Iranian President Raisi expresses skepticism over FATF membership

Iranian President Ebrahim Raisi (Raeesi) on Monday criticized the previous administration for insisting on Iran joining the Financial Action Task Force (FATF). In a speech to the families of those killed in the Iran-Iraq war (1980-1988), he suggested that his government might prefer to focus on relations with “neighboring and friendly countries”, presumably including China. and Russia.

Iran has been on the FATF’s blacklist, along with North Korea, since February 2018 for failing to pass legislation introducing transparency measures designed to combat money laundering, corruption and the financing of ” terrorism”. FATF members – which house most of the world’s financial centers – are required to undertake increased diligence and countermeasures against blacklisted states.

Many analysts, politicians and former Iranian government officials argue that failure to join the FATF would be detrimental to economic relations with the world, including Russia and China, as foreign banks are said to always be wary of transactions with the FATF. Iran.

Hard-line supporters backing Supreme Leader Ali Khamenei and the Revolutionary Guards say Iran should “look east” and forge closer ties with China and Russia as a counterweight to the United States and trade with these countries, avoiding dollar transactions as much as possible.

As the dollar amount of the World Central Bank’s reserves fell from 71% in 1999 to less than 60% at the end of 2020, according to the International Monetary Fund, the use of the dollar in Russian-Chinese trade has increased. from 90% in 2015 to 46%. early 2020.

However, the FATF is a multilateral organization and whether or not a country trades in US dollars, its financial transparency rules still apply. This leaves Iran the ability to trade Chinese or Russian currencies or enter into barter deals. This would deprive the country of hard currency, which it needs to invest in its economy to remain competitive and less dependent on oil exports.

SCO: non- $ trade expansion

Raisi pointed to the Shanghai Cooperation Organization, which includes Russia, China and India. Iran’s full membership was approved last week. The SCO aims to develop bilateral non-dollar-denominated trade and investment, and plans to issue bonds in national currencies.

“Some people had conditioned vaccine imports and even joined the Shanghai Cooperation Organization (SCO) for FATF approval,” Raisi said in his speech. Legislation passed two years ago by a predominantly reformist parliament was rejected by the watchdog of the Council of Guardians and languished in the Council for expediency, which arbitrates in disputes between state bodies.

Raisi said the acceleration of vaccine imports since taking office in August and membership in the SCO both resulted from the awareness of “neighbors and friendly countries” that Iran was no longer. “focused on the West”. Critics responded that this means Russia and China are using the Covid crisis as a tool to put pressure on Iran.

The previous government of President Hassan Rouhani argued that being blacklisted by the FATF hampered efforts to import Covid vaccines, including those distributed through the World Organization’s Covax program health (WHO).

China: main trading partner

Critics of FATF membership have also argued that membership would hamper Iran’s ties with regional allies that the US and Europe have declared “terrorists,” including Lebanese Hezbollah and groups. Palestinian activists. More than 40 principlist deputies signed a letter on April 6 calling on the government, parliament and the Council of Opportunity to make Iran’s membership in the FATF conditional on the lifting of all US sanctions.

Economist Kamal Tayyebi told the reformist Shargh newspaper on Tuesday that without FATF membership, Iran would not get much from SCO membership. “We shouldn’t expect Chinese companies to bypass [US] sanctions in the name of cooperation with Iran now that Iran has become a member of the SCO, “he said.

China, a full member of the FATF, is deemed compliant with seven of the organization’s 40 recommendations on money laundering and broadly compliant with 18.

Hossein Marashi, spokesman for the centrist Kargozaran (“Construction Executives”) party in July told Eghtesad News that Raisi’s government needed an agreement on the nuclear issue and approval for membership of the FATF to increase economic growth to 5% and reduce inflation.

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