are former Senators Joseph Lieberman and Kelly Ayotte; former Senior Advisor to the Director of National Intelligence Amb. Joseph DeTrani; former Undersecretary of Defense for Policy Amb. Eric Edelman; former Under Secretary of State for Arms Control and International Security Amb. Robert Joseph; former Under Secretary of State for Global Affairs Amb. Paula Dobriansky; former U.S. Attorney General Michael Mukasey; former Assistant Secretary of Defense Mary Beth Long; former Chief Counsel and Senior Advisor for the Senate Foreign Relations Committee Jamil Jaffer; former Chair of the Homeland Security Council Frances F. Townsend; former Senior Advisor to the U.S. Special Operations Command for Counter Threat Finance and Counter Network Operations David Asher; and former clandestine operations officer and former Treasury Department Special Agent John Cassara.

The full text of the letter and the list of signatories is included immediately below:

July 15, 2019

The Honorable Steven Mnuchin
United States Secretary of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Mr. Secretary:

We are writing to respectfully request that you examine whether Iran’s counterpart to a new European trade vehicle formed to evade U.S. sanctions on Iran meets the criteria either for designation for being owned or controlled by designated Iranian entities subject to U.S sanctions, or for designation under Executive Order 13846. We believe it does.

Set up by Germany, France, and the UK, the new trade vehicle, formally known as the Instrument for the Support of Trade Exchanges (INSTEX), was established to avoid U.S. sanctions by enabling trade without using the U.S. dollar or going through U.S. banks. Iran’s counterpart, the Special Trade and Finance Instrument (STFI), was registered in April in Tehran’s neighborhood of Davudieh, near the headquarters of the Central Bank of Iran (CBI). According to the French Ministry of Economy and Finance, the STFI has eight shareholders.

The largest shareholder is Faradis Gostar Kish, an informatics firm, with 23 percent of STFI shares. Faradis Gostar Kish is a subsidiary of the Informatics Service Corporation, which itself is a subsidiary of the National Informatics Corporation. The National Informatics Corporation is owned by four major Iranian banks, all of which are on Treasury’s Specially Designated Nationals (SDN) List and subject to secondary sanctions. The four banks are the CBI, with 48.5 percent of the shares; Bank Melli, with 21.75 percent; Bank Saderat, with 21 percent; and Bank of Industry and Mine (BIM), with 4.75 percent. Since Faradis Gostar Kish is fully owned by sanctioned entities, it too should be designated as an SDN.

The remaining 77 percent of STFI shares are equally divided among seven Iranian banks, all of which are on the SDN List: Karafarin, Refah, Keshavrazi, Eghtesad Novin, Pasargad, Saman, and Middle East. Finally, the STFI has four board members, three of whom represent firms controlled by the government of Iran. In other words, the government dominates the board.

Given that 100 percent of STFI’s shares are owned by persons specifically designated by the Treasury Department or by persons who are SDNs by operation of law, we respectfully request that you consider the designation of the STFI for being owned or controlled by designated persons.

Further, Executive Order 13846 provides the Secretary of the Treasury with the authority to designate any person who has materially assisted or provided certain support to any Iranian person included on the SDN List. Under this standard, STFI would be ripe for designation for providing such support to designated Iranian entities, including its shareholders.

We respectfully request that you consider the designation of the STFI based on its ownership structure and for materially assisting or providing support to Iranian SDNs, and apply secondary sanctions as appropriate.

Thank you for your time and attention to this matter, and we look forward to receiving your response.

Sincerely,

David Asher | Sen. Kelly Ayotte | Josh Block | John Cassara | Toby Dershowitz | Amb. Joseph DeTrani | Amb. Paula Dobriansky | Michael Doran | Mark Dubowitz | Amb. Eric Edelman | Reuel Marc Gerecht | Saeed Ghasseminejad | Lawrence J. Haas | Jamil Jaffer | Amb. Robert Joseph | Orde Kittrie | Dr. Matthew Kroenig | Sen. Joseph Lieberman | Valerie Lincy | Mary Beth Long | Michael Makovsky | Clifford D. May | Scott Modell | Judge Michael Mukasey | Clarine Nardi Riddle | John Podhoretz | Michael Pregent | James Rickards | David Rivkin | Michael Rubin | Jonathan Schanzer | Ray Takeyh | Behnam Ben Taleblu | Frances F. Townsend | Kenneth R. Weinstein

Foundation for Defense of Democracies

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Track PersiaTrack Persia is a Platform run by dedicated analysts who spend much of their time researching the Middle East, in due process we fall upon many indications of growing expansionary ambitions on the part of Iran in the MENA region and the wider Islamic world. These ambitions commonly increase tensions and undermine stability.