Thursday, May 7, 2009

Banking 101 with Hugo Chavez and Mahmoud Ahmadinejad.

Banking 101 with Hugo Chavez and Mahmoud Ahmadinejad.

By Nicholas Hanlon*

The leaders of Iran and Venezuela have created an impressive network of trade and international influence with which they openly oppose the United States.  Whether the funding goes to Iran’s nuclear weapons program, Hezbollah, the purchase of Latin American politicians, or the further consolidation of Chavez’s power at home, this mobilization of strategic advantage has reached a global status in international finance.  The anti-free-trade bloc, known as ALBA, and the new oil consortiums with Russia and Iran are symptomatic of a rising alternative economic system where there are no checks on tyranny.  Now, in the same month when the U.S. Treasury named six New York based Iranian front companies who move money for the proliferation of sanctioned weapons technology to Iran’s nuclear program, Venezuela and Iran have inaugurated a joint bank to fund development projects.  These projects benefit Iran and Venezuela as they jockey petrol dollars and, if needed, subsidize them with profits from organized crime, cocaine traffic, and other forms of illicit trade all while oppressing civil liberties.  Hugo Chavez hopes to create similar joint development banks with Syria and Qatar.

The Americas Report has chronicled how these unchecked advances will lead to the ability of foreign powers to leverage U.S. foreign policy in ways never imagined.  This past month, and even this past year, has demonstrated that our ability to slow or handicap Iran’s circumvention of sanctions is instructive but insufficient.  Hence, funding for the Iranian-Venezuelan agenda will become increasingly autonomous from the international finance system.  This means that despite the drop in oil consumption and declining prices, the overt intentions of both the Islamic Revolution and the Bolivarian Revolution are now more inter-connected.  Counter terrorism analysts and U.S. foreign policy makers must use the rhetoric of these revolutions as context for the formation of their own strategies.


On April 3rd, Hugo Chavez and Mahmoud Ahmadinejad inaugurated ‘The Iran-Venezuela Joint Bank.”  Each country has put up their own half of an initial capital base of 200 million dollars, which they plan to raise to 1.2 billion.  The new bank is the offspring of The Export Development Bank of Iran.  Known in Venezuela as the Banco Internacional de Desarrollo, this Iranian institution is under sanctions from both the U.S. Treasury and the international community for its alleged involvement in Iran’s nuclear program.  Chavez and Ahmadinejad must find new ways to finance Iran’s nuclear program among other suspect programs because sanctions are having some effect.  Ultimately, they prefer a completely new and alternative way to fund their endeavors.  The joint bank marks another historical step in the geo-strategic repositioning of the United States’ enemies in their alliance against the West.  With each bit of influence that Chavez buys in Central and South America with Venezuelan petrodollars, Iran either takes a cut in terms of assets, influence, or increased operational capabilities.  The joint bank will add to the perception of legitimacy in Chavez’s financial transactions.   


On April 7, 2009 the U.S. Department of the Treasury named a “Chinese individual and six Iranian entities under Executive Order 13382 for their connection to Iran's missile proliferation network.  Additionally, Treasury identified eight aliases used by E.O. 13382 designee LIMMT Economic and Trade Company, Ltd. ("LIMMT") to circumvent sanctions.  E.O. 13382 is an authority aimed at freezing the assets of weapons of mass destruction proliferators and those who support them.”1  The Under Secretary for Terrorism and Financial Intelligence, Stuart Levey, appealed to the authority of the Security Council and international obligations to stop the fake companies from procuring “centrifuge and missile technology for Iran.”[i]  The New York County District Attorney's Office filed a criminal indictment against the procurement network on the same day.  In March, the Treasury designated companies associated with Iran’s Bank Melli for the banks part in Iran’s nuclear and ballistic missile programs.  The U.S., the E.U., and Australia had already named Bank Melli as a proliferator.  The bank maintained accounts and provided letters of credit and financial services for Iranian front companies who were moving materials for and giving support to sanctioned activities.


