Editor’s note: This story contains a graphic image that some readers may find disturbing.
Perched high above midtown Manhattan, behind security-locked doors in an unmarked office, a half-dozen 20-somethings sit at computers, looking for ways to inflict hardship on the Iranian government and the people it rules. The “war room,” as its occupants call it, is a mere 20 blocks from Iran’s Mission to the United Nations and even closer to the hotel where Iranian President Mahmoud Ahmadinejad stays during his visits to New York.
But this is not a U.S. government intelligence facility brimming with incoming feeds of classified data. The offices belong to the private nonprofit group United Against Nuclear Iran, and the computers contain a wealth of (mostly) open source economic data culled from Iranian and other sources.
UANI, as it calls itself, has one mission: to wage “economic warfare against the Islamic Republic of Iran ...The regime must be forced to choose between having a nuclear weapon or a functioning economy."
That’s not to say the group doesn’t have roots in government. It is headed by Mark Wallace, a former U.S. ambassador to the United Nations, and former heads of the CIA, the counterterrorism office of the National Security Council and the Mossad, Israel’s national intelligence agency, sit on its advisory board.
Part of what UANI does is psychological warfare, though it’s the smallest part. The group pays for a billboard high above Times Square that takes shots at Ahmadinejad and placed a blow-up Ahmadinejad punching-bag doll outside the Hotel Warwick when he stayed there recently while in town to address the United Nations. It also lobbies effectively, working with friendly congressmen to get sanctions strengthened.
Using 'name and shame' tactics
Mostly, it uses “reputational risk” to achieve its aims, trying to shame U.S. and international companies to end business dealings with the Islamic Republic or Iranian businesses, particularly those with Revolutionary Guard ties, even if those dealings aren't clearly in violation of economic sanctions against Iran. If those efforts don’t succeed, Wallace isn’t averse to using a bigger hammer: If you work with Iran, he is fond of saying, you shouldn’t get contracts from the U.S. government.
While the group’s impact is difficult to quantify vs. the overall impact of economic sanctions against Iran by the U.S., European Union and the United Nations, Wallace’s private network has contributed to some significant successes. Those include persuading an international money exchange to ban Iran and forcing Ahmadinejad out of his preferred New York hotels in September when he visited to deliver his final speech at the U.N. General Assembly as Iran’s president.
U.S. officials welcome the private group’s efforts, telling NBC News that UANI’s “name and shame” campaigns complement the government’s efforts to enforce the sanctions, which are limited to pursuing civil or criminal cases when companies are found to be in violation.
The public shaming is a familiar strategy -- with a twist. Activists demonstrated and demanded U.S. pension funds and university endowments divest stock in South African companies during the dying days of apartheid in the 1980s and ‘90s. The AFL-CIO and Harry Wu, a Chinese labor activist, exposed U.S. companies that used Chinese prison labor in the 1990s. And Chinese companies doing business in Sudan were accused in the early 2000s of aiding genocide in Darfur.
But UANI’s mission is more comprehensive and it’s led by a high-profile political figure, not a celebrity or anonymous activist. In addition to serving as U.S. ambassador, Wallace worked in the presidential campaign of Republican Sen. John McCain in 2008, working as vice presidential nominee Sarah Palin’s debate coach.
It’s also riskier and could backfire. Iran is not without the capability of striking back.
But Wallace feels comfortable that he’s on the side of right and believes he has a unique opportunity to affect history by forcing Iran to abandon its nuclear ambitions, which Tehran insists are intended to meet its energy needs, not build nuclear weapons. In his view, that begins with “crashing the currency.”
“You have all the elements that are there with the currency,” he said. “We measure everything we do. I challenge you to find a better mechanism of judging the impact of economic hardship that we're placing on the elites.”
UANI has a modest budget -- less than $700,000 in 2010, according to federal records – that it says it raises only from U.S. donors. It declines to identify them, citing security concerns.
But it claims some big results.
'Stealth sanctions' have big impact
The biggest was its lobbying of SWIFT, a Belgian-based international financial clearinghouse, to expel Iran, then pressuring the U.S. Congress to demand that SWIFT ban Iranian financial transactions from its worldwide network. Without SWIFT codes, international financial transactions become difficult, if not impossible, to complete. Since SWIFT expelled Iran on March 15, the value of the Iranian currency, the rial, has dropped precipitously.
Dan Yergin, the energy historian and author of “The Quest: Energy, Security, and the Remaking of the Modern World,” calls the SWIFT expulsion the “stealth sanctions.”
“Much of the international focus on sanctions has been on the oil side,” Yergin told NBC News. “But the SWIFT and other related banking restrictions have been the ‘stealth sanctions’ that are impacting on Iran’s ability to do business in the international economy.
“Less attention may have originally been paid to them, but they rank with the oil sanctions in terms of their effects on Iran. Overall, the … sanctions are imposing a much bigger cost on the Iranian economy than Tehran would have anticipated last winter and thus are creating a much bigger problem for the leadership.”
Now, UANI and Wallace want to strike harder. Iran’s currency, the rial, is near collapse, by some estimates having lost 80 percent of its value in the last year and 15 percent in the last week as measured against the dollar and euro. One dollar now equals 36,000 rials at the unofficial rate.
