Financial flows and their components
Access to financial flows became a cornerstone of the axis’s authority both domestically and transnationally. Axis members devised both formal and informal mechanisms to secure and enhance their economic power, seeking entry into financial markets and providing them with sources of international currency. The interconnectedness of the network enabled the seamless movement of cash and resources across borders, with domestic connections providing essential financial lifelines that sustained the axis’s regional presence. These cross-border transfers fortified the resilience of the axis, allowing it to withstand external pressures such as sanctions. In each country, businesspeople, government bureaucrats, local officials and armed actors collaborated to facilitate the transfer (both virtually and physically) of money across borders. These networks of individuals operated in both the formal sector, including by gaining influence over state-owned banks, and the informal sector, including via currency exchange houses. At times, informal money smugglers were also able to use government military vehicles to transfer cash, blurring the line between state and non-state in the countries affected.
Central banks
Central banks became a key mechanism for axis members to acquire and move money, with allegations arising that banks engaged in informal financial practices that facilitated the flow of currency from one part of the network to another. For instance, in 2018, the US Treasury reportedly uncovered a network – which included the governor of the Central Bank of Iran, an Iraq-based bank and its chairman, and a Hezbollah official – that transferred millions of US dollars on behalf of the IRGC to Hezbollah. These actors sat both inside and outside government, using their formal and informal authority to move the money.
A significant example of transnational financial flows was the dollar auction system at the Central Bank of Iraq, which it was alleged Iran and its allies gained influence over in pursuit of US dollars. This auctions system, originally designed to facilitate the import of goods by Iraqi companies by offering US dollars in exchange for Iraqi dinars, was reported to have been manipulated by a network of financial institutions and informal channels for the benefit of Iran’s network. For instance, the US Treasury discovered that an Iraqi businessman, Hamid al-Moussawi, employed partially aware, unaffiliated individuals to purchase US dollars during currency auctions held by Iraq’s central bank. According to the findings, al-Moussawi used their identity documents to bypass restrictions on currency purchases. By submitting inflated or fraudulent invoices, it was alleged that such actors secured large sums of dollars, which could then be moved across the region to benefit groups affiliated to the axis.
According to the US Treasury, Iran’s allies created intricate networks of front companies and multiple banking institutions to obscure the origin and destination of funds. For example, reports indicated that both the Assad regime and Hezbollah leveraged their connections with the PMF to gain access to Iraqi currency exchange houses. With the PMF’s assistance, Iraqi businessmen and currency traders reportedly acted as intermediaries in this process, purchasing US dollars and then reselling them to Hezbollah and the Syrian regime. As the deputy governor of Iraq’s central bank noted: ‘The main reason for this is the sanctions imposed on Iran and Syria, and the fact that their bank transactions are having trouble. Iraqi businessmen play the role of middlemen.’ Interviews with Iraqi bankers and exchange offices corroborated the notion that, for many, transferring money from Iraq to Lebanon or Syria was as easy as transferring money within Iraq. One interviewee outlined how the system operated: ‘If you give me money now, I will make a phone call and your friend can receive it in Beirut at the same time.’
After tracing the proprietors of companies and accounts cited in dollar application invoices, an investigative report by the Organized Crime and Corruption Reporting Project claimed that a substantial portion of the funds was directed to accounts linked to suspected financiers of the IRGC and its allies. These funds included at least $28 million directed to a company identified by the US as managing funds for an IRGC member, who was subsequently sanctioned for financing Yemen’s Houthis. In one example, according to the US Treasury, al-Moussawi, who was the owner and president of Al-Huda Bank, maintained strong relations with both the IRGC and Kataeb Hezbollah. It reported that, ‘[s]ince its inception, Al-Huda Bank has used forged documents to execute at least $6 billion in wire transfers out of Iraq.’
The Central Bank of Syria (CBoS) also played a key role in the transnational financial infrastructure. The Assad regime reportedly used currency exchange houses to circumvent sanctions, using both informal mechanisms, such as the hawala system which made transactions more difficult to trace, along with the formal channels such as the CBoS.
A Syrian economist interviewed for this paper explained that:
These details were echoed by the US Treasury, which in 2023 sanctioned the Damascus-based Al-Adham Exchange for allegedly assisting the Assad regime to maintain access to the international financial system. Al-Adham Exchange was accused of facilitating millions of dollars in transfers to CBoS accounts and regularly moving money abroad on behalf of the CBoS.
