Omri Ceren: Dollarizing Iran (2)

On Tuesday Eli Lake reported on the State Department’s letter to the governors of all 50 states as well as some local officials asking them to reconsider any laws on the books that called for divesting state funds from businesses interacting with Iran’s economy, or laws that would deny contracts to companies that do business with Iran. Following up on Lake’s report, Seth Lipsky noted that the “delicate wording — the wheedling tone — of the administration letter suggests that Secretary of State Kerry knows he has no authority to demand that states retreat from their laws against the Iranian regime.” It is imperative in the view of the Obama administration that we fund and otherwise facilitate Iran’s ventures. Now Omri Ceren writes from the Israel Project to update readers on developments in our unfolding partnership with the Islamic Republic of Iran:

On Monday Secretary Kerry met with Iranian FM Zarif in New York. His comments after the meeting suggest that he and Zarif are preparing this Friday to announce new American concessions facilitating Iranian access to the U.S. dollar [a]:

QUESTION: Mr. Secretary, did you reach any agreement (inaudible) with the dollar issue and the (inaudible) sanctions issue?

SECRETARY KERRY: We agreed to – we’re both working at making sure that the JCPOA, the Iran agreement – nuclear agreement – is implemented in exactly the way that it was meant to be and that all the parties to that agreement get the benefits that they are supposed to get out of the agreement. So we worked on a number of key things today, achieved progress on it, and we agreed to meet on Friday. After the signing of the climate change agreement, we will meet again to sort of solidify what we talked about today.

Note specifically Kerry’s claim that the Iranians are entitled to the concession under the terms of the deal: “the benefits that they are supposed to get out of the agreement.” He made the same claim two weeks ago, in comments that were promptly picked up by Iranian state media [b]. That’s not how the deal was sold last summer. Back then top Treasury officials explicitly and repeatedly declared that prohibitions on Iranian dollar access would remain in place to maintain U.S. leverage on Iranian terrorism, human rights violations, ballistic missile development, etc. [c].

But then a month ago the Iranians started declaring that they weren’t getting the relief they’re entitled to because of banking sanctions, and they demanded dollar access lest they walk away from the deal [d][e][f][g]. Within weeks of the new Iranian demands the AP and WSJ confirmed that the administration was planning to offer dollar-related concessions, which the AP noted “would reverse a ban that… the administration had vowed to maintain” [h][i][j]. That triggered a Congressional backlash, forcing the administration to publicly declare that no new concessions were planned [k].

Now it looks like concessions are back on the agenda, and so are Secretary Kerry’s claims that the Iranians are entitled to them. On Monday evening – few hours after his meeting with Zarif – Kerry again suggested that the Iranians aren’t getting all the relief they’re due, saying they’ve only gotten $3 billion of $55 billion in escrowed oil funds [m]:

Do you remember the debate over how much money Iran was going to get?… We calculated it to be about $55 billion when you really take a hard look at the economy and what is happening. Guess what, folks; you know how much they have received to date as I stand here tonight? About $3 billion.

That’s a strange claim to make. 1st, there’s no reason it would be true: during the 17 month JPOA negotiation period the Iranians repatriated $700 million of escrowed oil funds per month, or $11.9 billion total. So a mechanism exists for getting Iran those funds. 2nd, statements from Iran suggest it’s false: the Iranians declared in February that they had been given full access to $100 billion in escrowed reserves [l]. The State Department’s Marie Harf responded by blaming Treasury for underestimating the windfall at $50 billion – an estimate that Kerry repeated – but she didn’t suggest that the Iranians were wrong about having been given access to their escrowed funds [n].

Journalists spent Tuesday trying to figure out what Kerry could have been suggesting, and if he was intentionally echoing the Iranian position. The debate spilled into the State Department press briefing [o]. The AP’s Matt Lee: “he’s making the Iranians’ argument here, right?… saying that the Iranians are correct when they complain… that the Iranians have a point here.” CNN’s Elise Labott: “he’s trying to tell the Iranians they’re going to get their money?” Reuters’s Lesley Wroughton: “Is it because of the financial restrictions that the Iranians are arguing about?”

State Department spokesman Kirby repeatedly denied that Kerry had intended to echo Iranian talking points.

[a] http://www.state.gov/secretary/remarks/2016/04/255977.htm
[b] http://www.presstv.ir/Detail/2016/04/06/459389/Kerry-Iran-US-dollar/
[c] http://www.foreign.senate.gov/imo/media/doc/07-23-15%20Lew%20Testimony.pdf][http://www.washingtoninstitute.org/uploads/Documents/other/SzubinTranscript20150916-v2.pdf
[d] https://twitter.com/khamenei_ir/status/707981817434009600
[e]http://www.al-monitor.com/pulse/originals/2016/03/iran-sanctions-jcpoa-banking-khamenei-nowruz-speech.html
[f]http://www.reuters.com/article/us-iran-trade-finance-idUSKCN0WO1Y3
[g] http://thediplomat.com/2016/03/the-real-threat-to-the-iran-deal-tehrans-banking-system/]
[h] http://bigstory.ap.org/article/b2c1eb1820154a518deb12b85882536e/gop-worries-obama-leaving-door-open-new-iran-relief
[i]http://hosted.ap.org/dynamic/stories/U/US_UNITED_STATES_IRAN?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT
[j] http://www.wsj.com/articles/u-s-moves-to-give-iran-limited-access-to-dollars-1459468597]
[k] http://www.jta.org/2016/04/13/news-opinion/politics/amid-rumors-white-house-rules-out-giving-iran-access-to-us-dollar
[l] https://www.washingtonpost.com/world/iran-claims-100-billion-now-freed-in-major-step-as-sanctions-roll-back/2016/02/01/edfc23ca-c8e5-11e5-a7b2-5a2f824b02c9_story.html
[m] http://www.state.gov/secretary/remarks/2016/04/255951.htm
[n] https://twitter.com/marieharf/status/694371008459988992
[o] http://www.state.gov/r/pa/prs/dpb/2016/04/255961.htm#IR