As Iran sinks deeper into crisis, the ayatollahs are desperately seeking to strengthen ally-ships wherever they can.
Iran’s economic situation has gone from bad to worse with no end in sight. Since the onset of sanctions, re-imposed by the Trump administration in 2018, the county’s most vital industries, especially its cash-generating energy sector, have taken unprecedented hits, falling to half the production levels of pre-sanction years. At the monetary level, the Iranian Rial has lost about half of its value over the past two years, making the acquisition of vital necessities nearly impossible for much of the population.
Unemployment surged to an estimated six million last year, a number constituting nearly a quarter of the country’s workforce. Sharpening economic woes has been the fallout from the COVID pandemic. The health crisis quickly spiraled out of control by mid 2020 due to government mismanagement, inept health policies, and widespread disinformation.
On this backdrop, it is hardly surprising Iran is going to all possible lengths to circumvent sanctions, create avenues for moving capital, and solidify commercial relations. A recent report has revealed the latest culprit in facilitating Iran’s sanctions skirting.
According to initial media coverage, a former congressman from Indiana, Dan Barton, has raised the alarm of the increased financial activity taking place between the Islamic Republic and its northern neighbor, Armenia.
Barton has long had an interest in the Caucasus and its importance for American policy. He was a strong proponent of US diplomacy efforts in the Nagorno-Karabakh crisis in the early 2000s and remained strongly committed to monitoring the area and bringing attention to its vital geopolitical issues.
In his most recent comments on the region, Barton said to the growing cooperation between the Armenian government and Iran on what appears to be almost certainly money laundering activities and other shadowy business dealings. “The situation is very dangerous,” said Barton, highlighting the banking access Armenia has granted Iran, an asset the ayatollahs desperately need to circumvent international restrictions. “Armenia has assured the West that its banking sector is under increased control and Iran will not be able to launder money through Armenian banks. However, according to American officials, Iran has free access to Armenian banks operating in Nagorno-Karabakh,” said
Iran-Armenia cooperation on these issues is far from unprecedented. Back in 2012, the international media first reported the efforts of Iranian officials to gain a foothold in the Armenian financial system. At the time, Iran was already experiencing rising isolation as both American and European sanctions began to clamp down on its ability to do business and engage internationally. Both the US and EU implemented tough restrictions, sanctioning dozens of Iranian banks and other firms, making it increasingly difficult for Tehran to conduct business in dollars and euros.
As more and more Western banks rejected Iranian accounts and cash transfers Iran began looking for other, less conventional options. Armenia already had close trade ties to Iran and was a major customer for Tehran’s energy industry. The country also has strong commercial access to the EU; both of these factors made Armenia an excellent option to assist Tehran in obfuscating payments to and from foreign clients, deceiving Western intelligence agencies trying to prevent it from expanding its nuclear and missile programs.
Following the Trump administration’s decision to take a hardline stance against Iran, Armenia was forced to back off on some of its commitments to its southern neighbor. American officials made their expectations vis-à-vis Yerevan very clear. A 2019 official communique by the American Embassy in Armenia stated “We have made it clear to the Armenian government and the private sector that we expect Armenia to live up to its responsibilities as a member of the international community and to halt connections with Iran.” In the span of a few months, Iranians were completely shut out of the Armenian system, with even private individuals no longer able to hold bank accounts in the country.
However, over the recent period, especially since the new Biden administration came to power, Armenia has begun a strategic rapprochement with Iran, a process bolstered with help of other regional stakeholders like Russia. The mutual interests of these countries are now rapidly growing, with cooperative talks on energy, transportation, and other critical infrastructure, well underway. This poses a threat to Western interests in the Middle East by allowing Iran to avoid restrictions to its economy, at a time when the US is desperately trying to keep Iran at the negotiating table.
Armenia has been in the sites of Western sanctions prior to its dealings with the Iranian regime, and its recent decision to increase cooperation with the Islamic Republic could soon revive such sanctions. As Tehran and Yerevan edge closer to their old collaborations, it is time for the US and its allies to wake up to this threat.
