June 06, 2018
A new Senate GOP-authored report alleges that top officials in the Obama administration secretly authorized Iran to convert assets to the U.S. dollar, even after the officials repeatedly assured Congress that no such financial transactions would take place under the 2015 nuclear deal.
GOP Senate report says Obama officials gave Iran access to US financial system
Sen. Rob Portman (R-Ohio), chairman of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations, unveiled the new report on Wednesday, claiming top government officials granted a "license" that would allow the "conversion of Iranian assets worth billions of U.S. dollars using the U.S. financial system."
"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," the report reads.
"Despite these claims, 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 continues.
The transactions didn't go through, however, because two U.S. banks refused to comply with the administration's request to convert the money over legal and reputational concerns, the report says.
The report cites multiple instances where top officials such as Treasury Secretary Jack Lew pledged before Congress and the public that Iran would not have access to the U.S. financial system, both before and after authorizing the license.
“The Obama administration misled the American people and Congress because they were desperate to get a deal with Iran," Portman said in a statement.
Under President Obama, the U.S. and several other nations signed the Joint Comprehensive Plan of Action (JCPOA) with Iran in the summer of 2015, a pact that aimed to curb development of Iran's nuclear program. In exchange, the U.S. agreed to lift some of its economic sanctions issued against Iran.
Despite this financial relief, most of the U.S. sanctions directed at Iran generally remained in effect, which barred U.S. persons, financial institutions and other groups from conducting business with Iran and its parties.
The Omani Bank Muscat, on behalf of Iran, asked that the Office of Foreign Assets Control (OFAC) convert $5.7 billion in assets, a request that came shortly after the JCPOA went into effect, because foreign banks were having problems converting Iran’s assets, the report says.
Iran wanted to convert the Omani rials to euros, but the Omani rial’s value is tied to the U.S. dollar. In order for the conversion to be complete, the rials had to be converted to U.S. dollars, which would then be converted into euros. The report says that this conversion process was not allowed under U.S. sanctions and that there were other options available to convert such funds — just less efficient.
Despite this, OFAC provided Bank Muscat with a specific license in February 2016, authorizing roughly $5.7 billion worth of Iranian assets to be processed through the U.S. financial system, the report says.
U.S. officials at OFAC then tried to encourage two banks to make such conversions.
"To further encourage the banks, one U.S. government official wrote 'I agree it would be a good idea to have [Secretary] Lew engage [the U.S. bank]. If they refuse we can suggest [Secretary] Kerry will call, which will drive them nuts,'" the report says, referring to then-Secretary of State John Kerry.
When the banks declined, the officials eyed other banks as options.
Meanwhile, the officials continued to assure lawmakers that such transactions with the U.S. financial system were not taking place.
"As the Treasury and State Department worked behind the scenes to help Iran access the dollar, the message to Congress remained the same: The JCPOA did not allow Iran to access the U.S. financial system," the report says.
The report pointed to indicators that suggested officials knew about these efforts, like how the materials prepared for Lew's testimony on Capitol Hill noted that he should disclose the specific license to Bank Muscat “if pressed.”
Other records suggest officials knew that providing access to the U.S. financial system was off limits.
A senior State Department official negotiating the implementation of the JCPOA told his Iranian counterpart in an email that the specific Bank Muscat license “exceeded” the U.S. commitments under the nuclear deal, adding that the transaction was meant to be “a gesture of support.”
Iran’s assets ultimately were not converted, and they remained at Bank Muscat.
"Bank Muscat was unable to effectuate the conversion using the U.S. dollar. The State Department indicated Iran converted the funds in small increments using European banks and without accessing the U.S. financial system," the report says.
Portman said carrying out those transactions would have undermined the power of financial penalties.
"Sanctions are a vital foreign policy tool, and the U.S. government should never work to actively undermine their enforcement or effectiveness," his statement continues.
The report lays out a series of recommendations to ensure such secret transactions do not take place. This includes informing Congress of future negotiations with Iran, requiring the Treasury Department to notify Congress when it provides any specific license, increased coordination between the State and Treasury departments, and increased policing of U.S. sanctions policies.
“We now have an opportunity to fix the fundamental flaws in this deal and put in place a strong agreement that truly protects America’s national security interests and the interests of our allies in the region,” Portman said.
News of the report comes one month after President Trump announced he will withdraw from the pact, doing away with the major international deal spearheaded by his predecessor.
Trump, who campaigned on the promise to scrap the agreement, described the deal as “a horrible, one-sided deal that should have never, ever been made.”
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