(The Conversation) – The Iranian Islamic regime has been seriously challenged since the start of public protests last September. The government has sought to contain and suppress the protesters – even resorting to executions – but has been unable to stop them.

There are continuing reports of mass demonstrations in various parts of the country, including in the capital Tehran and other major cities in recent weeks.

The European Union last week placed new sanctions on Iranian individuals and entities, but stopped short of labelling the Revolutionary Guards a terrorist group. Australia has also imposed new sanctions on Iranian officials, but critics have said it is not sufficient.

Regime endures despite decades of protests

This is not the first time the Islamic regime has been besieged by protests. It has faced many domestic and foreign policy challenges over the past 40 years, including severe Western sanctions and international isolation.

The regime came to power in the wake of the momentous revolution of 1978-79 that toppled the pro-Western monarchy of Mohammad Reza Shah. This propelled his key religious and political opponent, Ayatollah Ruhollah Khomeini, to transform Iran into a radical, predominantly Shia Islamic republic, with an anti-US posture.

Via Pixabay. File.

Since then, Iran has been marked by growing domestic discontent over the regime’s conservative religious laws, political oppression, corruption and economic woes. The US has also frequently criticised the regime for human rights violations, its alleged frequent meddling in its neighbours’ affairs, and its controversial nuclear program.

Yet, the regime has managed to stay in power with a mix of force to contain internal opposition and ideological and pragmatic resilience to rebuff outside pressure.

In the process, the state has endured, but the society has suffered from religious restrictions, poor governance, economic decline, social and cultural stagnation and endemic corruption, despite Iran being an oil- and gas-rich country.

A new crisis for the regime

The current wave of protests – the largest and longest in the Islamic Republic’s history – was sparked by the death of a young Kurdish woman Mahsa Amini while in the custody of the regime’s notorious morality police. She had been arrested for for not wearing her hijab properly last September.

This tragic episode drove large masses of Iranian women, most from the post-revolutionary generation, to take to the streets for the first time. Their slogan became ubiquitous: “women, life, freedom”.

Given the widespread public grievances over other issues, the ranks of the protesters rapidly snowballed, signalling a revolutionary direction.

Shocked by the scale of the protests, the regime has used brute force to suppress them. So far, more than 500 demonstrators have been killed, many more injured and tens of thousands detained. At least four protesters have been hanged on charges of “war against God” or “corruption on earth”.

Do sanctions matter?

Most of the authoritarian governments in the region, plus Russia and China, have remained mute on the regime’s crackdown. But the West and human rights organisations have been outraged.

The US, UK and EU have condemned the regime’s repressive actions at home and supply of arms to Russia in support of its aggression in Ukraine. They have imposed multiple rounds of sanctions on the regime, including last week.

Members of the Iranian diaspora, including those in Australia, have also urged democracies around the world to put greater pressure on the regime.

In line with the US and its other allies, the Australian government also announced new Magnitsky-style sanctions on the regime in early February, targeting 16 law enforcement, political and military officials, including those with the powerful Islamic Revolutionary Guard Corps.

This came after criticism the government has been too slow and “risk-averse” to act.

An Australian Senate inquiry has also recommended designating the Revolutionary Guards a terrorist organisation – a move taken by the US and Canada.

But the Australian government has not so far acted on the Senate inquiry’s recommendation, probably because it wants to keep lines of diplomatic communication open. The UK has also resisted for similar reasons.

The reality, though, is that sanctions are unlikely to have any more impact on the regime than what it has experienced during most of its existence. No outside measure is likely to deter the governing clerical elite from ensuring its survival.

The Basij paramilitary forces and other individuals targeted by Canberra hardly have any assets in Australia. Furthermore, the volume of trade between the two countries has dwindled over the years, amounting to just A$205 million in 2020-21.

However, sanctions do have symbolic value. Canberra could also go a step further by severing diplomatic ties, though this will not be in the interest of keeping the lines of communications open.

What could come next?

As of late, Supreme Leader Ayatollah Ali Khamenei has reportedly pardoned many of the detained protesters. This amnesty, however, doesn’t apply to everyone and comes with conditions.

