U.S. Moves to Give Iran Limited Access to Dollars
Proposal on sanctions relief comes amid rising criticism from Tehran
WASHINGTON—The Obama administration is preparing to give Iran limited access to U.S. dollars as part of looser sanctions on Tehran, according to congressional staff members and a former American official briefed on the plans.
The proposed move comes amid rising Iranian criticism that the landmark nuclear agreement reached last year between global powers and Tehran hasn’t provided the country with sufficient economic benefits.
Executives at European and Asian banks have said in recent interviews that they remain reluctant to conduct any financial transactions with Iran due to fears they might run afoul of the U.S. Treasury and its regulations that ban dollar dealings with Iranian firms. Most major international trade, particularly in oil and gas, is conducted in U.S. dollars.
The Treasury is considering how to issue licenses to offshore dollar clearing houses for specific Iranian financial institutions, an approach that wouldn’t require the involvement of American banks, according to the congressional officials. The clearing houses, likely involving select foreign banks, would conduct the dollar transactions instead, shielding the U.S. financial system from any direct contact with Iran, these officials said.
“They are looking at a couple mechanisms to allow for this dollar trade, stopping short of normalizing banking transactions,” said a congressional banking official briefed by the administration on its plans, which haven’t been finalized.
Treasury action on Iran’s access to the dollar wouldn’t require congressional approval.
American law still prohibits U.S. and foreign banks from dealing in dollars with Iran, despite the July nuclear agreement. The Treasury Department designates Iran’s entire financial system as a “primary money laundering concern” due to Tehran’s nuclear and missile programs and support for international terrorist groups, such as Hezbollah in Lebanon and Hamas in the Palestinian territories.
The U.S. Treasury and State departments declined to comment Thursday on preparations to allow Iran limited access to dollars.
But Treasury Secretary Jacob Lew has stressed in recent weeks the need for the U.S. to comply with the “letter and spirit” of the nuclear agreement and help Iran gain economic relief. Congressional officials following the deliberations said they expected a Treasury action could come within weeks, though they acknowledged details of the proposal were evolving.
Since 2006, the U.S. government has imposed an escalating campaign to freeze Iran out of the global banking system in a bid to persuade Tehran to roll back its nuclear program. The sanctions crippled Iran’s economy and cut by more than half its oil exports. Under the nuclear agreement Iran consented to limit its nuclear aspirations in exchange for the lifting of most international sanctions.
Treasury and State Department officials have traveled to the Middle East, Europe and Asia in recent weeks to meet with foreign governments and private businesses to discuss ways to help Iranian commerce, according to U.S. officials, who didn’t address the proposed dollar arrangement.
On Wednesday, Mr. Lew gave an address on sanctions policy at the Carnegie Endowment for International Peace, a Washington think tank, and argued the U.S. risked losing international credibility if it didn’t follow through and provide Iran with significant relief.
“The risk that sanctions overreach will ultimately drive business activity away from the U.S. financial system could become more acute if alternatives to the United States as a center for financial activity…assume a larger role,” Mr. Lew said.
The Treasury chief refused during a March congressional hearing to answer a lawmaker’s questions about whether Iran would be granted access to the dollar. The administration will “make sure Iran gets relief,” he responded.
Members of Congress from both parties have rapped reports that the White House is preparing to provide Iran with access to the U.S. dollar.
Lawmakers argued in letters to the administration this week that such a step risked undermining U.S. sanctions campaigns around the world, which are predicated on using the heft of the U.S. financial system to punish America’s adversaries. Iran, they stressed, continues to support terrorism and is developing ballistic-missile capabilities, despite moving to scale back its nuclear program.
Republican Sens. Marco Rubio of Florida and Mark Kirk of Illinois wrote Mr. Lew on Wednesday seeking assurances that Iran wouldn’t be granted dollar access. Their offices said they haven’t received responses.
In a letter to President Barack Obama on Thursday, Rep. Brad Sherman (D., Calif.), said, “I believe this will set bad precedent, and it will not be the last time the Iranians and/or their business partners receive additional relief not contemplated” under the nuclear deal.
Senior members of Congress on Thursday also released statements voicing concern about the proposed arrangement.
House Speaker Paul Ryan said that the administration should abandon the dollar-access idea.
And House Democratic Whip Steny Hoyer, who gave qualified support to ending the sanctions regime during congressional debates, said he was opposed to granting Tehran any new relief “without a corresponding concession. We lose leverage otherwise, and Iran receives something for free.”
Iran has conducted a string of ballistic-missile tests in recent months that the Obama administration said were “inconsistent” with a United Nations Security Council resolution, though it stopped short of charging Tehran with a violation. U.S. officials also believe Iran is a major supplier of arms and funding for the Bashar al-Assad regime in Syria and the Houthi militia in Yemen.
Since the agreement went into force in January, Iran has scaled back its nuclear activities. The U.S., however, has maintained penalties on Iranian defense and missile firms and individuals allegedly involved in human-rights abuses.
Iranian officials have increasingly complained that the ongoing U.S. penalties are prohibiting Iran from conducting normal business with a flood of European, Asian and Middle East companies that have sought to enter the Iranian markets.
Iran’s Supreme Leader Ayatollah Ali Khamenei sharply criticized the Obama administration during a Persian New Year’s speech for allegedly misleading Tehran’s nuclear negotiators during the talks.
“Our banking trade, our efforts to return wealth from their banks, various kinds of businesses that require financial services, all of these are still facing problems,” Mr. Khamenei said. “When we investigate the issue, it becomes obvious that [the banks] are afraid of the United States.”
Mr. Lew and other U.S. officials said in the months after the nuclear agreement that Iran would continue to be denied any access to the U.S. financial system. This included blocking Iranians from establishing accounts at American banks or conducting dollar trade through European or Asian banks.
“Iranian banks will not be able to clear U.S. dollars through New York, hold correspondent account relationships with U.S. financial institutions, or enter into financial arrangements with U.S. banks,” Mr. Lew said last summer.