Sunday, March 20, 2016

Sanctions Eased, Iran Sends Black Market a Strategic Warning

By THOMAS ERDBRINK, NYT, MARCH 19, 2016

TEHRAN — The pastry shop, tucked away in an affluent west Tehran neighborhood and selling Disney-themed cakes and party hats, is not particularly notable except for one thing: It is owned and operated by Iran’s powerful Ministry of Petroleum.

The shop — along with luxury cars, an airline and dozens of other pricey assets — was seized by the government from Babak Zanjani, a 43-year-old billionaire businessman who for over a decade was a major figure in Iran’s sanctions-busting network and this month received a death sentence for his dealings.

Mr. Zanjani’s arrest in 2013, after President Hassan Rouhani came to power, was portrayed as a symbolic break with the high levels of corruption that defined the years under the presidency of Mahmoud Ahmadinejad, from 2005 to 2013. His conviction, by a lower court, was an attempt to show the Iranian public that, with the lifting of sanctions in January, the days of the sanctions-skirting middlemen are over.

Reconnecting Iran to the world economy is a top priority for President Rouhani. But to fully reconnect, Iran needs to dismantle the network of thousands of intermediaries that was devised to get around the sanctions. The problem, economists and insiders say, is that enough sanctions remain in place that the Iranian economy still cannot function without the network.

The government has taken some steps. The Ministry of Petroleum is working on a new, more competitive model for its oil contracts, and the Parliament signed a bill to fight money laundering, an important step toward more financial transparency.

(More here.)

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