Exclusive – Will New US Sanctions Target Hezbollah’s Top Lebanese Allies?

Lebanese PM Saad Hariri meets US Secretary of State Mike Pompeo in Washington. (Dalati & Nohra)
Lebanese PM Saad Hariri meets US Secretary of State Mike Pompeo in Washington. (Dalati & Nohra)
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Exclusive – Will New US Sanctions Target Hezbollah’s Top Lebanese Allies?

Lebanese PM Saad Hariri meets US Secretary of State Mike Pompeo in Washington. (Dalati & Nohra)
Lebanese PM Saad Hariri meets US Secretary of State Mike Pompeo in Washington. (Dalati & Nohra)

“I am not the one who decides US sanctions against Hezbollah. The US administration is clear in how to handle this issue.”

This is how Lebanese Prime Minister Saad Hariri responded to all criticism against his recent visit to the United States. The criticism was mainly from Free Patriotic Movement MPs and their allies over the premier’s talks with American officials who are perceived as spearheading sanctions against Hezbollah. Most notable of those officials are Secretary of State Mike Pompeo and Assistant Secretary for Terrorist Financing in the United States Department of the Treasury Marshall Billingslea.

Former Lebanese Ambassador to Washington Antoine Chedid told Asharq Al-Awsat that Hariri’s visit was significant given the meetings he held with various officials, specifically Pompeo and senior Treasury officials and World Bank President David Malpass.

The visit was deemed a success, said Chedid, after Pompeo stressed the need to preserve the stability of Lebanon’s economic and security institutions despite his clear objectives to impose sanctions against Hezbollah. The official’s remarks reveal that Hariri “succeeded in separating the Lebanese state, its security and political institutions, and the banking sector from Hezbollah. This is no easy feat.”

The former envoy added that US sanctions against Iran and Hezbollah are being discussed on a daily basis by the Washington administration and they are not swayed by opinions or dictates.

Close allies

It is also no secret in Lebanon that new sanctions could target top allies to Hezbollah. A senior banking official told Asharq Al-Awsat that the US Treasury may sanction FPM members. He added, however that this is yet to be confirmed. He also said Billingslea has accused FPM chief and Lebanese Foreign Minister Jebran Bassil of exploiting his position to protect Hezbollah.

Moreover, the US official expressed concern that Lebanese banks may shirk their obligations to comply with the sanctions, especially those located in areas where Hezbollah wields influence.

Repercussions of sanctions

Economic researcher and strategist, Professor Jassem Ajaka that speculation has been rife about the new wave of sanctions, but it is “certain” that they will include top Lebanese officials who are Hezbollah members and their allies. They will also target businessmen, whom Washington believes hold the keys to the party’s financial dealings.

This will pave the way to two scenarios, said Ajaka.

The first sees senior politicians being targeted. An American administration official had previously said that politicians in Lebanon hold the vast majority of the country’s wealth, so in order to impose any policy change, one must slap sanctions on them. Indeed, Washington had taken a step in that direction by blacklisting earlier this year two lawmakers. Lebanon will be confronted with a major hurdle, however, when the US blacklists a minister, making it impossible for the government to work with him.

Officials in Washington themselves are conflicted over whether to take this route, said Ajaka. Sanctioning top Lebanese figures will escalate the confrontation between Beirut and Washington. It also undermines the significance the US has placed on Lebanon in its Middle East strategy. Some American officials speculate that senior Lebanese politicians are deliberately escalating their rhetoric to force Washington into a confrontation, which is why Ajaka ruled out this scenario at the moment.

The second scenario, he remarked, sees imposing sanctions on lower ranked politicians or figures who work in the shadows and who are members of Hezbollah and its allied parties. These figures control the finances of their parties. According to the American view, this strategy targets Hezbollah’s allies more than the party itself with the aim of driving a wedge between them.

The economic and financial impact will be the same in either scenario, remarked Ajaka. They will both hamper the financing of the CEDRE pledges. They may not find any financers at all if the US believes that these parties would benefit from them. Washington could choose to pressure the dollar bonds market, which in turn will lead to popular disgruntlement against these parties and consequently affect the results of the next parliamentary elections.