The Assad regime, according to the US Treasury, relied on informal trading houses to secure crucial foreign currency from Lebanon and transfer it into Syria, helping control the depreciation of the Syrian pound. The US Treasury reported similar details in its 2023 sanctions against another Damascus-based exchange house, Al-Fadel Exchange, which was alleged to have facilitated the transfer to the Syrian regime of cash collected in other Middle Eastern countries.
Reports also indicated that the Assad regime allowed other network groups, including Hezbollah, to use Syrian exchange houses to carry out financial transactions. This practice was highlighted in US Treasury sanctions against Al-Fadel Exchange, which allegedly facilitated millions of dollars in transfers to CBoS accounts since 2021. In communications outlining the sanctions against Al-Fadel, the US Treasury stated that its owners, Fadel, Muti’i and Muhammad Balwi, were the only individuals authorized by the CBoS to work on behalf of Hezbollah.
Cross-border cash transfers
Beyond facilitating transactions through connections with the formal governments and central banks in their countries, exchange houses were also reportedly used to courier cash to other axis groups. Couriers used various routes, both physical and virtual, ensuring that when one route was shut down, others could be leveraged in their place.
Speaking on the subject of overcoming sanctions, a Syrian businessman explained, ‘financial transfers between Lebanon and Syria are largely handled either by physically transporting the cash through illegal crossings or by cash couriers with connections on both sides of the border, ensuring they can bypass authorities.’ Similarly, a Lebanese MP highlighted the scale of these operations, stating that ‘well-known gangs buy dollars from the local market in alarming quantities and smuggle them into Syria.’ The MP criticized the lack of action taken against these smugglers, who they claimed freely crossed the border with large sums of cash under the protection of state authorities.
Likewise, dollars purchased from Iraq’s central bank auction were physically smuggled to Syria across land borders by Iraqi armed groups or by others under the direct protection of those groups. A Syrian businessman explained in an interview with the authors:
In other arenas, the axis used different forms of currency to move cash. For instance, in late 2024 the US Office of Foreign Assets Control stated that five cryptocurrency wallets associated with the IRGC were used by a Houthi-affiliated businessman, Said al-Jamal, to move funds electronically. The loss of the Assad regime necessitated a greater reliance on other axis groups such as the Houthis, who subsequently assumed a more pivotal role.
Energy trading
In response to US sanctions targeting Iran’s financial sector and oil industry, the axis increasingly relied on oil and gas resources as a crucial lifeline. Tehran facilitated the direct and indirect shipment of crude oil and fuel to its partners in Iraq, Lebanon, Syria and Yemen, but also other regions. The revenue generated from these local energy sales was frequently used to finance the Axis’s operations. Again, these routes were diverse, encompassing both land and sea, allowing for navigation around any potential disruptions.
Iran’s trade extended beyond its usual partners and states aligned with the axis of resistance, reaching further afield. China emerged as the largest market for Iranian energy, with 2024 marking a significant milestone. That year, China accounted for a substantial portion of Iran’s energy trade, reflecting a 24 per cent increase compared to 2023. Approximately 91 per cent of Iran’s total oil exports, amounting to 533 million barrels, were directed to China. This trade was valued at around $70 billion in 2023.
Moreover, it was not only adversaries of the US and UK who were involved in this network, but also their allies. The shipping fleet connected to Iran extended to involve Gulf Arab countries, highlighting shifting alliances in a more multi-aligned global order. For example, a Reuters investigative report mapped the movements of the vessel Sahara Thunder, which transported Iranian oil from Bandar Abbas in Iraq to Venezuela, Murmansk in northern Russia, various ports in China and through Fujairah in the United Arab Emirates (UAE). Another ship linked to Iran’s energy trade also sailed to the UAE, where an Emirati firm refuelled the ship. The company was alleged to have instructed the Iranian firm Sahara Thunder to pay 4.3 million dirhams ($1.2 million) to its agent in cash. Additionally, a report found that the southern Iraqi city of Basra served as the heart of Iran’s fuel-blending operations, with Khor Al Zubair and Umm Qasr ports being key export points for transferring its fuel.
Despite facing international sanctions, Iran continued to collaborate with neighbouring countries with which they share oil fields. For instance, Iran and Qatar jointly exploit the South Pars/North Dome Gas Field, the world’s largest natural gas field. Similarly, Iran and Saudi Arabia engaged in joint ventures to exploit the Arash-Dorra gas field, with both states expressing interest in collaborative efforts to enhance their energy production capabilities.
