April 1, 2016

Obama Administration Considers Further Step to Fulfill US Commitments Under Accord

US-POLITICS-OBAMAReports indicate that the Obama administration is considering the issuance of a general license to permit Iran limited and indirect access to certain dollar-clearing services.  Under this proposed license, non-U.S., non-Iranian banks would be permitted to set up an offshore facility in order to facilitate currency exchanges in support of Iran-related business so long as such exchanges do not start or end with the U.S. dollar.  No Iranian banks would be allowed direct access to such an offshore facility.

Critics of the nuclear accord have pounced on the Administration, calling this an undue “concession” to Iran.  This is wrongProvided that this license is implemented, the United States would not be providing Iran an additional concession, but would rather be fulfilling the terms of its obligations under the nuclear accord.  Pursuant to § 24 of the JCPOA’s Main Text, the United States is committed to take certain additional steps to ensure that Iran receives practical benefit for the sanctions-lifting outlined in Annex II.  In authorizing a license to permit Iran indirect and limited access to certain dollar-clearing services, the United States would be acting consistent with its JCPOA obligations – not “above and beyond” them.

Why is the Obama Administration Considering This Step?

Despite the dire warning of critics that U.S. sanctions would collapse in the face of the lifting of nuclear-related sanctions, surviving U.S. sanctions have been so strong as to deny Iran any practical benefit from the sanctions-lifting.  No major European bank has re-engaged with their Iranian counterparts or facilitated Iran-related business, and Memorandum of Understandings (MOUs) have become the flavor of the day for foreign parties interested in entering Iran in lieu of actual enforceable contracts.  Some analysts understood that this would be the case post-dealwhile others engaged in hyperbolic false warnings.  The danger is, though, that absent any practical benefit for its nuclear bargain, Iran will perceive the United States as a bad-faith actor and its own commitment to the nuclear accord will be undermined as a result. The end-result could be a return to an unconstrained Iranian nuclear program.

What are the Risks of Inaction?

In light of the limited impact of the sanctions relief, the Iranian people have recently expressed their own skepticism that the United States would live up to its obligations under the nuclear accord.  According to a recent poll carried out at the University of Maryland’s Center for International and Security Studies (CISSM), two-thirds of Iranians indicated that they were either “not very” or “not at all” confident in the U.S.’s willingness to comply with the JCPOA.  By failing to take action to resolve the serious issues that are facing Iran and that are the result of our sanctions, we would be sending the wrong message to the wrong people: the Iranian people.  Yearning for economic reprieve, the Iranian people’s skepticism that the U.S. will adhere to its commitments risks not just the nuclear accord but also the possibility for a better relationship between the U.S. and Iran in the future.

It is our belief that the United States should take such action out of its own interest – not Iran’s.  Faced with growing skepticism from the Iranian people and seeing that Iran is being denied practical benefit to the nuclear bargain it struck with world powers, the United States needs to take additional steps to secure the nuclear accord and ensure that Iran’s nuclear program remains constrained and under the close inspection of the international community.  Failure to take action will not just risk Iran’s incentive to continue to comply with the nuclear accord – viewing the U.S.’s inaction as itself non-compliant with the agreement – but will also undermine those people inside Iran that seek Iran’s political and economic re-integration with the world, including with the United States.   

Has the U.S. permitted such transactions in the recent past?

Yes. The United States had in place a U-turn license providing Iran indirect access to dollar-clearing services up until November 2008 – all during the tenure of the Bush administration.  This previous U-turn license allowed Iran to make and receive payment in U.S. dollars (something that the proposed license does not seem to do).  It was revoked in order to put pressure on Iran to concede on elements of its nuclear program and was unlikely to have been put in place absent the U.S.’s growing concern over Iran’s nuclear ambitions.

Based on today’s reports, the Obama administration is considering a much more limited license authorization than existed under the U-turn license.  Critics who claim that implementing such a license will lead to the end of the U.S. sanctions are giving us the same kind of hyperbole in which they regularly traffic.  Just as the U.S. enforced sanctions on Iran prior to November 2008 – including a comprehensive trade and investment embargo with Iran – so too can the U.S. maintain its sanctions on Iran should it authorize a new license. There should be zero question about this.  

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