Obama’s Secret Iran Détente
Long before a nuclear deal was in reach, the U.S. was quietly lifting some of the financial pressure on Iran, a Daily Beast investigation reveals. How the sanctions were softened.
The
Obama administration began softening sanctions on Iran after the
election of Iran’s new president in June, months before the current
round of nuclear talks in Geneva or the historic phone call between the
two leaders in September.
While those negotiations now appear on the verge of a breakthrough the key condition for Iran—relief from crippling sanctions—began quietly and modestly five months ago.
A
review of Treasury Department notices reveals that the U.S. government
has all but stopped the financial blacklisting of entities and people
that help Iran evade international sanctions since the election of its
president, Hassan Rouhani, in June.
On Wednesday Obama said in an interview with NBC News
the negotiations in Geneva “are not about easing sanctions.” “The
negotiations taking place are about how Iran begins to meet its
international obligations and provide assurances not just to us but to
the entire world,” the president said.
But
it has also long been Obama’s strategy to squeeze Iran’s economy until
Iran would be willing to trade relief from sanctions for abandoning key
elements of its nuclear program.
One
way Obama has pressured Iran is through isolating the country’s banks
from the global financial sector, the networks that make modern
international commerce possible. This in turn has led Iran to seek out
front companies and cutouts to conduct routine international business,
such as selling its crude oil.
In
this cat and mouse game, the Treasury Department in recent years has
routinely designated new entities as violators of sanctions, forcing
Iran to adjust in turn. In the six weeks prior to the Iranian elections
in June, the Treasury Department issued seven notices of designations of
sanctions violators that included more than 100 new people, companies,
aircraft, and sea vessels.
Since June
14, however, when Rouhani was elected, the Treasury Department has only
issued two designation notices that have identified six people and four companies as violating the Iran sanctions.
When
an entity is designated as a sanctions violator it can be catastrophic.
Banks and other investors almost never take the risk of doing business
with the people and companies on a Treasury blacklist because of the
potential reputational harm and the prospect they could lose access to
U.S. financial markets.
“Sounds like Obama decided to enter the Persian nuclear bazaar to haggle with the masters of negotiation.”
A
Treasury spokesman contacted by The Daily Beast said the effectiveness
of sanctions should be measured by their results and not the number of
entities designated. (A White House spokesman declined to comment,
directing inquiries to the Treasury.) The Treasury spokesman also said
that the significant financial pressure on Iran in recent years changed
the calculus of the country’s leaders and led to the election of
Rouhani, who is a former nuclear negotiator and is considered more
moderate than his predecessor.
“In
the months since the Iranian election we have continued to pursue our
unwavering goal of preventing Iran from obtaining a nuclear weapon,” the
spokesman said. “We have not let up on vigorous sanctions enforcement
one iota. This includes new designations of sanctions evaders as well as
other steps to address potential sanctions evasion.”
But
the enforcement of sanctions, experts said, is very different than the
process of designating new violators. To start, sanctions enforcement
means the levying of fines or other legal measures against those people
and entities already designated by the Treasury Department as a
violator.
The
designation process is more proactive. “The designations are important
because they identify illicit actors that are abusing the international
financial sector in addition to signaling the U.S. intention to isolate
Iran’s economy,” said Avi Jorisch, a former U.S. Treasury official who
has worked closely on Iran sanctions and has advocated for toughening
these sanctions since leaving government.
Advocates
of sanctions relief also acknowledge that the administration has
pursued a policy of quietly lessening financial pressure on Iran. They
argue that was a logical policy when married to the process of renewing
diplomatic negotiations with Iran, which according to the Wall Street Journal this week, has been going on for several months.
“Before
the election there were a lot of these designations,” said Trita Parsi,
the executive director of the National Iranian American Council, a
group that has advocated for ending sanctions on Iran since. “Their
impact was probably not decisive, but it was a way for the White House
to signal to the Iranians and Congress they were going forward with the
sanctions train.” Parsi continued: “After the election [the Obama
administration] wanted to give the opposite signal, a pause. The last
thing you would want to do is let the sanctions train go forward and
potentially scuttle an opportunity that could have been there.”
Following
the Iranian elections, there were also a lot of changes inside the
Iranian government, making the task of designating officials and
entities a bit more tricky, Parsi said. But a significant part of the
administration’s decision, in Parsi’s opinion, was the belief that
continuing a high pace of designations would “undermine the signal that
they were trying to send, that there was an opening.”
Mark
Dubowitz, the executive director of the Foundation for the Defense of
Democracies, an organization that has worked closely with Congress and
the administration on devising the current Iranian sanctions, said the
slow pace of designations was only one kind of sanctions relief Obama
has been offering Iran.
“For
five months, since Rouhani’s election, the United States has offered
Iran two major forms of sanctions relief,” Dubowitz said. “First there’s
been a significant slowdown in the pace of designations while the
Iranians are proliferating the number of front companies and cutouts to
bust sanctions.”
The
second kind of relief Dubowitz said the White House had offered Iran
was through its opposition to new Iran sanctions legislation supported
by both parties in Congress.
By
Dubowitz’s estimates, Iran is now selling between 150,000 and 200,000
barrels of oil per day on the black market, meaning that Iran has
profited from the illicit sale of over 35 million barrels of oil since
Rouhani took office, with little additional measures taken by the United
States to counter
it.
“Sounds
like Obama decided to enter the Persian nuclear bazaar to haggle with
the masters of negotiation and has had his head handed to him,” Dubowitz
said.
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