Iran, which for months resisted the suggestion that the sanctions were effective, now acknowledges that inflation, much of it caused by sanctions and the SWIFT ban, is hurting the economy.
In recent weeks, Wallace’s group publicly pressed European companies that it believed were supplying Iran with the special paper, inks and presses used to print Iranian currency to stop doing business with Tehran. In a letter early this month to the German company Koenig & Bauer AG, which had provided the Central Bank of Iran with presses in the past, Wallace demanded to know if the company was still supplying Iran, then raised the possibility that continuing work with Iran could threaten its business with the U.S. government.
“UANI finds KBA’s apparent business in Iran particularly galling in light of its extensive contracts with the U.S. Department of Treasury and its role in U.S. banknote production,” Wallace wrote. “KBA has been the recipient of over $131 million in contracts from the U.S. Treasury’s Bureau of Engraving and Printing, in addition to $2.39 million awarded to KBA subsidiary KBA North America by the U.S. Department of Defense.
“UANI strongly believes that the only responsible action for KBA in light of the fact that the CBI is a sanction-designated entity under U.S. and EU law is for KBA to immediately and publicly reject CBI solicitations for KBA services.”
On Wednesday, KBA told NBC News that it had stopped supplying printing presses to Iran nine years ago.
But in a written response to Wallace dated Oct. 10, KBA acknowledged it had provided “spares and auxiliary equipment” to its “Iranian client” since then. KBA also said that early this year, it submitted a “conditional offer” to the Central Bank of Iran when it sought bids on a contract to for new banknote machines.
Ultimately, KBA decided to discontinue sales to Iran, not long before it received Wallace’s letter, it said.
The lack of such equipment could have the added benefit of making Iranian currency more susceptible to counterfeiting, perhaps by an enemy of Iran, Wallace said. That uncertainty about the rial would make it even less valuable on whatever open markets on which it was still exchanged.
KBA’s rapid response to Wallace is indicative of UANI’s growing clout in the international business community.
As a result of actions like these, “regime change” in Iran is now being discussed seriously in Washington policy circles. Wallace won’t say whether that is his specific goal, but acknowledges that virtually any alternative would be preferable to the current “theocratic regime.”
Beyond SWIFT, Wallace said UANI’s efforts have led to dozens of agreements from U.S.-based and other international companies agreeing to stop doing business with Iran.
In some cases, trading partners have credited UANI in announcing their decisions to stop doing business with Iran. In others, they have not.
Targeting Iran's auto industry
Iran has the world’s 13th largest auto manufacturing industry and the largest in the Middle East and Central Asia. The industry is a major employer and a prestige piece for the Iranians. Not every country’s president can boast that his limousine is built in a local factory. Ahmadinejad can.
Numerous European and Asian auto companies had supplied parts and “build kits” to Iran. But UANI lobbied the companies early this year and again “called them out,” as Wallace put it. He again cited the EU and U.N. sanctions and suggested that a publicity campaign would hurt U.S. sales of their cars.
Of the companies targeted in the campaign -- Hyundai, Fiat, Peugeot, Porsche and Renault – Wallace says only the latter continues to supply Iran.
A Renault spokeswoman, Raluca Barb, told NBC News on Thursday that the company's Iranian venture, Renault Pars, in which it owns a 51 percent interest, does not violate the sanctions.
“Renault respects the regulations,” she said. “The automotive business is not included in sanctions against Iran.”
The Hyundai Motor Co. said it decided to discontinue operations in Iran after being contacted by UANI. The other auto companies that are no longer doing business with Iran didn’t cite UANI’s campaign, but numerous Iranian press accounts have connected the pullout to the threatened publicity blitz.
The auto company withdrawals contributed to a 42 percent nosedive in Iranian auto production over the past six months, Agence France Press reported last week, citing industry ministry figures.
UANI also says it forced Caterpillar, the huge U.S.-based construction company, to stop supplying equipment to Iran. After a letter-writing campaign failed, UANI bought a billboard opposite the company’s headquarters in Peoria, Ill., showing a piece of earth-moving equipment alongside a photo of Ahmadinejad and the words, “Today’s work, tomorrow’s nuclear Iran.” As soon as the company halted the sales in February 2010, the billboard came down.
At the time, Caterpillar said it did not have extensive business dealings with Iran, and that it couldn’t control sales in the secondary market. But it did bar non-U.S. subsidiaries from accepting orders that it knew were destined from Iran.
The company did respond to requests from NBC News this week for comment.
The most vivid of UANI’s efforts was its “cranes campaign.” After grisly images emerged showing of Iranians being hung by construction cranes, UANI tracked down all the crane manufacturers who had done business with Iran and asked them to divest. For the most part, they did.
There are other less obvious successes, like pressuring all 13 of the world’s major shipping registries, including those in Russia, South Korea, and Japan, to deny Iran access to their services. That, in turn, has prevented the regime and from insuring their tankers. UANI also quietly obtained pledges from Moldova, Mongolia and other nations to stop reflagging Iranian vessels.