The trading system operated by Iran undermined the effectiveness of economic sanctions, posing a significant challenge to US, UK and allied policymakers in their efforts to curb the growing influence of the axis in the MENA region and beyond.
This broader trading system operated by Iran undermined the effectiveness of economic sanctions, posing a significant challenge to US, UK and allied policymakers in their efforts to curb the growing influence of Iran and the axis in the MENA region and beyond. This dynamic has unveiled a global order where traditional allies and adversaries are interconnected in their pursuit of profit.
The energy supply chain also blurred the lines between state and non-state actors, as well as between national borders. The onset of conflict in Syria from 2011 and subsequent sanctions against the Assad regime led to a sharp decline in Syria’s domestic oil production, making the country heavily dependent on Iranian oil. Estimates suggested that about 8 per cent of Iran’s total annual oil exports, equivalent to around 87.6 million barrels, went to Syria before Assad was overthrown. The Assad regime’s control over formal critical infrastructure in Syria, including ports, storage facilities and refineries, enabled large-scale fuel imports to continue despite the presence of opposing groups in other parts of the country.
Reports indicated that Hezbollah played a role in facilitating the transport of Iranian oil through Syria, using a network of businesspeople and front companies, and tactics such as deceptive shipping routes and falsified vessel registrations to evade regulation. Corroborating these claims, the US Treasury’s September 2024 sanctions against Hezbollah-affiliated individuals, companies and vessels revealed the sophisticated tactics employed by Iran and its allies to finance their operations through the oil trade. These US sanctions detailed how some oil shipments were managed directly by Hezbollah-affiliated front companies, such as Hokoul SAL Offshore, which the US Treasury found obscured the flow of oil to Syria by layering corporate ownership and distancing Hezbollah from direct involvement. Among the individuals sanctioned were Lebanese businessmen Ali Nayef Zgheib and Boutros Georges Obeid who were accused of ‘having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of’ Hezbollah.
In 2021, Hezbollah publicly admitted its role in acquiring fuel from Iran to alleviate Lebanon’s worsening energy crisis. The import and sale of Iranian oil to the Syrian regime and in Lebanon reportedly enabled Hezbollah to generate substantial revenue. A Lebanese economist noted that:
Hezbollah also worked to transport fuel from Lebanon to Syria. The US Treasury found that Heavy Industrial Fuels SAL received a $1 million payment in 2022 for liquefied petroleum gas shipments from Lebanon to Syria. Using illegal border crossings in areas like Baalbek-Hermel, Hezbollah transported subsidized diesel from Lebanon to Syrian warehouses controlled by the Syrian army’s Fourth Division or its affiliated businessmen. Having been bought at significantly lower prices in Lebanon, this fuel was resold in Syria at a substantial mark-up. At its peak, this operation was estimated to bring in revenues of around $300 million per month. When Lebanon stopped subsidizing fuel in late 2021, the same network began smuggling Iranian fuel into Syria.
Meanwhile, persistent fuel shortages in areas of Syria held by the Assad regime presented a lucrative opportunity for the PMF, which traded subsidized oil products from Iraq and sold them on the black market to residents in northeastern Syria at inflated prices. Around 10,000 barrels of oil were thought to have been smuggled into Syria via this route each day. As such, the PMF used its access to the Iraqi government to acquire subsidized fuel to then ship to axis allies in Syria.
Iranian oil was also sold via Iraq through a combination of formal agreements and informal mechanisms. One important method involved barter deals, in which Iraq exchanged crude oil for Iranian gas and fuel products. This arrangement allowed both countries to bypass US sanctions that restricted financial transactions. Additionally, Iranian oil was allegedly blended with Iraqi oil to obscure its origin, making it more difficult to trace and sanction. This blending process was facilitated by ship-to-ship transfers that enabled the seamless movement of oil across borders. This network of economic intermediaries ensured that Iranian oil continued to reach international markets despite the imposition of sanctions by the US and others.
In another arena, Iran relied on another ally – the Houthis – to diversify its energy exports. For example, the US Treasury accused businessman Said al-Jamal of generating revenue for the Houthis through the illicit sale of Iranian petroleum, stating that:
This diversity of routes and supplies allowed Iran and its allies to remain able to respond and adapt to shocks in any one theatre, such as when the Assad regime fell in Syria.