But this may not mark the end of the story. The regime is well-entrenched and possesses all the necessary means to get even tougher. Many of those who created it still run it. Their fortunes are intimately tied to the survival of the theocratic order.

The protesters have also shown a remarkable determination to continue their actions in one way or another. The scene is set for more troubled times ahead.

Amin Saikal, Adjunct professor, The University of Western Australia

This article is republished from The Conversation under a Creative Commons license. Read the original article.

(The Conversation) – To justify invading Ukraine, Vladimir Putin has painted Russia as a hegemonic power re-asserting its rightful claim to imperial greatness. Yet even before the invasion, Russia’s economic capabilities were hardly capable of sustaining an empire.

Now, with foreign sanctions presiding over a plummeting Russian ruble, Russia’s economic standing has fallen further still. If measured at today’s exchange rates, Russia’s economy would be the 22nd largest in the world, with a gross domestic product (GDP) not much larger than the state of Ohio’s.

That’s a far cry from the past, when Russia was a true world power. According to data assembled by the late economic historian Angus Maddison, it was the fifth largest economy in the world in 1913, behind the United States, China, Germany and Britain. By 1957, when the U.S.S.R. outpaced the United States to launch the first satellite into space, the Soviet economy was the world’s second largest after America’s.

Putin’s quest for greatness

Putin was elected president following the chaotic disintegration of the Soviet Union and the 1998 financial crisis in which Russia defaulted on its debt and abandoned its fixed exchange rate.

At the time, Russia’s market-value GDP had bottomed out at US$210 billion, making it the world’s 24th largest economy, behind Austria. (All contemporary GDP figures are from the October 2021 World Economic Outlook published by the International Monetary Fund.)

Putin established an informal social contract with the Russian people based on his ability to deliver strong economic growth. Under Putin’s rule, and buoyed by a commodity price supercycle that would stretch well into the 21st century, Russia’s GDP in market exchange rates rose tenfold, returning Russia to global relevance and providing purchasing power to its middle class.

However, Russia researchers argued that as Russia’s economy began to flag, from a peak in 2013, Putin sought new legitimacy to govern through foreign policy actions to re-establish Russia’s status as a “great power.” These efforts were epitomized by the Crimean annexation of 2014.

Russia’s invasion of Ukraine, against the backdrop of Russia’s market-rate GDP losing a third of its value between 2013 and 2020, represents a doubling down of Putin’s strategy to seek legitimacy from “great power status,” rather than economic performance.

Yet the West’s unrelenting financial and economic sanctions have only accelerated Russia’s economic downfall.

Russian stocks traded on the U.K. market have fallen by 98 per cent, wiping out US$572 billion of wealth, while stocks on Russian exchanges remain suspended.

The Russian currency has fallen to 155 rubles per dollar — a drop of more than 50 per cent from 75 rubles per U.S. dollar before the invasion. If not for recent captial controls and the rising prices of commodities — brought about by the sanctions themselves — that make up the majority of Russia’s exports, it would fall even further.

Domino effect

A country’s market-rate GDP is its GDP converted to a global currency like the U.S. dollar. While there are other ways to measure GDP, when it comes to global trade and investment — and economic power — the market rate is what matters.

Russia’s market-rate GDP in 2021 was US$1.65 trillion, enough to make it the world’s 11th largest economy, behind South Korea. If we crudely convert Russia’s 2021 estimated GDP by March 7, 2022, currency rates, rather than the average exchange rate used last year, and place it against the 2021 market-rate GDP table, the rankings change and Russia slides to 22nd place, falling between Taiwan and Poland.

This drop is likely an underestimate. While a falling ruble lowers Russia’s exchange rate of its GDP to U.S. dollars, its weakening economy lowers its ruble GDP directly. And Russia’s isolation will erode its economic competitiveness, widening the economic gap further in the medium term.

Ukrainians confronted with the oncoming Russian army were wise to Putin’s chimeric strategy. “Don’t you have problems in your country to solve? Are you all rich there, as in the Emirates?” one elderly man heckled Russian soldiers.

Putin’s next move

Robert F. Kennedy famously observed that GDP failed to account for many things that we care about — like health and education. The fall in Russia’s market-rate GDP cannot begin to describe the human tragedy playing out in both Ukraine and Russia.