All of this occurred in the last several months.  Yet, these are almost arbitrary headlines of a thirty-year-old all out overt asymmetrical war against the U.S. and its allies that began in 1979 for Iran and dates back even further for the leftists in Central and South America.  What is new here are the exponential strategic leaps forward that Iran has gained from its alliance with Hugo Chavez.  Douglas Farah summed up the relationship on his blog last year like this;


“So, Iran sponsors Hezbollah and allies with Chavez.  Chavez sponsors the FARC and allies with Iran.  The FARC has the dope; Hezbollah has the international distribution network, having been involved in heroin traffic and organized criminal activities for years.


What is alarming to me is that, despite Hezbollah’s stated intention to attack the United States and Iran’s evident interest in having the ability to strike at the United States, this alliance (and the Chavez-Iran alliance) attracts very little attention at senior policy levels.”[ii]


That lack of attention Farah mentions has continued in the present Administration.  It begs the question; would the leader of the free world have been duped into such photo ops in Trinidad had he been properly briefed on Chavez’s willful facilitation of the FARC and Hezbollah, let alone his dictatorial behavior inside Venezuela?  Such choice propaganda material will undoubtedly reinforce the propaganda machines that power oppressive leftist regimes in Cuba and their aspiring counterparts like Ortega in Nicaragua, the FMLN in El Salvador, and Zelaya in Honduras.  This goes especially for Iran.  One specific example of the benefits of the Iran-Venezuela-Hezbollah network surfaced last June when the Treasury department named a Venezuelan diplomat in Damascus as a Hezbollah fundraiser.  Ghazi Nasr al Din, former Charge d' Affaires at the Venezuelan Embassy in Damascus, gave Hezbollah donors information on bank accounts where the deposits would go directly to Hezbollah.  Adam J. Szubin, Director of the Office of Foreign Assets Control (OFAC), had this to say;


"It is extremely troubling to see the Government of Venezuela employing and providing safe harbor to Hezbollah facilitators and fundraisers. We will continue to expose the global nature of Hezbollah’s terrorist support network, and we call on responsible governments worldwide to disrupt and dismantle this activity,"[iii]


Several analysts have suggested that any threat posed by Chavez will decrease with the price of oil but it appears that he has found ways around this.  Keep in mind that Chavez consolidated power in the electorate with the promise of poverty reduction programs, known as “misiones”, at a time when oil revenue was abundant.  So, when Chavez creates a new development bank with Iran it is good to take a step back and get a snap shot of each countries development projects, accounting, and expenditures. 


In the 2008, March/ April edition of Foreign Affairs, the former chief economist of the Venezuelan National Assembly from 2000 to 2004 analyzed Chavez’s poverty program and presented evidence that there was a negative impact of the “Revolution” that actually hurt the poor of Venezuela the most.  According to Francisco Rodriguez;


Neither official statistics nor independent estimates show any evidence that Chávez has reoriented state priorities to benefit the poor. Most health and human development indicators have shown no significant improvement beyond that which is normal in the midst of an oil boom. Indeed, some have deteriorated worryingly, and official estimates indicate that income inequality has increased. The "Chávez is good for the poor" hypothesis is inconsistent with the facts.”[iv]


Rodriguez further explains how Chavez has been able to maintain the perception of success through political maneuvering.  The real lack of success is partly due to corruption and mismanagement, which Rodriguez attributes to the assertion that Chavez’s “Empty Revolution” is no different in practice from his Washington Consensus predecessors.  Yet, where does all that oil money go?  A popular view among regional analysts is that Chavez has staved off dissention in the military ranks by buying toys for his generals.  That is certainly not the only factor that stands between Venezuelan military elites and Chavez’s grasp on power.  However, the price tag on Chavez’s military expenditures explains a lot.


Jane’s Defense Weekly reported last November that Venezuela’s Defense Ministry increased its defense spending by 25% for the 2009 budget.  In the years, prior Chavez had amassed a military that defies conventional necessity.  In monetary terms, Ben Miller sums it up in a previous Americas Report as follows;


“According to the National Budget Office, Venezuelan President Hugo Chavez has tripled his country’s defense budget since 2000 to a whopping $3.3 billion in 2008.  Chavez's biggest purchases from Russia came in 2006 when, in that year alone, he signed deals for over $3 billion in weapons.[1] Between 2004 and 2005, Venezuela doubled the value of the major conventional weapons it imported from$13million to $27million.

