June 18, 2018

Secret plan to help Iran thwarted

09 June 2018, 08:34 | Taylor George

Obama administration tried secret bank workaround for Iran, new report says

US President Barack Obama speaks in the Rose Garden of the White House in Washington Thursday

"Despite claims both before and after the Iran deal was completed that the USA financial system would remain off limits, the Obama administration issued a specific license allowing Iran to convert billions of dollars in assets using the United States financial system", the report stated.

Wall Street Journal editorial board member Bill McGurn discusses the report that the Obama administration gave Iran brief access to the USA financial system. If the Omani bank had allowed the exchange without such a license, it would have violated sanctions that bar Iran from transactions that touch the US financial system.

Still, the report by the Senate Permanent Subcommittee on Investigations sheds light on the delicate balance the Obama administration sought to strike after the deal, as it worked to ensure Iran received its promised benefits without playing into the hands of the deal's opponents.

Former President Barack Obama reportedly granted licenses that effectively allowed the Iranian government access to the American financial system, despite repeated promises that the administration would bar the Islamic Republic from entry to the markets. Even Secretary Lew testified before the Senate Foreign Relations Committee in July 2015 that, "Iranian banks will not be able to clear USA dollars through NY, hold correspondent account relationships with US financial institutions, or enter into financing arrangements with USA banks".

For example, in July 2015, Treasury Secretary Jack Lew testified before the Senate Foreign Relations Committee that, under the JCPOA, Iran "will continue to be denied access to the [U.S.'s] financial and commercial market".

The report says that government officials said in subsequent testimony to Congress, though, that Iran would not be granted access to the financial system.

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Without the license issued by the Treasury the proposed exchange would have run afoul of USA sanctions.

In July 2015, Obama Treasury Secretary Jack Lew assured the Senate Foreign Relations Committee that, under the nuclear accord, Iran "will continue to be denied access to the [U.S.] financial and commercial market" and that "Iranian banks will not be able to clear USA dollars through NY, hold correspondent account relationships with US financial institutions, or enter into financing arrangements with US banks". Cruz has been an adamant opponent of the 2015 Joint Comprehensive Plan of Action, the worldwide nuclear agreement with Iran negotiated by the Obama administration and five other world powers, calling it "catastrophic" and "disastrous".

Iran eventually found other ways to convert its money to Euros so it could access it. The report says unnamed State Department officials who negotiated the side deal wanted the US bank transaction to be authorized "as a gesture of support" to Iran. They warned that unless Tehran was willing to give up more, the US shouldn't give Iran anything more than it already had. The report drills down deeper, naming the specific financial institution involved - the Iranian Bank Muscat was allowed to move almost $6 billion through the USA marketplace. Trump withdrew from the landmark Iran nuclear deal last month.

Because the clock counts down till US secondary sanctions are snapped again into place, European nations should weigh whether or not doing enterprise with Iran is price dropping entry to the USA monetary system or dealing with US sanctions penalties.

"To be clear, the U.S. Department of Treasury is not working on behalf of Iran to enable Iranian access to U.S. dollars elsewhere in the worldwide financial system, nor are we assisting Iran in gaining access to dollar payment systems outside the U.S. financial system". It was created to allow Iran to briefly convert into dollars from Omani rials about $5.7 billion worth of Iranian assets frozen in an Omani bank. According to the report, during a roadshow in London, OFAC Director John Smith "downplayed the likelihood of any future penalties or fines", telling the audience "that 95 percent of the time OFAC sees an apparent violation it results in a simple warning letter or no enforcement action".

His comments and those of other top Obama administration officials drew the ire of the committee's Republican chairman. The U.S. dollar is the world's dominant currency, so allowing it to be used as a conversion instrument for Iranian assets was the easiest and most efficient way to speed up Iran's access to its own funds. OFAC officials should also refrain from telling foreign persons and entities that violations of US sanctions only result in an enforcement action five percent of the time.

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