Israel Matzav: For $3 billion in annual US foreign assistance, they help Iran evade sanctions

Thursday, November 18, 2010

For $3 billion in annual US foreign assistance, they help Iran evade sanctions

If you pay taxes in the United States, this next story should outrage you. The United States spends $3 billion per year on foreign aid to prop up the un-democratic government of Egyptian President Hosni Mubarak. What does the United States get in return? Unrelenting hostility toward Israel, the Americans' closest ally in the region, and assistance to the nuclear weapons-seeking government of Iran in bypassing United Nations and other sanctions.

Egypt is expanding its financial ties with Iran through a jointly owned financial institution: the Misr Iran Development Bank. MIDB was founded in 1975, four years before Iran's Islamic revolution, and has somehow endured the tumult since. Today, the MIDB may have become a vehicle for Iran to circumvent economic sanctions with extensive help from Egypt, one of America's closest allies in the region. It is a testament to how difficult it can be for the U.S. to enforce international sanctions, even among countries that appear to be natural allies in the effort to deter Iran.

Egypt controls 59.86 percent of MIDB, split evenly between the state-owned National Investment Bank and Misr Insurance Company, which is partially owned by the state. Iran's 40.14 percent share in MIDB, worth about $80 million, is held by the Iran Foreign Investment Company. The IFIC is the investment arm of Iran's Oil Stabilization Fund, a sovereign wealth vehicle that generates profits for the Iranian government, with investments in the Middle East, Africa, South America, and beyond.

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The IFIC may now be positioning the Egyptian bank as a vehicle to circumvent international sanctions. In 2009, as the international community began to discuss ways to punish the Islamic Republic for its illicit nuclear program, the bank transferred $50 million to Iran, according to the government-controlled Tehran Times.

Then, as the U.S., European Union, and UN enacted sanctions on Iran in July of this year, the same state-owned paper reported IFIC managing director Mehdi Razavi announcing that the MIDB would open its first official branch in Iran. This enables Iran to make unfettered transfers. Egypt's cooperation implies that the two nations' economic ties are only going to deepen, despite the clear U.S. and UN desire to stop exactly these kinds of deals.

Egypt, one of America's closest allies in the Middle East and the recipient of more U.S. foreign aid than any country in the world save Israel, is certainly not planning on becoming a rogue state allied with Iran. If nothing else, the quiet nature of this economic cooperation suggests Egypt would prefer to remain in good U.S. graces. But Egypt is clearly hedging between Iran and the U.S. Egyptian President Hosni Mubarak's regime is likely concerned about growing Iranian influence in the region. Perhaps the decision makers predict that U.S. influence will wane after leaving Iraq, or perhaps they simply see an opportunity for a profitable joint venture.

Whatever motivates Egypt's deal making, the U.S. will need to address both the MIDB and the Egyptian leadership if the international sanctions regime against Iran is to remain intact.

The United States used to have a President who would bluntly tell people that you are 'with us or against us.' Some people didn't like him, but everyone respected him. Now, the US has a President who goes around bowing to World leaders (and to others) and apologizing for imaginary slights that the United States committed, which he invariably blames on his predecessor. The new cooperation between Egypt and Iran - and Egypt 'hedging its bets' are the result of the Obama administration's feckless foreign policy.

What could go wrong?

Labels: Hosni Mubarak, Iran Foreign Investment Company, Iran sanctions regime, Misr Iran Development Bank, US foreign aid