Internal strife as Treasury rejects State Department efforts to appease Iran
The Obama administration is at odds over whether to give Iran access to the U.S. financial system, a move that is opposed by parts of the administration, according to communications exclusively obtained by the Washington Free Beacon.
Tensions have been brewing between the State and Treasury Departments over contradictory statements about U.S. efforts to boost Iran’s economy and give it unprecedented access to U.S. dollars, according to conversations with sources who described a deepening internal divide over the issue.
While top administration officials had promised Congress that such access would never be granted under last summer’s nuclear agreement, some in the administration have changed their tune.
Secretary of State John Kerry recently participated in a public diplomacy campaign to encourage European governments and businesses to reengage with Iran, a move that was undertaken at the behest of the Iranians, who had publicly griped that the Islamic Republic was not receiving enough economic benefits as promised under the nuclear deal.
The administration’s efforts on Iran’s behalf sparked anger on Capitol Hill among critics of the nuclear accord, who have been pressuring the administration to promise that it will not grant Iran access to the U.S. dollar, either in the United States or abroad.
While the administration declined to make such a promise when pressed earlier this year by Sens. Marco Rubio (R., Fla.) and Mark Kirk (R. Ill.), Treasury Department officials are now telling Congress that the administration is committed to blocking Iran from the U.S. marketplace—promises that appear to contradict efforts underway at the State Department.
Several sources both inside and outside of Congress told the Free Beacon that Treasury officials—who oversee the international sanctions regime on Iran—are upset with what they believe is the State Department’s misguided diplomacy on behalf of Iran.
“It’s no secret that Treasury officials are seething with anger at Secretary Kerry,” said one congressional adviser apprised of the situation. “They say he’s endangering corporations and banks because he keeps declaring that Iran is open for business and safe to enter, suggesting that the secretary doesn’t quite understand how U.S. sanctions or financial crime risks work.”
“In reality Iran is a financial cesspool, and any firm that listens to Kerry is taking on enormous risk, and Treasury is running out of ways to tell him that,” the source said.
The June 7 promise was offered just weeks before airline giant Boeing announced a landmark deal to sell Iran a cadre of new planes.
“The U.S. Department of Treasury is not working on behalf of Iran to enable Iranian access to U.S. dollars elsewhere in the international financial system, nor are we assisting Iran in gaining access to dollar payment systems outside the U.S. financial system,” the letter states. “The administration has not been and is not planning to grant Iran access to the U.S. financial system.”
There are not efforts to promote business with Iran, according to the letter, that go further in its guarantees than any past communication with lawmakers on the issue.
“The concerns that remain regarding Iran’s economy, such as transparency issues, corruption, and regulatory obstacles, have given businesses and banks pause when considering whether to engage with Iran,” the Treasury Department writes. “We have been clear with audiences here and abroad that Iran has a lot of work to do to address these areas of concern if it wants to attract investment and trade.”
“We are encouraging our European partners to make clear to Iran that Iran must address the shortcomings in its financial system if it wants to reintegrate into the international economy,” the letter adds. “When we speak to the private sector … it is not to encourage them to do business with Iran.”
A senior congressional aide who works with the Obama administration on Iran issues confirmed the internal tensions, telling the Free Beacon that the Treasury Department’s latest communications to Congress directly contradicted Kerry’s actions.
“The Treasury Department’s letter couldn’t be more in conflict with Secretary of State John Kerry’s de facto role as Tehran’s trade representative,” said the source. “This inconsistency in the administration’s message should deeply concern any and all international banks and companies thinking about venturing into the Iranian market.”
The Treasury Department, in its latest correspondence with Congress, makes an explicit promise to completely block Iranian access to U.S. dollars; it also guarantees that the Obama administration is not encouraging any company to reengage in business with Iran, according to a copy of the communication obtained by the Free Beacon.
The Treasury Department letter further criticizes Iran for its ties to terrorist financing and corrupt business practices.
“Iran is a high-risk jurisdiction and has been designated as such by the international standard setting body on anti-money laundering and counterterrorist financing,” the letter states.
“Until Iran has addressed other concerns we have with its behavior outside the nuclear file, the U.S. financial system (including the branches of U.S. financial institutions abroad) will remain off limits to Iran an U.S. persons will not [be] able to provide financial services or products to Iran without explicit authorization,” the Treasury Department vows.
The latest promises from Treasury Department officials come after months of protest by Rubio and Kirk, who have pressured the Obama administration to freeze out Iran from every sector of the American financial system.