POLICYWATCH 2476
Even after the deal is in effect, the United States can sustain or increase tough barriers on Iran's trade with other countries, but this fact has not been highlighted by the president or his team.
On August 19, in a move designed to address concerns by wavering members of Congress, President Barack Obama sent a letter to Rep. Jerrold Nadler (D-NY) outlining some steps his administration will take after the nuclear deal's implementation to continue to press Iran. Another set of clarifications the administration could issue toward the same end would be about the sanctions pressure Washington will apply to block Iran from normal trading relations with other countries.
Indeed, under the nuclear deal Washington has reserved rights to preserve serious limits on Iranian trade with European and Asian firms. However, it is by no means clear if the Obama administration will make vigorous use of those rights. Sanctions are never automatic: just because the U.S. government has the authority to block certain transactions does not mean it will actively make use of that power, including through vigorous enforcement. At least some of those uncertain about the nuclear deal would feel more comfortable were there convincing evidence that the administration plans to continue vigorously impeding normal Iranian trade.
The potential barriers fall into several categories: sanctioning foreign banks involved in Iran trade, supporting seizure of Iranian assets, highlighting the risks from Iranian deceptive financial practices, and maintaining regulatory pressure.
CONTINUING U.S. SANCTIONS ON FOREIGN BANKS INVOLVED IN IRAN TRADE
At present, the 2010 Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) prohibits U.S. banks from opening or maintaining correspondent or payable-through accounts for any foreign financial institutions that fall afoul of its provisions, effectively shutting these institutions off not only from the U.S. banking system but from all transactions in U.S. dollars. This has been a serious impediment to normal Iranian trade. Asian firms, among others, have faced complications arranging for payment as a result.
In the Joint Comprehensive Plan of Action's (JCPOA's) Annex II.B.4.1.1, Washington pledges to "cease the application" of certain sanctions, but this applies only to Section 104(c)(2)E(ii)(I), one small provision of CISADA. Nothing is said in the JCPOA about the rest of CISADA. Namely, the other parts of Section 104(c)(2) of CISADA describe a wide range of activities that can justify U.S. sanctions on a foreign financial institution. Such activities include if the institution "facilitates the efforts of the Government of Iran (including efforts of Iran's Revolutionary Guard Corps or any of its agents or affiliates)...to provide support for organizations designated as foreign terrorist organizations"; "engages in money laundering" to that end; "facilitates efforts by the Central Bank of Iran [CBI] or any other Iranian financial institution" to that end; or "provides significant financial services for Iran's Revolutionary Guard Corps [IRGC] or any of its agents or affiliates whose property or interests in property are blocked pursuant to the International Emergency Economic Powers Act" or for "a financial institution whose property or interests in property are blocked pursuant to that Act in connection with...Iran's support for international terrorism."
The list of activities subjecting foreign banks to the secondary CISADA sanctions is potentially far-reaching. Many IRGC "agents or affiliates," such as Iran's largest construction company, Khatam al-Anbia, and the IRGC's retirement funds and credit unions, are major economic actors, and arguably any dealings with them constitute facilitating efforts to support terrorist organizations. As then treasury secretary Timothy Geithner said in 2011 when designating "the entire Iranian banking sector -- including the Central Bank of Iran -- as a threat" under Section 311 of the USA PATRIOT Act, "If you are a financial institution and you engage in any transaction involving Iran's Central Bank or any other Iranian bank operating inside or outside Iran, you are at risk of supporting Iran's illicit activities: its pursuit of nuclear weapons, its support for terrorism, and its efforts to deceive responsible financial institutions and evade sanctions. Any and every financial transaction with Iran poses grave risk of supporting those activities." This language would suggest that the CISADA provisions could be easily triggered if a foreign bank has dealings with an Iranian bank.
The JCPOA is less than clear about what sanctions remain. For instance, Annex II.7.2. gives a long list of activities banks may carry out post-implementation, but footnote 14 specifies that "the sanctions lifting described in this Section...is without prejudice to sanctions that may apply under legal provisions other than those cited in Section 4" -- in other words, the CISADA provisions still apply. Indeed, Annex 2, Attachment 3, of the JCPOA provides a long list of Iranian institutions no longer subject to sanctions under various provisions. This list, however, is distinct from any decision about whether CISADA's provisions still apply to such institutions; that is, those institutions may still be subject to extensive sanctions even though they will no longer be penalized for proliferation activities.
BILLIONS IN COURT JUDGMENTS
Another barrier to Iran resuming normal foreign trade with Europe and Asia could be the vigorous legal actions planned by private U.S. lawyers and plaintiffs aimed at seizing Iranian assets linked to U.S. court judgments against Iran and its instrumentalities for supporting terrorist attacks against specific Americans. (Full disclosure: this writer has been an expert witness in many such cases.) Those judgments now total $46 billion. A case the Supreme Court is considering taking involves about a billion dollars transiting U.S. banks while en route between non-U.S. banks and destined for the CBI. Those funds were frozen and judged by the U.S. Second Court of Appeals in New York to be liable to seizure. The lawyers and plaintiffs involved are quite determined to pursue any Iranian funds that may be cleared through New York-based banks, which could complicate the use of U.S. dollars in Iran's trade.