But what these figures do make clear is that Putin’s claim to legitimacy through economic performance is all but destroyed. With “great power status” tied closely to economic power, Putin’s back-door source of legitimacy from stirring up nationalist pride now seems closed as well.

Putin may have led Russia from one “Times of Troubles,” but he has delivered it to another one. That’s cold comfort to the Ukrainians, and indeed to the rest of the world, who are wondering Putin’s next move.

Eric Werker, William Saywell Professor of International Business, Simon Fraser University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Featured image: Pixabay.

( RFE/RL ) – Cryptocurrencies are being eyed by Iran, Russia, and other sanctioned states as a way to evade punitive barriers to international trade — but the dependence of “crypto” on banking systems makes it anything but a safe haven for illicit payments.

Crypto enjoys a reputation of being “untraceable” and is seen by Moscow and Tehran as a panacea as they look for ways to bypass international sanctions and their access to the global banking system.

But while experts say there is always room for rogue cryptocurrency exchanges that might be willing to trade with sanctioned persons and entities or for sanctioned states themselves to set up virtual currencies, international trade still relies on trust and payments that can be converted into reliable currencies like the euro and U.S. dollar.

This means that crypto transactions are going to be routed through the international banking system like any other, and the risks of getting caught for violating compliance regulations are high.

“Crypto has kind of a terrible reputation because it was initially very popular with criminals, because people thought it was untraceable,” says Peter Piatetsky, a former U.S. Treasury official who now heads the consultancy firm Castellum.AI. “But the ironic part is that crypto is actually way more traceable than traditional finance.”

Iran’s Open Challenge

The issue of using cryptocurrencies to circumvent sanctions attracted attention earlier this month when a top Iranian trade official announced that Tehran had for the first time used an unidentified cryptocurrency to pay a $10 million import bill to an undisclosed trade partner.

In an August 9 tweet, Deputy Trade and Industry Minister Alireza Peyman-Pak promised that more such transactions will be made, writing that by the end of September the “use of cryptocurrencies would be widespread in foreign trade with targeted countries.”

The announcement was seen as a message from Tehran that it had found a way to skirt international sanctions that left it cut off from SWIFT — the world’s largest bank-transfer system — and have hampered Iran’s ability to import weapons and foreign technologies for decades.

Owing to global concerns over Iran’s controversial nuclear program, new sanctions were imposed by the UN and the United States, further isolating Tehran from the international trade market.

Seeking an end around, Iran has looked for ways to make transactions that are either untraceable or essentially sanctions-proof, such as barter deals with willing states that regulators can do nothing about.

Potential trade partner Russia — which itself is subject to stiff international sanctions due to its occupation and annexation of Ukraine’s Crimean Peninsula in 2014 and even stronger punitive sanctions since its full-scale invasion of Ukraine in February — has also expressed interest in using crypto as a way to get around trade barriers.

But considering the long trail virtual currencies leave for regulators to track, Piatetsky questions why any entity would use them to conduct trade with sanctioned states.

“Who in their right mind is willing to be paid by Iran in crypto? Piatetsky asks. “Even in the criminal world people want to be paid with [a currency] that’s valuable. And if you’re being paid in crypto from a party that is sanctioned, you do have a high risk of losing your money.”

What’s In Your Virtual Wallet?

Traditional banking in some ways offers a better shield from regulators because money is sent from account to account, with little visibility of where the money is ultimately going.

With cryptocurrencies, it is the opposite, according to Piatetsky.

“The biggest differences between crypto and kind of traditional finance is that there is this traceability,” he said. “With crypto, if you know somebody’s wallet number, you can see how much money they have in it. And you can also see who they’ve sent money to and where they’ve received money from.”

As long as there is more than one currency in the world, a U.S.-based sanctions expert told RFE/RL, there is a chance that trades could be made, for example, involving the Russian ruble or the Iranian rial. But for that to happen everyone involved would have to be onboard with not exchanging goods for more reliable currencies, as well as the risk that the transaction could become a worthless digital file.

Even in the event Iran did make a $10 million transaction this month, which Piatetsky said he doubts, it is unlikely it would be for the types of foreign technologies that Iran seeks.

