Iran uses Hizbullah agents to circumvent sanctions

By Nohad Topalian and Junaid Salman in Beirut


People walk past a branch of Jammal Trust Bank in Beirut's Hamra street on August 30th, 2019, a day after the US announced sanctions in Lebanon aimed at shutting down financing to Iran-backed Hizbullah. Powerful US financial sanctions were imposed on Jammal Trust Bank, which was accused of acting as a key financial institution for Hizbullah. [Anwar Amro/AFP]

Iran has been using a network of Hizbullah agents in Lebanon to circumvent US sanctions through various means, crippling Lebanon's economy and exposing its banking sector to sanctions, economists and banking experts warned.

Lebanon's economic crisis "is the result of years of political corruption and the existence of a state within the Lebanese state", a financial analyst and economist based in Beirut told Al-Mashareq, on condition of anonymity.

US sanctions "aim above all to rein in Hizbullah, whose policy is linked to Iran's policy and serves its expansionist objectives in the region", he said.

Iran has been using the Lebanese banking sector "as a means to circumvent the US sanctions imposed on it, through Hizbullah", the economist said.


Lebanese army block supporters of Hizbullah and Amal as they shout slogans against protestors in central Beirut, on June 6th. Protestors poured into the streets of the Lebanese capital to decry the collapse of the economy, as clashes erupted between supporters and opponents of Iran-backed Hizbullah. [Anwar Amro/AFP]

The party does not use the Lebanese banking sector directly, he explained, "but rather has its allies perform banking transactions to fulfill Iranian requests".

This is done by "withdrawing dollars in cash and smuggling them to Syria, and from there to Iraq and Iran", as well as through the import of raw materials such as fuel, he said.

"Lebanese companies imported more fuel within a six-month period in 2019 than they did in all of 2018, which reveals the magnitude of smuggling to Syria and the circumvention of the US sanctions imposed on the Syrian regime," he said.

Hizbullah has compiled a dossier of Lebanese bank employees, in order to blackmail them into becoming collaborators or punish them by denying them jobs in the future, the economist said.

Additionally, he said, some bank employees who are Hizbullah sympathisers provide special services to advance Iran's interests including "opening accounts with fake names, or concealing the name of the owner".

He accused these employees of converting Lebanese pounds into dollars and withdrawing them from the account, extending large loans, and issuing cashier's checks instead of cash to conceal the source.

"The banks' compliance departments can reveal these facts," he said. "But their failure to do so points to collusion on the part of the banks' compliance managers."

'Parallel banking system'

Tehran found in Hizbullah "a window through which to enter the Lebanese banking market to withdraw dollars", Arab Economic News editor-in-chief Violette Ghazal al-Balaa told Al-Mashareq.

Hizbullah has been able to maintain its financial activity in Lebanon "through a parallel banking system that continues to deal with the party and executes its requests by smuggling dollars through illegal crossings to Syria", she said.

This parallel system, set up by Hizbullah to supply Iran with dollars from Lebanon, involves "a small circle of banks" that are close to the party, she said.

This network "was rocked by the outing of Jammal Trust Bank for violating the US sanctions and its closure following its inclusion on the sanctions list of the US Treasury's Office of Foreign Assets Control", she said.

This jolted some banks in the network, al-Balaa said, so Hizbullah then "turned to using organised networks that deal in cash".

This new cash network included outfits referred to as the "Dahiya currency exchangers", in reference to Beirut's southern suburb, a Hizbullah stronghold.

"Some manipulated the price of the dollar and engaged in profitable speculation, while networks of individuals withdrew dollars from ATM machines, totaling an estimated $1 billion," she said.

"That money was then smuggled to either Syria or Turkey, and from there to Iran, thus causing the dollar liquidity crisis in Lebanese markets."

When this got more difficult to pull off, as the dollar crisis deepened, the party prevailed on businessmen in its orbit to withdraw money from Lebanese banks and deposit it in Iraqi banks that work for Iran, she said.

"Those withdrawals amounted to an estimated $6 billion."

Lebanese state suffers

Additionally, al-Balaa said, there are reports that Hizbullah-linked "Lebanese businessmen and companies entered into contracts to import raw materials and consumer goods under the pretext of meeting the needs of the local market".

These were later determined to exceed domestic consumption capacity many times over, she said, and are understood to be another method to smuggle dollars from Lebanon to Iran.

"The Lebanese state, especially the banking sector, is suffering today as a result of the sanctions imposed internationally on Hizbullah," former Lebanese Minister of Economy and Trade Alain Hakim told Al-Mashareq.

Hizbullah's "continuous disparagement of the banking sector" is because the sector serves as a "barrier against its activities", Hakim said.

This is why the party has made a point of "pinning the blame for the economic crisis in Lebanon on the banks", he said.

Lebanon is paying a high price for Hizbullah's activities internally and in Syria, and for its subservience to Iran, Al-Joumhouriya economic editor Tony Farah told Al-Mashareq.

The party's hegemony over the Lebanese state has contributed to "the wrecking of the national economy and Lebanon's alienation from its Arab and international friends, which put it in the predicament it finds itself today", he said.

Hizbullah is trying to exploit the banking system, but will fail, he added, due to "stringent monitoring by the banks", and the party's own concern about "US and international surveillance of its activities within the Lebanese banking system".

For these reasons, "Hizbullah deals in cash", Farah said.

"In the cases where the party was able to exploit the banking system to process its transactions, the banking system paid the price by seeing a number of banks shut down," he said.

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