Not all of its initiatives have worked, however.
Its biggest campaign has been against MTN, the South African cell phone company that owns 49 per cent of Irancell, which controls the mobile market in Iran and has been accused of tracking Iranian dissidents. But MTN has refused to get out.
Last week, Wallace excoriated MTN’s leadership in typical, no-holds-barred language. “It is widely known that MTN has carried out orders from the Iranian regime to shut off text messaging and Skype during times of political protest in Iran, and reportedly has a floor in its Tehran headquarters where Iranian military officials compile and access data to track, apprehend, torture, and murder regime opponents,” he wrote in a letter to the company that also went out as a press release.
“MTN has blood on its hands … We call for a global boycott of MTN's products and services and divestment from its stock, until it ends its reckless partnership,” he concluded.
'A liberating force for Iranians'
MTN did not immediately respond to Wallace’s most-recent broadside, but in a press release in February in reply to an earlier letter, it said its investment in Iran was “in compliance with applicable sanctions regulations and law” and that it viewed its non-controlling stake in Irancell as being in keeping with its core mission: “to speed up the progress of the emerging world by enriching the lives of the people within it.”
“Our success in widening access to mobile technology has been, and continues to be, a liberating force for Iranians, whatever their political allegiances,” it said. “Mobile technology has brought communities together, empowered individuals and helped raise living standards for millions in the developing world. MTN is proud of this legacy.”
Swatch, the Swiss watch manufacturer, has also resisted UANI’s appeals, saying in a letter to Wallace that it “sells to consumers, not regimes.” Why would UANI, which is concerned with nuclear proliferation, care about watches? Because, Wallace said, the high-end watches Swatch sells and other luxury items go to the “elites,” particularly officials of the Revolutionary Guards, and he wants them to feel the pain of sanctions, even if only on their wrists.
UANI’s allies in Congress give it high praise.
“What I like,” said Rep. Ileana Ros-Lehtinen, the Florida Republican who chairs the House Foreign Affairs Committee, “is they are in the weeds. You name a sector in the Iranian economy and they have been inside it, putting a lot of pressure on them. We’ve worked with them, especially on embargo and sanctions legislation. So many of the bills had their genesis with them.”
The campaign also finds favor on the other side of the aisle.
“Part of their approach involves putting pressure on corporations to end existing business relationships with Iran,” said Rep. Steve Israel, D-N.Y. “Along with their success on that front, UANI has used that experience to communicate effectively with members of Congress on how best to strengthen existing sanctions and ensure companies are complying with our laws.”
One major concern about the success of the sanctions is that the Iranians might lash out, having tired of seeing their nuclear scientists assassinated, their nuclear research sabotaged, their currency ravaged.
That may already be happening. U.S. officials ascribe continuing attacks on U.S. banks’ computer networks that began last month to Iran, perhaps in response to U.S. and EU sanctions on its banks. Israel claims Iran was behind the drone mission Hezbollah carried out over northern Israel this week, and Hezbollah acknowledged that the unmanned aircraft that was shot down was manufactured in Iran. And Tehran still has many other options for retaliation, experts say.
“The main concern for the market is that the Iranian regime acts out in desperation, as the financial noose tightens,” said John Kilduff of Again Capital and a CNBC oil analyst. “If Iran attempts to make good on its threats to close the Strait of Hormuz or attempts some other attack, prices will spike higher, at least temporarily. If, however, there is regime change in Iran, resulting in a Western-friendly government, we could see the mother of all price breaks at the gasoline pump.”
'Punishing the innocent'
There are those who also characterize what Wallace and UANI are doing as harming the Iranian people rather than the government.
“It is profoundly immoral. It is punishing the innocent,” said Haroon Moghul, a fellow at both the New American Foundation and the Fordham Law School Center for Security, speaking of UANI’s campaign.
“I'm no fan of Iranian government,” he continued. “I wish it would go away. But what do the people have to do with the government? It is weakening the people of Iran. We are making harder for them to change their government. Sanctions empower criminal elements, make it harder to civil society to operate, make it harder for Iran to become a real democracy.”
Reacting to that kind of criticism, Wallace acknowledges that his and his colleagues are involved in “a proxy war,” but adds, “I'm comfortable fighting that war.”
The Iranian Foreign Ministry said it is aware of the efforts of UANI and Wallace, but says the group’s campaign is misguided.
“I think that the nature of this organization is known to all of us,” said the spokesman, Alireza Miryusefi. “They take actions based on the false presumption that my country is pursuing a nuclear weapon program. As we have emphasized on several occasions, Iran's program is fully peaceful and their presumption is totally wrong.”
Wallace, however, has no doubts that Iran is bent on becoming a nuclear military power, and remains convinced that the pressure that UANI is bringing to bear will ultimately succeed.
“Our message is clear: You have to choose between doing business with our checkbook or their checkbook -- with the reality being we're the biggest checkbook in the world,” he said. “Notwithstanding the purported demise of the United States, we're still the biggest checkbook in the world.”
Richard Engel is chief foreign correspondent of NBC News; Robert Windrem is a senior investigative producer.
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