Miami Herald: Iran’s stealth financial partners in Latin America | by Otto J. Reich and Ezequiel Vázquez Ger
While the United States and NATO keep watch over Iran’s activities at its nuclear facilities and the Strait of Hormuz, the Islamic Republic has been outflanking the West with the help of anti-American regimes in Latin America.
As a response to Iran’s continued efforts to build an atomic bomb, President Obama recently announced new measures freezing Iranian assets in this country. At the same time, James Clapper, the director of national intelligence, publicly warned of a possible Iranian attack on U.S. soil.
Iranian presence in several countries of the hemisphere has been documented, but many activities remain a mystery. One unconventional mechanism developed by Iran, with the help of Venezuela and Ecuador, is a way to bypass the economic sanctions, as Iran may be using a parallel financial system operated by members of ALBA countries — the Cuba-Venezuela-Bolivia-Ecuador-Nicaragua axis — to elude financial sanctions by the West and engage in money-laundering.
According to confidential bank reports, in November 2008 the Central Bank of Ecuador authorized the establishment of “a mechanism for deposits and payments to facilitate foreign trade” with Iran. In closed sessions, the Central Bank of Ecuador approved a system allowing the confirmation and payment of letters of credit for foreign trade transactions between it, the Export Development Bank of Iran (EDBI) and the International Development Bank in Caracas (BID).
By that time, both the EBDI and the BID had been already added by the U.S. Treasury Department Office of Foreign Assets Controls (OFAC) to the lists of Specially Designated Nationals as companies that do business with Iran’s defense establishment. The documents show that the Central Bank of Ecuador knew about and decided to ignore this fact when signing the agreements with Iran and Venezuela. Mere days after the signing of the agreement, EDBI extended credit facilities to the BCE for $40 million for “importation of Iranian goods and services to Ecuador.”
Parallel to the signing of the agreements, the ALBA countries created a “Unique System of Regional Compensation” (SUCRE, in its Spanish acronym). The SUCRE is a virtual currency unit adopted by ALBA nations in order to replace the dollar in regional trade. The SUCRE’s existence makes it possible for these countries’ central banks to offset their accounts directly, without making use of correspondent banks abroad. Consequently, ALBA nations can bypass foreign banks’ supervision when they wish to hide certain international transactions. Therefore, the only assessors of the legality of these transactions are the very same suspect central banks that use the SUCRE for their foreign transactions.
Moreover, last October the Constitutional Court of Ecuador approved a trade agreement with Iran with the aim of facilitating trade and strengthening commercial relations between both countries. Article 11 of the agreement establishes that: “the payments between the Contracting Parties shall be made in freely convertible currencies and in accordance with international banking rules and practices, unless the central banks of the contracting parties agree otherwise in accordance with its laws and regulations.” That means that the agreement itself opens the possibility for payment methods that might not be in accordance with international banking rules and practices.
The fact that Ecuador uses the U.S dollar as its currency means that once the money gets into the country it is automatically injected into the economy. Ecuador’s dollarization plus the SUCRE mechanism together represents a scheme that facilitates money-laundering operations in the region. Considering that Iran and Venezuela support terrorism, that high Venezuelan officials have been designated as “Drug Kingpins” by the United States, that Ecuador has become a haven for organized crime, there is reason to believe that those countries are using Ecuador to launder money from illicit activities such as narcotics trafficking, kidnapping and terrorism.
Rep. Ileana Ros-Lehtinen, chair of the House Foreign Affairs panel, said recently: “The Iranian regime has formed alliances with Chávez, Ortega, Castro, and Correa that many believe can destabilize the hemisphere. These alliances can pose an immediate threat by giving Iran a platform in the region to carry out attacks against the United States, our interests, and allies.”
The evidence indicates that Ros-Lehtinen was not exaggerating.
Otto J. Reich is president of the consulting firm Otto Reich & Associates LLC. Ezequiel Vázquez Ger is an associate at the firm.