It appears that Lebanon is heading towards financial and economic ruin, should the US so decide, transforming it into another Iran, Syria or Venezuela.

Hariri visited the US after obtaining information that dozens of Lebanese officials will be targeted by sanctions. The premier is concerned that ministers in his cabinet may be among them, which may lead to the collapse of the government. It appears, however, that the Americans have given him “temporary” assurances that this will not take place.



Iran's Revolutionary Guards Extend Control over Tehran's Oil Exports

Iranians drive as smog obscures the skyline in Tehran, Iran, 18 December 2024. EPA/ABEDIN TAHERKENAREH
Iranians drive as smog obscures the skyline in Tehran, Iran, 18 December 2024. EPA/ABEDIN TAHERKENAREH
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Iran's Revolutionary Guards Extend Control over Tehran's Oil Exports

Iranians drive as smog obscures the skyline in Tehran, Iran, 18 December 2024. EPA/ABEDIN TAHERKENAREH
Iranians drive as smog obscures the skyline in Tehran, Iran, 18 December 2024. EPA/ABEDIN TAHERKENAREH

Iran's Revolutionary Guards have tightened their grip on the country's oil industry and control up to half the exports that generate most of Tehran's revenue and fund its proxies across the Middle East, according to Western officials, security sources and Iranian insiders.

All aspects of the oil business have come under the growing influence of the Guards, from the shadow fleet of tankers that secretively ship sanctioned crude, to logistics and the front companies selling the oil, mostly to China, according to more than a dozen people interviewed by Reuters.
The extent of the Iranian Revolutionary Guard Corps' (IRGC) control over oil exports has not previously been reported.

Despite tough Western sanctions designed to choke Iran's energy industry, reimposed by former US President Donald Trump in 2018, Iran generates more than $50 billion a year in oil revenue, by far its largest source of foreign currency and its principal connection to the global economy.

Six specialists - Western officials and security experts as well as Iranian and trading sources - said the Guards control up to 50% of Iran's oil exports, a sharp increase from about 20% three years ago. The sources declined to be identified due to the sensitivity of the matter.

Three of the estimates were based on intelligence documents about Iranian shipping while others derived their figures from monitoring shipping activity by tankers and companies linked to the IRGC. Reuters was unable to determine the exact extent of the IRGC's control.

The IRGC's growing domination of the oil industry adds to its influence in all areas of Iran's economy and also makes it harder for Western sanctions to hit home - given the Guards are already designated as a terrorist organization by Washington.

Trump's return to the White House in January, however, could mean tougher enforcement of sanctions on Iran's oil industry. The country's oil minister said Tehran is putting measures in place to deal with any restrictions, without giving details.

As part of their expansion in the industry, the Guards have muscled in on the territory of state institutions such as the National Iranian Oil Company (NIOC) and its NICO oil trading subsidiary, according to four of the sources.

When sanctions hit Iran's oil exports years ago, the people running NIOC and the wider industry were specialized in oil rather than how to evade sanctions, added Richard Nephew, a former deputy special envoy for Iran at the US State Department.

