Italy “big Iran” player potential has interregional security risks, commentary

Mario Draghi at ECB 

Europe continues to pursue Iran nuclear deal, look to Mario Draghi

 Italy advances interests in Libya 

By Rachel Brooks

May 25, 2021 

Commentary 

As the threat of the Iranian regime looms over international security, Europe has opted, along with the United States, to pursue a return to the JCPOA nuclear agreement. This was an agreement that Iran had failed to comply with when it was in full force. Experts have voiced concern at the thought of a return to the agreement, citing the lack of compliance from the Iranian regime. Attempting negotiations with Iran, the U.S. walks back from its maximum pressure campaign under the Trump administration. Biden pursues a nuclear deal once more. Once again, Italy desires a seat at the negotiation table, wrote Aniseh Bassiri Tabrizi with Rusi.org’s international analysis.

Tabrizi wrote that, in recent years under the Conte government, Italy’s role in such negotiations has been “minimal.” Italy opted out of Instrument to Support Trade Exchanges membership, citing that the mechanism would be “ineffective” in improving “legitimate trade with Iran.” The Instrument to Support Trade Exchanges, or INSTEX was an effort of a European special purposes vehicle to facilitated non-USD and non-SWIFT transactions with Iran to avoid U.S. sanctions. This was implemented in January 2019 under the stiff crackdown of the Trump administration. 

Italian politicians have likewise been loath to progress any advancement in the sphere of Iran engagement. In 2019, hen-Deputy Prime Minister and leader of the right-wing League party Matteo Salvini  stated that Italy could not have normal relations “with a country that wants to destroy Israel.” 

Yet, under the government of Draghi, Italy has expressed support of the signal shift in U.S. foreign policy and the European return to a JCPOA agreement renewal. Italy expressed support of the EU’s Declaration by the High Representative on behalf of the EU” with regards to returning to a JCPOA agreement. 

“We appreciate the renewed support of the European Union to the #JCPOA, one of the pillars of nuclear non-proliferation. In a delicate context, Italy stands ready to support any initiative towards restoration as soon as it is fully implemented,” tweeted the Italian Foreign Ministry on January 12. 

Italy had offered to “play the role of a mediator” between the Americans and Iran in the nuclear dossier, a role that the United States declined to grant. 

Prime Minister Mario Draghi continues to pose an interesting player in terms of regional finance. Draghi is a powerful figure in European Banking, as former head of the European Central Bank. The Wall Street Journal reports that, in his new role as Prime Minister, Draghi is now pushing for a “consolidation wave” of bank mergers across Italy to “clean up” the region’s “feeble banks.’ Banks across Europe are “fragmented” in comparison to U.S. banking, with many regional branches scattered. Draghi’s calls for consolidation and merger were ignored in his previous role, yet, he works now to push a move toward this once again. 

Draghi has formerly vested interest in the banking system of Iran likewise.

 In 2007, The Wall Street Journal reported that then-Bank of Italy Governor Mario Draghi had taken over management of the Rome branch of Iran’s Bank Sepah. The Sepah bank, at the time Iran’s fifth-largest branch, was on a list recommended frozen on March 26, 2007, by the UN Security Council. Italy was referred to as “one of Iran’s largest trading partners” in the 2007 article. Draghi had appointed two commissioners to the Sepah bank and put conditions on other financial institutions in Italy that may wish to do business with Sepah. 

In 2017, Il Foglio reported that, under the “effect” of Rohani’s political influence, Iran had received the green light from Italy and Europe to open new branches of Saman and Melli bank branches in Italy. Iran had received the green light of Italy and Italy’s centralized banking. 

During the Obama administration, see U.S. House Committee’s Task Force to Investigate Terrorism Financing, the U.S. reported pushback from Italian trade partners and investigation of funds outside of the United States that are funneled to the purpose of Iranian proxy terrorism. The U.S., in a meeting in July 2015, Steven Perles of Perles Law, described how Italy had formally intervened in enforcement activities of the Flatow, Eisenfeld, and Duker legal case in Italy. Perles Law specializes in anti-terrorism litigation. 

