Retaliatory Attack By Iran's Proxies On Israel Seen More Likely
The US government has assured Israel of military backing, the White House spokesman said Monday, amid reports that Iran could be considering a direct retaliatory attack on Israel.
The US government has assured Israel of military backing, the White House spokesman said Monday, amid reports that Iran could be considering a direct retaliatory attack on Israel.
“We know that Iran has made very public threats against Israel itself,” John Kirby said in an ‘on-the-record press gaggle’. "And one of the things that the President said in his call with Prime Minister Netanyahu was that the Israeli government could count on the United States’ support for any self-defense needs against threats directly by Iran to Israel.”
The world has been anticipating an Iranian retaliatory operation, after a precision Israeli strike on its Damascus embassy killed two top IRGC generals and five other officers on April 1.
Iranian officials have been threatening retaliation and many observers have indicated that most likely, Tehran will use it proxy forces to target Israel instead of launching attacks from its territory. Another type of operation mentioned by some Iranian insiders is a possible attack on an Israeli diplomatic mission in a third country.
However, Hezbollah chief Hassan Nasrallah, claimed Monday that Iran's Supreme Leader Ali Khamenei has decided that the response to Israel’s attack has to be "direct" as opposed to an operation “in another country.” This still does not necessarily mean an attack from Iranian territory, rather an attack directly on Israel.
“The Americans have accepted that there’ll be an Iranian response,” Nasrallah said in a televised speech, “even the Israelis have accepted that there’s an Iranian response. And the whole world has accepted that this is a natural right for Iran.”
This is the message that Iranian officials have been sending out more or less consistently: that there will be retaliation, even though some voices inside Iran have been calling for ‘patience’ and ‘strategic thinking’ and ‘not playing into the hands of Israelis’.
An unconfirmed report Monday suggested that the regime in Tehran has conveyed to the Biden administration that it would refrain from attacking Israel if the US could pressure Israel to agree to a ceasefire in Gaza.
“I don’t really have a comment to make on the report that Iran claims they would refrain from responding if there was a ceasefire,” Kirby told reporters Monday. “But if Iran is serious about a ceasefire, they’ll use the influence they have with Hamas to press for a positive response to that proposal…We want a ceasefire too. They can lean on Hamas. That would be the best outcome.”
It is not impossible that Iran could come up with such a proposal, given that a ‘direct’ attack on Israel –as Nasrallah has suggested– can have dire consequences for the Islamic Republic.
Not responding may not be an option for Khamenei, whose state propaganda machine has been built around the notion of standing up to Israel and the US. Giving up the right to respond in exchange for a ceasefire in Gaza could therefore be the face-saving formula he looks for. The risk, of course, is that if there’s no ceasefire, he’d be even more obliged to retaliate not to lose more credibility.
A CNN report Monday quoted sources ‘familiar with US intelligence’ that Iran’s retaliation against Israel will likely be carried out by Iranian proxy groups rather than by Iran directly.
“US intelligence assesses that Iran has urged several of its proxy militia groups to simultaneously launch a large-scale attack against Israel, using drones and missiles, and that they could attack as soon as this week," the CNN report read, contradicting previous reports in American media.
Last week, a New York Times report stated that both American and Israeli military analysts have reached the conclusion that “it is more likely that Iran would strike Israel itself than that it would have its proxies attack U.S. troops in the region, including in Iraq and Syria.”
It seems no one knows for a fact what a potential response from Iran may look like. Or if there would be any response after all.
"From Damascus, I declare loud and clear that Israel will be punished,” Iran’s foreign minister Hossein Amir-Abdollahian said Monday. But even such a seemingly categorical statement is qualified. "The manner in which Iran will respond to Israel will become clear on the battlefield,” he said.
An examination of the data from the Central Bank of Iran unveils that his government is actually the largest debtor among them.
“You remember that in an election meeting, they handed the candidates the names of three [major debtors] in sealed envelopes, but now [Economy Minister] Mr. Khandouzi is releasing the financial information of 2,000 companies on [the Central Bank] website for everyone to see,” President Raisi said at a meeting with hardliner student activists on Saturday.
Raisi was referring to a highly sensational presidential election debate in 2021. During this debate, his rival, the former Governor of the Central Bank of Iran, Naser Hemmati, handed him a sealed envelope purportedly containing a list of top debtors to the banking system. Hemmati later said that he had previously provided the names to the judiciary, which was headed at the time by Raisi, on multiple occasions – saying that action was taken. Hemmati added that he himself couldn't announce the names during the debate due to legal constraints.
It has long been an open secret that Iran's predominantly government-controlled banks face a shortage of capital and that their lending policies are influenced by insiders, such as Iran’s clerics.
The ministry of economy defines a 'major debtor' as persons or entities that hold loans worth at least 10% of a bank's total resources and defaulting on the payments.
In November 2021, such loans were estimated to total around $10 billion but the value of these loans would have been 5-6-fold higher in dollar equivalents, at the time they were granted. The Iranian currency dropped significantly from mid-2018, but most of these loans were issued before that period.
Six months after an order by the economy minister mandated them to comply, four state-owned banks, including Bank-e Melli, Iran's largest bank, released their lists of major debtors in April 2022. Subsequently, the Central Bank published its list, encompassing 14 other banks along with their major debtors.
