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Obama May Allow Foreign Governments to Use Dollars for Business with Iran

The Obama administration is reportedly considering more concessions to Iran, possibly including the Treasury Department issuing a license that would “permit offshore financial institutions to access dollars for foreign currency trades in support of legitimate business with Iran, a practice that is currently illegal,” as the Associated Press describes it.

“Several restrictions would apply, but such a license would reverse a ban that has been in place for several years and one the administration had vowed to maintain while defending last year’s nuclear deal to skeptical U.S. lawmakers and the public,” the AP continues, anticipating the new concession to Iran would “prompt intense opposition from critics of last July’s nuclear accord.”

One of those critics is Rep. Brad Sherman, a Democrat from California, who wrote a letter to the president saying that allowing dollar transactions for Iran will “set bad precedent, and it will not be the last time the Iranians and/or their business partners receive additional relief.”

Republican Sen. Marco Rubio and Sen. Mark Kirk, meanwhile, wrote Treasury Secretary Jack Lew to point out that giving Iran access to the American dollar would “benefit Iran’s financiers of international terrorism, human rights abuses and ballistic missile threats.”

The dollar ban is no small matter. As the AP notes, U.S. regulators have herded Asian and European banks away from Iranian money exchanges by levying “billions of dollars in fines” and “threatening transgressors with a cutoff from the far more lucrative American market.”

Under the prospective new licensing arrangement, Iranian rials would still be firewalled from directly entering the American financial system, and payments “wouldn’t be able to start or end with American dollars,” but with a bit of currency shuffling by third-party foreign banks, the dollar would become a thinly veiled instrument of Iranian commerce.

Administration officials seem to think that firewall should be good enough to satisfy critics of the Iran deal, but it is strange to hear them downplaying the prospective concession as a trifle while Iran treats it like a very big deal.

The UK Daily Mail quotes Mark Dubowitz of the Foundation for the Defense of Democracies describing the dollar license as a “major concession to Iran” and predicting the change would be “adamantly opposed by the U.S. Congress.”

That might be the point of the exercise, as the Daily Mail also has Patrick Clawson of the Washington Institute speculating the administration does not expect the proposal to get past Congress. Instead, it is meant to be a lightning rod for anti-Iran energy in Congress, which might content itself with blocking President Obama’s new concessions, instead of pushing for new sanctions against Iran.

Dubowitz also thought the dollar idea might be a trial balloon for even more concessions to Iran, which has been complaining that the U.S. is not giving it enough tangible rewards for supposedly upholding its end of the Obama nuclear deal.

Treasury Secretary Lew took that line in a speech to the Carnegie Endowment for International Peace, quoted by the Associated Press:

Since Iran has kept its end of the deal, it is our responsibility to uphold ours, in both letter and spirit… If foreign jurisdictions and companies feel that we will deploy sanctions without sufficient justification or for inappropriate reasons – secondary sanctions, in particular – we should not be surprised if they look for ways to avoid doing business in the United States or in U.S. dollars.

America is always helpless before the righteous anger of foreign powers in the Obama administration worldview. Until now, U.S. regulators were swinging heavy cudgels to beat Iran back from the dollar, using access to the American market as a weapon against foreign banks, but now they appear terrified about “overdoing” sanctions and prompting international interests to avoid doing business with us.

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