If you ever find yourself in downtown Tehran, it's hard to miss the five-story-tall mural commemorating Khaled al-Islambouli, the man who assassinated Egyptian President Anwar Sadat in October 1981. The mural has long been a symbol of Iran's deep disdain for Egypt's secular rulers, particularly their peace with Israel and their alliance with the U.S. The mutual animosity has endured over the years, from Egyptian support for Iraq during the Iran-Iraq War to the 2009 arrest of 26 members of an Iran-backed Hizbullah cell in Egypt. In recent years, Cairo has also expressed its staunch opposition to Iran's nuclear program, which Egypt and other Arab states view as a threat.
But Egypt-Iran relations are not as black-and-white as they may seem. Egypt is expanding its financial ties with Iran through a jointly owned financial institution: the Misr Iran Development Bank. MIDB was founded in 1975, four years before Iran's Islamic revolution, and has somehow endured the tumult since. Today, the MIDB may have become a vehicle for Iran to circumvent economic sanctions with extensive help from Egypt, one of America's closest allies in the region. It is a testament to how difficult it can be for the U.S. to enforce international sanctions, even among countries that appear to be natural allies in the effort to deter Iran.
Egypt controls 59.86 percent of MIDB, split evenly between the state-owned National Investment Bank and Misr Insurance Company, which is partially owned by the state. Iran's 40.14 percent share in MIDB, worth about $80 million, is held by the Iran Foreign Investment Company. The IFIC is the investment arm of Iran's Oil Stabilization Fund, a sovereign wealth vehicle that generates profits for the Iranian government, with investments in the Middle East, Africa, South America, and beyond.
Tehran created the stabilization fund in 1999 to help insulate it from the gyrations of the oil market. When oil was up, the regime threw money into the fund and invested it through the IFIC. When oil was down, Iran withdrew money from the IFIC's investments to make up the shortfall. In the face of severe international sanctions, Iran has been withdrawing heavily of late. This August, when it became clear that the stabilization fund enabled the Iranians to resist international sanctions, the U.S. Treasury Department placed it on the Iranian Transactions Regulation (ITR) list, an administrative designation that made it unlawful for Americans to do business with the company because it is "wholly owned by the Government of Iran."
The Iranian regime looks to exercise similarly direct influence in the MIDB. The bank's website reveals that one of four members Tehran named to the board is "Dr. Davood Ebrahim Danesh Jafari." More commonly known as Davud Danesh-Jafari, he was Iran's minister of economy and finance affairs under Iranian President Mahmoud Ahmadinejad from 2005 to 2008.
The IFIC may now be positioning the Egyptian bank as a vehicle to circumvent international sanctions. In 2009, as the international community began to discuss ways to punish the Islamic Republic for its illicit nuclear program, the bank transferred $50 million to Iran, according to the government-controlled Tehran Times.