The Obama administration secretly gave Iran access to the U.S. financial system, even after telling Congress that Iran would continue to be barred from the U.S. market, a new Senate report said Wednesday.
Republicans on the Senate Permanent Subcommittee on Investigations, part of the Committee on Homeland Security and Governmental Affairs, released a report early Wednesday that said this access was given to Iran during the talks. The report said Iran was never able to access the market because two U.S. banks refused to participate, but said the Obama administration’s effort was contrary to the plans it conveyed to Congress.
“As the United States negotiated with Iran, one important U.S. interest consistently remained off-limits: Iran would not be granted access to either the U.S. financial system or the U.S. dollar. Foreign financial institutions were free to conduct business with the government of Iran and Iranian entities, but U.S. financial institutions continued to be barred from engaging Iran,” the report said.
“Senior U.S. government officials repeatedly testified to Congress that Iranian access to the U.S. financial system was not on the table or part of any deal,” it stressed.
“This notwithstanding, the U.S. Department of the Treasury, at the direction of the U.S. State Department, granted a specific license that authorized a conversion of Iranian assets worth billions of U.S. dollars using the U.S. financial system,” it added. “Even after the specific license was issued, U.S. government officials maintained in congressional testimony that Iran would not be granted access to the U.S. financial system.”
The report noted that in 2015, former President Barack Obama’s Treasury Secretary Jack Lew testified in the Senate that Iran would “continue to be denied access to the [U.S.] financial and commercial market.”
A followup letter from Treasury said Iranian banks “will not be able to clear U.S. dollars through New York, hold correspondent account relationships with U.S. financial institutions, or enter into financing arrangements with U.S. banks.”
And in early 2016, Sens. Marco Rubio, R-Fla., and Mark Kirk, R-Ill., asked about reports that the U.S. was willing to give Iran some access to U.S. financial markets. Treasury replied in June, “The administration has not been and is not planning to grant Iran access to the U.S. financial system.”
But the report found that in February of 2016, the U.S. quietly issued a license allowing Iran to access the U.S. financial system.
Specifically, it said an Iranian bank, Bank Muscat, was allowed to move about $5.7 billion through the U.S. financial system.”
“For the duration of the specific license, Bank Muscat was authorized to use the U.S. financial system to convert additional future Iranian deposits, known as ‘fresh funds,'” the report said. “One Bank Muscat executive wrote this was a “gigantic breakthrough which has assured Iran of almost full global financial inclusion.”
That excitement was short-lived, however. The report said the Obama administration encouraged two U.S. banks to help Iran, but they refused.
“A State Department official even suggested that Secretary Kerry or Secretary Lew should contact the U.S. banks and encourage them to facilitate the conversion,” the report said. “Both banks declined to complete the transaction due to compliance, reputational, and legal risks associated with doing business with Iran.”
The report is likely to bolster Republican complaints about how the Obama administration was not upfront with Congress about how the Iran nuclear agreement, which the GOP says was already too generous to Iran and didn’t do enough to verifiably require Iran to give up its nuclear weapons program.
The report made several recommendations in light of its findings, including that the Trump administration should be “aware” of Iran’s recent access to the U.S. financial system as it tries to renegotiate the Iran deal.
It said Congress should require the Treasury Department to provide details of any license it gave to Iran, and ensure that all current sanctions against Iran are enforced in full.