The data published at that time and subsequently has, however, been incomplete and vague.
“What interest rates were charged on the loans granted to major debtors? What guarantees were taken for the loans? How were the borrowers’ credit and guarantee assessed? How much of these debts can be recovered and [the collection of] how much is doubtful or impossible?” an editorial in the reformist news outlet Shargh asked after publication of the first set of lists.
Allegations have persisted that major debtors with poor credit utilize loans to speculate in housing, foreign currency, and gold markets rather than investing in production – contributing to higher inflation rates.
“What were these loans for? Were the loans spent for the purposes indicated on loan application forms? What assets were created by the money taken from the bank and how much added value was produced?” the editorial asked, referring to such allegations.
The public is often led to believe that major debtors to the banking system are individuals and private companies.
But, Iran International’s examination of the data provided by the Central Bank and other banks indicates that the private sector’s share of such loans is minimal.
Instead, entities such as the State Welfare Organization, the National Iranian Oil Company (NIOC), and companies owned by banks, automakers, and several other government agencies emerge as the top debtors.
During his campaign Raisi promised that borrowing from the Central Bank was a “redline” his government would not cross. Government officials, accordingly, claim they are fulfilling this promise.
Experts assert that rather than borrowing directly from the Central Bank to address its budget deficit, the government has significantly increased its borrowing from other banks to obscure its financial activities.
This practice, in turn, puts pressure on the Central Bank to print more money in order to provide loans to these banks – leading to an increase in liquidity and higher inflation, according to these experts. According to Iran International's calculations based on periodic official statements, The Raisi government has been printing the equivalent of $460 million per month, adding to the monetary base.
“The government and government-owned companies’ debts to the banking system have doubled since August 2021 when Raisi assumed office,” Dalga Khatinoglu, an Iran economic analyst and oil expert, told Iran International.
“Debts to the banking system include bonds that the government has issued and forced banks to buy as payment of previous government debts. This is the reason the government’s debts to banks are continuously increasing despite payments claimed to be made,” he said.
“But the government’s debt to the banking system is only a fraction of its overall debts. It has also borrowed very heavily from the Central Banks and owes $100 billion to the National Development Fund. The total amounts to $118 billion, that is, equal to two and half years of the government [operating] budget,” Khatinoglu added.
Etemad daily reported last week that the budget bill for the current year received only partial approval from the parliament, a situation unprecedented in Iran. The approval process saw the bill exchanged between the government, parliament, and Guardian Council multiple times over several months. Even when partially approved, the bill required over 20 revisions in a single day. Notably, the parliament granted the government permission to utilize an "on account" budget before receiving full approval from the Guardian Council.
Describing the new Iranian year (1403, which began on March 20) as "a year without a plan," Etemad highlighted the uncertainty faced by the government regarding its budget allocation. Additionally, the government lacks clarity on which areas and sectors it can allocate funds to using the on-account budget. The parliament has pledged to provide clarification on this matter in April and May.
In practical terms, Etemad noted that the government has only received guidance on the first two months of the year from the parliament. However, there are no established laws or regulations governing the on-account budget and how parliament can oversee its spending.
The government’s own news agency, IRNA, has said in a commentary that this kind of unplanned budgeting will certainly lead to higher inflation. Former Lawmaker Gholam Ali Jafarzadeh Imanabadi concurred with IRNA and said the government cannot be happier about spending the budget without any legislative supervision.
Imanabadi criticized the lack of clarity, stating, "It's regrettable that no one knows how much budget the government has for the current year." He sarcastically added, "The Majles can only supervise the way people keep their pets and walk their dogs," referring to ever-more stringent Islamic regulations.
According to Etemad, a preliminary version of the budget bill sets the annual budget of Iran at 60,479 trillion rials, which is slightly more than $100 billion after the national currency fell 30% in the past three months. Government-owned companies allocated around 37,000 trillion rials and the government’s operation budget 27,000 trillion rials.
Etemad emphasized the absence of both a budget and a plan for spending, despite the presence of the Planning and Budget Organization in Iran.
In his New Year's Day speech, President Raisi claimed, without evidence, that the inflation rate in Iran is decreasing. However, Iran International TV reports a 40 percent increase in housing costs over the past year, with Tehran experiencing a rise of over 50 percent during the same period.
Jailed sociologist Saeed Madani had said earlier that widespread economic problems were part of the underlying crises in Iran during the past year which have led, among other things, to a rise in emigration of educated Iranians and brain drain, and a decline in the turnout in the country's recent elections.
Avaz Heidarpour, a medical doctor and a former lawmaker, told Khabar Online that some 10,000 medical staff have left Iran in the past three years saying that they need welfare for their families and hope for their children.
Outlining the importance of economic issues in social movements, sociologist Ahmad Bokharai told Khabar Online: "The protests in 1999 and 2009 were political in nature while the ones in 2017 and 2019 had economic reasons. What happened during the 2022 protests was a revolt with combined political, economic and cultural motivations.
In an interview with Etemad, lawmaker Ahmad Alirezabeigi likened the partial approval of the budget bill by the Majles to "drinking a cup of poisonous hemlock," indicating it was an unavoidable action. This suggests it may have been directed by none other than Supreme Leader Ali Khamenei as a solution to the political impasse between the government, the parliament, and the Guardian Council.