Report: Trump Administration Considers Weakening Iran Sanctions

The Associated Press

With less than two weeks to go until a far stronger round of U.S. sanctions hits Iran, the Trump administration is reportedly considering an exemption European governments strongly requested: allowing Iranian banks to continue doing business with the global financial transfer system SWIFT (Society for Worldwide Interbank Financial Telecommunications), based in Belgium.

Various observers see the potential SWIFT exemption as the Trump team either caving to Europe or recalibrating sanctions because the actions scheduled for November are too severe.

According to the Wall Street Journal’s analysis on Thursday, a struggle is raging between administration officials over the decision, particularly Treasury Secretary Steven Mnuchin and National Security Adviser John Bolton:

Treasury Secretary Steven Mnuchin signaled that the U.S. may not force Belgium-based financial-messaging service SWIFT to disconnect Iranian banks from the global banking network. The secretary has told foreign governments the U.S. could take a less-confrontational approach, according to people who have been briefed on the matter by government officials.

But other powerful voices close to the president, including national security adviser John Bolton, are ready to sanction SWIFT should it ignore Washington’s call to disconnect Iranian institutions, according to those people. The National Security Council didn’t respond to a request for comment about Mr. Bolton’s position and the administration’s decision-making process.

It sounds as if Mnuchin has not completely rejected Bolton’s point of view:

Mr. Mnuchin, speaking to The Wall Street Journal during a visit to the Middle East this week, suggested an openness to keeping some Iranian banks on SWIFT—while leaving room for a final decision that included forcing a Swift disconnect.

“Our objective is to make sure that financial institutions do not process sanctioned transactions,” he said.

His office is “having very specific discussions with SWIFT,” he said. “I will use all the tools in my power to make sure that sanctioned transactions do not occur.” Humanitarian transactions will be allowed, he said.

The WSJ quoted Treasury officials who feared pushing too hard on this point might alienate Europeans at a moment when the administration wants to get them on board with its Iran strategy. European governments and corporations might be motivated to develop alternative financial systems if U.S. sanctions become too severe. The sweet spot would be penalties just severe enough to adjust Iran’s behavior without providing the financial incentives to take game-changing steps to avoid the pain.

There is also the question of how to best invest America’s diplomatic resources in containing Iran. The Trump administration wants to go after corporations such as Turkey’s Halkbank for helping Iran violate sanctions, or at least persuade the Turkish government to tighten the noose on Tehran a bit. If the November sanctions are so tough they rearrange international financial systems to avoid them, the end result could be a situation where Iran more easily escapes penalties even though they are nominally tougher.

The countervailing argument holds that Iran was told to expect a “full snapback,” as one senior administration official put it to the Wall Street Journal, and President Trump wishes to deliver exactly that. The administration also hopes increasingly tough sanctions will illustrate how many Iranian companies, and even alleged humanitarian organizations, are actually linked to the extremist Islamic Revolutionary Guard Corps (IRGC). The Treasury has sanctioned the IRGC as a terrorist group, but the Department of State has not listed it as a Foreign Terrorist Organization.

Philip Klein at the Washington Examiner on Friday saw talk of a SWIFT exemption as Trump “caving” to the Europeans. He argued that severing Iran from SWIFT in 2012 was one of the strongest blows delivered to the regime until President Barack Obama’s nuclear deal lifted sanctions a few years later.

“Having access to the network allows Iran to fund terrorism and destabilize the region, and could even make it easier for them to finance their nuclear program,” Klein said.

The New York Times speculated SWIFT management might be concerned about damaging their relationship with European Union countries if they comply with American demands. In 2012, there was much less disagreement between the U.S. and EU about sanctions on Iran.

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