Secret CIA Report Says Iran Will Spend $100 Billion Post-Nuclear Agreement Windfall on Its Economy, Not on Militants

Brian Bennett

July 17, 2015

Iran unlikely to spend most of its post-sanctions funds on militants, CIA says

A secret U.S. intelligence assessment predicts that Iran’s government will pump most of an expected $100-billion windfall from the lifting of international sanctions into the country’s flagging economy and won’t significantly boost funding for militant groups it supports in the Middle East.

Intelligence analysts concluded that even if Tehran increased support for Hezbollah commanders in Lebanon, Houthi rebels in Yemen or President Bashar Assad’s embattled government in Syria, the extra cash is unlikely to tip the balance of power in the world’s most volatile region, according to two U.S. officials who spoke on condition of anonymity to discuss the intelligence document.

The controversial CIA report, on which key members of Congress have been briefed, provides ammunition to both sides in the battle brewing on Capitol Hill over what White House aides call President Obama’s signature foreign policy achievement, a sweeping multinational agreement that aims to block Iran’s ability to build nuclear weapons for at least a decade in exchange for the easing of sanctions that have hobbled its economy.

Under the deal sealed Tuesday in Vienna, once Iran completes a series of strict requirements, the U.S., the European Union and the United Nations will suspend the most damaging sanctions against Iran’s financial and energy sectors, and Tehran will be given access to about $100 billion from oil revenue frozen in overseas accounts. That could occur early next year.

The United States will rescind most of its banking sanctions, allowing Iranian banks to reconnect to the global financial system, and will lift restrictions on various Iranian industries, as well as trade in gold and other precious metals. Nearly 750 companies, individuals, aircraft and ships will be removed from U.S. blacklists.

Sanctions related to Iran’s human rights abuses and support for groups linked to terrorism will stay in place. A U.N. arms embargo will lift in five years, and restrictions on the transfer of ballistic missile technology will remain for eight years, although the White House said the U.S. and its Persian Gulf allies would step up efforts to block Iranian military shipments or other support to its proxies.

Secretary of Defense Ashton Carter will visit Saudi Arabia on Tuesday to follow up on Obama’s pledge at a Camp David summit to supply more weapons and intelligence cooperation to Arab allies anxious about the deal. Secretary of State John F. Kerry plans to brief Persian Gulf leaders in Qatar on Aug. 3.

“It is certainly the case that Iran could decide to apply additional revenue to the activities that are concerning the region,” Ben Rhodes, Obama’s deputy national security advisor, told the Saudi-owned news channel Al Arabiya on Thursday.

“What we need is a better capacity to interdict weapons shipments, have a maritime capability, to have cyber defenses, to deal with these asymmetric threats from Iran,” he said.

Iran funnels tens of millions of dollars to Hezbollah each year, according to U.S. estimates. Tehran gives far more, an estimated $6 billion a year, in cash, oil and other aid to Assad’s government in Syria, which is engulfed in civil war.

“Syria is really where Iran is spending significant amounts,” Mark Dubowitz, an expert on sanctions policy at the Foundation for Defense of Democracies, a Washington research institute, said in a telephone interview.

Republican lawmakers briefed on the CIA report have seized on the danger that Iran could increase support for terrorist groups and expand its military role in Yemen, Syria and other regional hot spots, describing it as a fatal flaw in the Vienna agreement.

“I don’t know what information the Obama administration possesses that indicates this deal will actually prevent Iran from getting a nuclear weapon or will cause the mullahs to reduce their support for worldwide terrorism, but it sure isn’t the same intelligence we’re seeing in the Intelligence Committee,” Rep. Devin Nunes (R-Tulare), chairman of the House Intelligence Committee, said in a statement.

The Obama administration is banking, in part, on President Hassan Rouhani and other moderates in Iran’s leadership steering most of the anticipated money into domestic infrastructure and other investments to quell growing public frustration over unemployment, the high inflation rate and a shortage of imported goods.

Rouhani was elected in 2013 on a promise to improve Iran’s economy, and U.S. intelligence analysts say his advisors determined early on that Iran’s moribund finances could not recover under sanctions. The analysts believe the sanctions are what kept the Iranians at the negotiating table over the last 20 months.

For his part, Obama acknowledged Wednesday that some of the money could be siphoned off to fund militant activity in the Middle East.

“Do we think that with the sanctions coming down that Iran will have some additional resources for its military and for some of the activities in the region that are a threat to us and a threat to our allies? I think that is a likelihood that they’ve got some additional resources. Do I think it’s a game-changer for them? No,” Obama said during a White House news conference the day after the deal was reached.

“The notion that they’re just immediately going to turn over $100 billion to the IRGC or the Quds Force, I think, runs contrary to all the intelligence that we’ve seen and the commitments that the Iranian government has made,” Obama said, referring to the Iranian Revolutionary Guard Corps and its special forces units abroad.

Obama said it was a “mistake” to say his administration believes that Iran will spend the money only on “day-care centers and roads and paying down debt.” But he said preventing Iran from building a nuclear weapon is far more important than releasing “incremental additional money” that Iran could use “to try to destabilize the region or send to their proxies.”

Iran has about $100 billion frozen in oil escrow accounts in banks in several countries that buy Iranian petroleum products, including China, India, Japan, South Korea and Turkey. U.S. analysts say $50 billion more is frozen in other overseas accounts that could become available later as sanctions ease.

Iran will be able to withdraw the first $100 billion when it has met the initial terms of the nuclear deal, including removing two-thirds of its centrifuges, reducing its enriched uranium stockpile by 98%, disabling its plutonium facility and allowing International U.N. inspectors broad access for monitoring of operations.

Appearing on CNN, national security advisor Susan Rice said the goal of the U.S. and five other world powers in the negotiations with Iran was solely to stop Tehran from amassing enough nuclear fuel to build a bomb that could be used against the United States or its allies, and was “never” meant to stop Iran from funding terrorism or address other concerns about Iran’s activities in the region.

“We think for the most part they’re going to need to spend it on the Iranian people and their economy, which has tanked,” Rice said. “It is possible, and in fact we should expect, that some portion of that money would go to the Iranian military and could potentially be used for the kind of bad behavior we have seen in the region up until now.”

Congress has 60 days to review the accord and an option to approve or reject it. Opposition is widespread among Republicans, who control both houses, but it’s far from clear whether they can secure enough votes to override a promised White House veto.

Divining how foreign leaders will act is a challenging job for intelligence analysts and comes with many pitfalls, Michael Allen, a former director for counter-proliferation strategy on the National Security Council under President George W. Bush, said in a telephone interview.

“Traditionally the hardest analytical intelligence questions are leadership intentions,” said Allen, who has not seen the CIA assessment on the deal. “I’m not sure we are in a position to assess that the Iranians would spend the vast majority of their windfall on the economy versus supporting malign activities in the region.”