How Iran Could Snub Sanctions in the Americas

Jan 11, 2012

By Douglas Farah

One of the overlooked aspects of Iran’s relations with Venezuela and like-minded “Bolivarian” governments in Latin America is the advantages they offer to blunt the impact of international sanctions. This is particularly true where Iran has set up numerous false-flag banks to facilitate trade, but also to acquire sorely needed products. It is likely to be among the main topics of discussion on Ahmadinejad’s current tour.

There are several examples of Iran’s attempts to by-pass financial sanctions using pass-throughs to the banking systems in Latin America. The Banco International de Desarrollo, opened in Venezuela in 2008, is a wholly owned subsidiary of Sadarat Bank, now under international sanctions for aiding Iran’s nuclear program. The Export Development Bank of Iran (EDBI), also under sanctions for supporting Iran’s Qods Force and nuclear program, in 2009 offered to deposit $120 million in Ecuador’s central bank to aid in expanding trade, which boomed in 2008 from less than $3 million a year to $200 million, then declined to $30 million in 2010.  That year, President Correa said his country wouldn’t accept money from sanctioned Iranian banks.  Yet, Iran may be pursuing alternative arrangements for moving sanctioned money to the world financial system.

Working in tandem with the sanctioned banks is the Fondo Binacional Venezuela-Iran (FBVI), established in May 2008 with an initial capital of $1.2 billion. Each country provided half of the initial capital. This institution is directly managed by Ricardo Menéndez, the minister of Science, Technology and Industry, which is responsible for Venezuela's nascent nuclear program. It is an especially opaque institution, and none of its expenditures pass through Venezuela’s National Assembly or any other outside body for approval or auditing.

Finally, a new shopping mecca for Iran and its Venezuelan allies may be Panama, with its bustling free trade zone, dollarized economy, and lax regulation. With Venezuela, Ecuador, Nicaragua and Bolivia all reeling from economic crises and shortages of goods, Panama offers a thriving free market hub for the elites of the Bolivarian revolutionary axis to move goods, and, in the process, help the Iranian regime to survive.

Douglas Farah is a CSIS Americas Program adjunct fellow and senior fellow at the Alexandria, Virginia-based International Assessment and Strategy Center.