“If this is a government announcement,” he said of Peyman-Pak’s tweet, “is this something that the government wants?”

“Are they buying a plane? Are they buying a ship? Is there a ship broker somewhere that’s willing to accept crypto? I don’t know,” Piatetsky said. “But it’s one thing to announce that you’ve done a $10 million transaction, and another to [pull it off]. And of course, to actually explain it would mean it would immediately be shut down.”

Efforts to Regulate

International regulators, bodies, and Western countries are well aware of the prospect that cryptocurrencies could be used for illicit trade.

In March the European Union — in tightening sanctions against Russia due to its war in Ukraine — addressed the possible use of cryptocurrencies in illicit trade and in June introduced new legislation to ensure that “crypto-assets will be traced and identified to prevent money laundering, terrorist financing, and other crimes.”

An illustration of the Bitcoin, Ethereum, and Dash cryptocurrencies plunging into water.

And the U.S. Treasury Department has taken steps to prevent the illicit use of cryptocurrencies, including for ransomware payments, noting that “virtual currencies can be used for illicit activity through peer-to-peer exchangers, mixers, and exchanges.”

Kraken, a U.S.-based crypto exchange, is reportedly under federal investigation on suspicion of violating sanctions by allegedly allowing users in Iran to trade virtual currencies.

Tornado Cash, a “crypto mixer” that allows its users some element of anonymity when transferring crypto assets, was added this month to the U.S. Treasury’s list of sanctioned organizations. Tornado Cash stands accused by the United States of laundering more than $7 billion in virtual currency, including funds stolen by a state-sponsored hacking group in North Korea.

Within days of the listing, Dutch authorities on August 10 announced the arrest of a developer suspected of contributing code to the open-sourced, Ethereum blockchain-based platform.

And in March, the U.S.-based cryptocurrency exchange Coinbase, responding to U.S. government requests that platforms help ensure that crypto cannot be used to evade sanctions, announced it had blocked more than 25,000 cryptocurrency wallet addresses “related to Russian individuals or entities we believe to be engaging in illicit activity.”

“Regulatory efforts have focused on basically saying: ‘We’re going to regulate the exchanges,'” Piatetsky explained. “The exchanges are basically like the bank. And the government is saying we’re going to find exchanges and make sure exchanges have compliance so they can stop transactions to and from bad actors.”

A Second-Rate Club

Russia and Iran have ironically barred the use of cryptocurrencies within their own countries, citing concern they could be used to fund illicit activities.

But the head of the Russian Finance Ministry’s Financial Policy Department, Ivan Chebeskov, said in May that “the idea of using digital currencies in transactions for international settlements is being actively discussed” and suggested that crypto could help counter the impact of Western sanctions.

Although Iran officially bars cryptocurrencies domestically because they could be used as a “tool for money laundering and the financing of terrorism,” the head of parliament’s economic commission, Mohammad Reza Pour Ebrahimi, said earlier this year on state television that lawmakers were considering “the limitations of sanctions and foreign exchange” and looking at crypto as a way to help the country conduct international trade.

Officials, meanwhile, have openly endorsed the mining of crypto on Iranian soil as a way of circumventing sanctions.

But saying that cryptocurrency can be used for trade, or even developing digital currencies of their own to create a group of willing trade partners, doesn’t mean it will work, say sanctions experts.

The development of digital currencies, which are based on a country’s fiat currency, would still require Moscow and Tehran to secure them with technology and to establish trust in their worth.

Castellum.AI’s Piatetsky has doubts about how many partners Iran or Russia could find.

“Could Russia create some sort of ecosystem where there’s a Putin coin and an Iran coin, and they just do business with each other? Sure, but they would be honestly much better off filling planes with gold and flying them back and forth,” Piatetsky said.

“It’s like somebody that’s not being let into a club saying, ‘Well, I’m going to create a better club,'” he added. “Okay, do it. Let’s see who comes in if nobody wants to be in your club because your product is terrible.”

Michael Scollon

Michael Scollon is a senior correspondent in RFE/RL’s Central Newsroom in Prague.

Via RFE/RL

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