The Flatow, Eisenfeld, and Duker case refer to lobby actions taken by the parents of Islamist terror victims that were a result of Iranian proxy. Flatow refers to Alisa Flatow who was the victim of a Gaza suicide bombing in 1995 near Kfar Darom, on the Israeli side of the Gaza Strip border. Eisenfeld and Duke refer to the victims of a suicide bus bombing in Jerusalem in 1996 that killed Matt Eisenfeld, his fiancee Sara Duker, see The Jewish Telegraphic Agency.  The perpetrator in the bus bombing was a Hamas insurgent, who received training from Iran. 

“In our enforcement activities for the Flatow, Eisenfeld, and Duker case in Italy, where I suspect a lot of this $100 billion will go, as they are Iran’s largest trading partner in the EU, the Italian foreign ministry has formally entered our proceeding against the Iranians in objection to our domestication of the Flatow, Eisenfeld, and Duker terror victim judgments in Italy. If the Italian courts abide by the request of their foreign ministry, essentially, these judgments become non-entities in Italy and probably the rest of the European Union,” said Perles in the 2015 House Committee meeting. 

Italy signals a renewed interest in the mediation of the Libya internal conflict and rebuilding effort. The Turkish-government-backed news outlet Daily Sabah wrote in March that Turkey and Italy had mediated in the Libya political situation “positively.” In the wake of this influence, Libya has signaled that Italy is on a list of the companies with the “best chances” to participate in its national reconstruction.

Turkey and Italy are becoming major players of interest in the affairs of Libya. In terms of MENA-Gulf-regional security, this could create new challenges for the effort to divert Iranian intervention in the region Turkey and Libya are both states that hold hostility for Israel and have expressed heavy support of the Hamas-controlled Gaza. Hamas is a terrorist entity controlled by the Iranian proxy network. As western influencers in the region begin to likewise entertain the idea of courting the Iranian regime, the regional ripple effect begins to intensify.

The risks increase as the United States changes its foreign influence from one of pragmatism to one of idealism. On May 25, Secretary of State Anthony Blinken announced that he would seek $71 million in funding for the Hamas-controlled Palestinian Authority. Yet, activists against the Iranian regime, such as the Iranian Americans for Liberty organization, have warned sending funds to areas under Iranian political control will inevitably fund the regime. 

As the current American administration pursues its ideal against the cautioning of Iranian human rights activists, the influence of United States pragmatism begins to erode. This requires a western counterbalance from elsewhere, and yet, options for this are limited, as the western policy continues to be steered by the ideal that Iran’s regime has some moderates in office and that these moderates can be engaged.

In a recent Republic Underground experts panel, former prisoner of Iran, Xiyue Yang, stated that from his experience inside the regime there are “no moderates.” He broke down the logic of the western push to engage Iran likely comes from a hope to divert Iran from China’s increasingly aggressive foreign push. Yang, however, noted that China’s interests would be driven by what was economically logical for China and that the increase of sanction pressures against Iran had proven effective. Reflexively, a lessening of sanctions and relaxed pressures would have the opposite effect that the west intends. 

In the case of Italy, a political stance that is more favorable to Iran than in previous years, coupled with a political influence in Libya, may increase the opportunity of Iranian regime actors to exploit such a diplomatic relationship. Libya has been a traffic hot spot for weapons-funneling to Hamas, for example, see Al-Monitor. 

With Italy and Iran’s history of financial cooperation, and now with the political winds blowing in favor of increased Italian presence in Iran’s negotiations between western entities, the possibility of interregional banking option mitigation increases. 

The Islamic Republic has been known to use proxy-network politics, such as it did in Lebanon, to exploit legitimate finance for its extremist agendas. In a recent Republic Underground panel, Lebanese rights activist Charbel Hage explained the “Hezbollah model’ of attempts to infiltrate legitimate banks as well as illicit banking and criminal finance enterprise. 

As Italy becomes more invested in the politics of Libya and becomes interested in nuclear dossier mitigation with Iran, its role as a conduit in interregional politics of the Iran proxy network increases.