This number then sky-rocketed to $406 million over the next 12 months, causing Venezuela to surpass other nations such as Argentina, France, Syria, Iraq, Sudan, and Afghanistan in the index.
[1] The large majority of the weapons it received came directly from Russia.”[v]


In terms of hardware this amount of spending on unneeded military expenditures would be scandalous were there true freedom of the press in Venezuela.  Among the hardware are Russian T-72 tanks which military analysts find hard to imagine a use for in the jungle with no outside threat.  Combined with the 50 helicopters in Venezuela’s last order from Russia they do have the hardware to oppress a resistance movement, arm revolutionary terrorists, and to become the dominant military power in the region.  In the end, Chavez’s bills are piling up, he is successfully consolidating his power, and new revenue sources are opening to reinforce an increasingly oppressive regime.       


The official statement of the Financial Action Task Force, the primary international body for countering terrorist financing and money laundering, is “that the Islamic Republic of Iran’s lack of comprehensive anti-money laundering / combating the financing of terrorism (AML/CFT) regime represents a significant vulnerability within the international financial system.”[vi]  Many consider this an understatement and cite the common pet name for Iran in the international finance community as the “central banker of terror.”  There is no place for “anti-money laundering” and “combating the financing of terrorism” when those are the primary means of advancing Iran’s foreign policy.  Iran’s overt government policy to support terrorist organizations is completely consistent with the agenda of the Islamic Revolution and Ahmadinejad’s statements about the new Iran-Venezuela Joint Bank.  Ahmadinejad said of the inauguration, "What happened today represents a strong will to build a new world.” These words may seem typical for the christening of a grand endeavor were they not spoken by a head of state known for envisioning a world without America and the annihilation of Israel. 


Hugo Chavez has made many statements outlining his intentions to create an alternative international finance system.  In fact, the new communist trade bloc in the Americas bares the title, "The Bolivarian Alternative for the Americas" (ALBA).  Of ALBA, Chavez said, "A new political, economic, and geopolitical map can be perceived in Latin America and the Caribbean."  Like the joint bank with Iran, an aversion to liberal democracy and dictatorial tendencies seem to be the common requirement for membership.  ALBA includes Cuba, Ecuador, Bolivia, Honduras, Dominica, and Nicaragua.  Therefore, as the revolutionary vision progresses in Latin America and the Caribbean, Hugo Chavez has turned to the Middle East to globalize this anti-capitalist alternative.  He said at the bank inauguration “This is part of a strategy to form a new financial architecture between us”.  Chavez rarely misses an opportunity to denounce capitalism and ridicule the International Monetary Fund.  He described the recent G20 pledge of $1 trillion to the IMF as, “entrusting beef to vultures.”  The assumption being that he and his anti-western counterparts are a trustworthy alternative.   


*Nicholas Hanlon is a foreign affairs writer and researcher at the Center for Security Policy in Washington, D.C. He is a graduate of Georgia State University and has a BA in Political Science with a concentration in International Affairs and a Minor in French.


[i] PRESS ROOM Treasury Designates Iranian Proliferation Network and Identifies New Aliases April 7, 2009 tg-84, U.S. Department of the Treasury,

[ii] Douglas Farah, The Hezbollah-Latin American Ties Become More Evident, Oct 24, 04:17

[iii] PRESS ROOM Treasury Targets Hizballah in Venezuela June 18, 2008 hp-1036, U.S. Department of the Treasury,

[iv] Rodriguez, Francisco, An Empty Revolution, Foreign Affairs March / April 2008

[v] Miller, Ben, The Russian – Venezuelan Strategic Alliance The Americas Report October 6, 2008

[vi] FATF, FATF STATEMENT ON IRAN, Paris, 11 October 2007


* Nicholas Hanlon is a foreign affairs writer and researcher at the Center for Security Policy in Washington D. C.




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