Image: Missile test, retrieved from Bloomberg article.
A top Treasury Department official argued against imposing new legislative sanctions on Iran after its ballistic missile tests last month, even as he said the Islamic Republic would remain blocked from the U.S. financial system.
“New mandatory non-nuclear sanctions legislation would needlessly risk undermining our unity with international partners,” Adam Szubin, Treasury’s acting undersecretary for terrorism and financial intelligence, said at a conference Wednesday in Washington. “It is important to make sure our sanctions tools remain effective and are not overused.”
Republicans in Congress are still simmering over the nuclear accord with Iran that was completed last July and have criticized President Barack Obama for failing to punish the country for repeatedly defying a United Nations ballistic missile test ban. Republican Senators Marco Rubio of Florida and Mark Kirk of Illinois have introduced legislation to bar Iran from access to the U.S. financial system, including offshore U.S. dollar-clearing houses.
The U.S. already has the ability to impose new sanctions on individuals and entities for ballistic missile violations, Szubin said, citing restrictions placed on 11 people after the nuclear accord was reached last year. Iran has denied the missile tests are violations, in part because the accord with the U.S. and five other world powers guarantees that it doesn’t have a nuclear weapons capability.
While U.S. critics of the nuclear agreement said it would provide Iran with a windfall, the country’s leaders, including Supreme Leader Ayatollah Ali Khamenei, have complained that the benefits of sanctions relief remain elusive. European banks have been reluctant to establish lines of credit or finance investment in Iran due to concerns about the lack of transparency in the Iranian financial system and a fear of renewed U.S. sanctions.
Szubin said Treasury had seen “indications that some non-U.S. banks lack an understanding about the scope of U.S. sanctions with regard to Iranian funds that were formerly restrained.”
As part of the accord reached last year, Iran agreed to curtail its nuclear program in return for removal of nuclear-related sanctions, including unblocking access to as much as $100 billion in assets frozen in international banks outside Iran.
“We are in no way blocking Iran’s access to these funds,” Szubin said at the Foundation for Defense of Democracies conference. “We are not encouraging banks or other partners to do so.”
However, the U.S. won’t provide Iran access to the U.S. financial system, Szubin said, and there will be no restoration of the “U-turn’’ authorization, where transactions priced in U.S. dollars are cleared through a U.S. financial institution even though the money doesn’t stay in the U.S. bank. Obama and Treasury Secretary Jacob J. Lew have previously denied published reports that the administration would give businesses wanting to operate in Iran such access to U.S. dollars.
In a news conference April 1, Obama said Iran, while keeping to the letter of the nuclear deal, was violating its “spirit” through its recent missile launches and other actions. Iran must send “signals to the world community and businesses that it is not going to be engaging in a range of provocative actions that might scare business off,” Obama said.
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