"The IRGC guys were much, much better at smuggling, just terrible at oil field management, so they began to get a larger control of oil exports," said Nephew, who is now a researcher at Columbia University.
The IRGC, NIOC, NICO and Iran's foreign ministry did not respond to requests for comment.
RISK APPETITE
The IRGC is a powerful political, military and economic force with close ties to Supreme Leader Ali Khamenei.
The Guards exert influence in the Middle East through their overseas operations arm, the Quds Force, by providing money, weapons, technology and training to allies Hezbollah in Lebanon, Hamas in Gaza, Yemen's Houthis and militias in Iraq.
While Israel has killed a number of senior IRGC commanders over the past year, the oil specialists in its ranks have been able to continue their operations, two Western and two Iranian sources said.
The Iranian government began allotting oil, instead of cash, to the IRGC and Quds Force around 2013, according to Nephew.
The government was under budgetary pressure then because it was struggling to export oil due to Western sanctions imposed over Iran's nuclear program.
The IRGC proved adept at finding ways to sell oil even under sanctions pressure, said Nephew, who was actively involved in tracking Iranian oil activities then.
Iranian oil revenues hit $53 billion in 2023 compared with $54 billion in 2022, $37 billion in 2021 and $16 billion in 2020, according to estimates from the US government's Energy Information Administration.
This year, Tehran's oil output has topped 3.3 million barrels per day, the highest since 2018, according to OPEC figures, despite the Western sanctions.
China is Iran's biggest buyer of oil, with most going to independent refineries, and the IRGC has created front companies to facilitate trade with buyers there, all the sources said.
Oil export revenues are split roughly evenly between the IRGC and NICO, said one source involved in Iranian oil sales to China. The IRGC sells oil at a $1-$2 barrel discount to prices offered by NICO because buyers take a bigger risk buying from the Guards, the person said.
"It depends on a buyer's risk appetite, the higher ones will go for the IRGC, which the US designates as a terrorist group."
Two Western sources estimated that the IRGC offered an even bigger discount, saying it was $5 per barrel on average but could be as much as $8.
The oil is allocated directly by the government to the IRGC and Quds Force. It's then up to them to market and ship the oil - and work out a mechanism for disbursing the revenue, according to the sources and intelligence documents seen by Reuters.
NIOC gets a separate allocation.
CHINESE FRONT
One of the front companies used is China-based Haokun. Operated by former Chinese military officials, it remains an active conduit for IRGC oil sales into China, despite Washington hitting it with sanctions in 2022, two of the sources said.
The US Treasury said China Haokun Energy had bought millions of barrels of oil from the IRGC-Quds Force and was sanctioned for having "materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the IRGC-QF".
In one oil transaction dated March 16, 2021 involving Haokun and parties including Turkish company Baslam Nakliyat - which is under US sanctions for its trading links to the IRGC - a payment was processed via US bank JP Morgan and Turkish lender Vakif Katilim, according to the intelligence documents.
The transaction took place before the companies were sanctioned. Reuters has no indication JP Morgan or Vakif Katilim were aware of the Iranian connection - highlighting the risks of companies getting inadvertently caught up in the shadow trade.
JP Morgan declined to comment. Vakif Katilim said in a statement: "Our bank performs its activities within the framework of national and international banking rules."
Haokun declined to comment. Baslam did not respond to a request for comment.
'GHOST FLEET'
Quds Force commander Qassem Soleimani, who was killed in a US strike in Baghdad in 2020, had set up a clandestine headquarters and inaugurated that year for the unit's oil smuggling activities, initially staffed by former oil minister Rostam Ghasemi, according to the intelligence documents.
Reuters could not determine where all the oil money funneled through the IRGC goes. The IRGC headquarters and day-to-day operations has an annual budget of around $1 billion, according to assessments from two security sources tracking IRGC activities.
They estimated that the IRGC budget for Hezbollah was another $700 million a year.
"Exact figures remain undisclosed, as Hezbollah conceals the funds it receives. However, estimates are that its annual budget is approximately $700 million to $1 billion. Around 70%-80% of this funding comes directly from Iran," Shlomit Wagman, former director general of Israel’s Money Laundering and Terrorism Financing Prohibition Authority, said separately.
Hezbollah did not respond to a request for comment.
The former Secretary General of Hezbollah, Hassan Nasrallah, who was killed in an Israeli airstrike, said Iran provided the group's budget, including for salaries and weapons.
Iran's main tanker operator NITC, which previously played a key role in exports, also now provides services to the IRGC.
It executes ship-to-ship transfers of Iranian oil onto vessels operated by the IRGC to ship crude into China, according to sources and ship-tracking data. Such transfers are common practice to help disguise the origin of the oil tankers carry.
NITC did not respond to a request for comment.
In August, Israel's National Bureau for Counter Terror Financing, part of the country's defense ministry, imposed sanctions on 18 tankers it said were involved in transporting oil belonging to the Quds Force.
In October, the US Treasury slapped sanctions on 17 separate tankers it said formed part of Iran's "ghost fleet", outside of NITC vessels. It followed up with sanctions on a further 18 tankers on Dec. 3.