The Obama administration appears poised to do one more big favor for the Iranian ayatollahs before leaving office: It looks like Iran will be granted access to the American financial system.
If this happens, it will fly in the face of previous assertions from the administration. A Wall Street Journal op-ed by Mark Dubowitz and Jonathan Schanzer, respectively, executive director and vice president for research at Foundation for Defense of Democracies and its Center on Sanctions and Illicit Finance, notes:
Even as Washington prepared to release an estimated $100 billion in restricted Iranian oil assets and paved the way for Tehran to regain access to the Swift network (Society for Worldwide Interbank Financial Telecommunication)—allowing it to transfer funds across the global electronic banking system—the Obama administration vowed that the Islamic Republic would never get the ultimate prize: access to the U.S. financial system or dollar transactions.
Treasury Secretary Jacob Lew was adamant during a congressional grilling last July. “Iranian banks will not be able to clear U.S. dollars through New York,” he told the Senate Foreign Relations Committee, or “hold correspondent account relationships with U.S. banks."
Pressed on this matter more recently by Rep. Ed Royce, a California Republican, Lew is now giving more equivocal answers. Having access to the U.S. banks system would be a great advantage to Iran. But it would be a mistake to grant them this advantage:
The Financial Action Task Force, a global antiterrorism finance body, maintains a severe warning about Iranian financial practices. Last month it warned that Iran’s “failure to address the risk of terrorist financing” poses a “serious threat . . . to the integrity of the international financial system.” The Treasury Department also recognizes the danger, in 2011 labeling the Islamic Republic a “jurisdiction of primary money laundering concern.” That finding, which remains in place, cites Iran’s “support for terrorism,” and “illicit and deceptive financial activities.”
What explains this possible reversal? Most likely, Iran demanded it. Secretary of State John Kerry and Foggy Bottom, always fearful that Tehran will walk away from the nuclear deal, may be ready to comply.
Don’t expect the White House to admit this; the administration is more likely to offer a feeble claim that its ability to oversee Iranian dollar transactions could yield better intelligence.
Gaining intelligence from having Iran use the U.S. financial system would be gravely risky:
In 2008, however, the Treasury Department banned U.S. financial institutions from processing “U-turns”—temporary dollar transactions between non-U.S. banks and Iranian banks. Treasury determined that the risks simply outweighed the intelligence benefits. Four years later Treasury pushed to ban several Iranian banks, including the central bank, from the Swift messaging system. The threat to the integrity of the global financial system from Iranian banks, it again determined, was too grave, despite the intelligence that could be gathered.
The Europeans are giving Iran access to Swift, but the U.S. Congress is likely to put up strong opposition. The Obama administration believes that, if we cozy up to totalitarian regimes, they will be nice back. So far there is no evidence that this approach works.