US Treasury Official comments on foreign banks’ return to Iran

English: current flag of iran

English: current flag of iran (Photo credit: Wikipedia)

Foreign banks and companies will only reenter the Iranian market upon the finalization of a comprehensive, permanent nuclear agreement with the country, U.S. officials said Tuesday.

In a hearing, U.S. Undersecretary for Terrorism and Financial Intelligence David Cohen told members of the Senate Foreign Relations Committee that the recent spate of visits by foreign trade delegations to Tehran won’t result in new commercial deals under the 6-month joint plan of action agreed to by Iran and six other nations in November.

“We are as crystal clear as possible in all of our engagements that if these talks turn into deals that violate the elaborate sanctions regime that remains in place, that we will take action,” Cohen told lawmakers. “You see these delegations going to Tehran, but those conversations are about what may come in the future, not about what could happen today.”

The deal, which formally began on Jan. 20, keeps intact the vast majority of banking sanctions, including most U.S. measures against foreign banks doing business with Iran. Under the agreement, Germany and the five permanent member-states on the U.N. Security Council loosened restrictions on the trade of oil, automotive parts and precious metals and agreed to unfreeze $4.2 billion of Iranian funds.

“Most of these delegations appear to be going to get in line for the day that a comprehensive agreement is reached, if it is reached,” said Wendy Sherman, the Undersecretary of State for Political Affairs and the lead U.S. negotiator for the agreement, during Tuesday’s hearing.

Sherman delivered the comments a day after a delegation of over 100 French businessmen began a 3-day visit to Tehran. The delegation included representatives from France’s food, consulting, law, shipping, insurance, advertising, construction, pharmaceuticals and financial industries and included representatives of one bank, according to the Financial Times.

Delegates from Italy, Germany, Austria, Portugal and South Korea have also recently visited the Islamic Republic.

“We have told them all that they are putting their reputations, themselves, and their business enterprises at risk if they jump the gun,” Sherman said.

Tuesday’s testimony by the two officials comes amid an orchestrated effort by the Obama administration to assuage critics concerned that the joint plan may not go far enough to stall Iran’s purported nuclear weapons program.

U.S. officials, including Secretary of State John Kerry, have discouraged reported attempts by Iran to barter its oil for Russian goods, Sherman said, at the hearing.

The deal, first reported by Reuters, would see Russia swap 500,000 barrels a day of Iranian oil directly for Russian products, bypassing international banking sanctions and possibly violating U.S. restrictions.

“Anything like such an agreement between Russia and Iran would have potential sanctionable action… and make coming to a comprehensive agreement all the more difficult,” said Sherman.

The hearing coincides with the apparent stalemating of a new sanctions package introduced in December by Sen. Mark Kirk (R-IL) and committee chairman Robert Menendez (D-NJ).

Critics of the bill, which is cosponsored by over half the Senate, have argued that adopting new sanctions before the interim deal expires in July could prematurely terminate ongoing negotiations for a comprehensive agreement that would include more substantial sanctions relief in exchange for permanent limitations to Iran’s nuclear efforts.

President Obama vowed to veto new Iran sanctions legislation in his Jan. 28 State of the Union address.

Despite the Treasury Department’s efforts to engage with foreign banks and governments, the interim accord could permit Iran to exploit new channels of illicit finance, according to Mark Dubowitz, a longtime sanctions advocate and head of the Foundation for Defense of Democracies, a pro-Israel policy center in Washington, D.C.

“Iran may now be using gold to finance the war in Syria, which may be an unintended consequence of relaxing precious metals sanctions” that had been in effect since July 2012, said Dubowitz, at the hearing.

Despite U.S. concessions, taking advantage of the temporary sanctions relief is more practical on paper than in practice, according to Erich Ferrari, a sanctions attorney with Washington, D.C.-based Ferrari Legal, P.C.

“It’s still going to be difficult to do anything commercial because the affected businesses have by and large already left Iran,” Ferrari said. “This means they have to reinstitute themselves in Iran, negotiate the deals, finalize those deals, deliver the goods and find a banking channel to receive payment before the deadline.”

Deals for sellers of commercial aviation replacement parts seemingly facilitated by the accord can take up to a year to complete “in the best circumstances,” said Ferrari.

Newly licensed deals with Iran, “from contract, to delivery, to payment,” must begin no earlier than Jan. 20 and terminate no later than July 20, Cohen confirmed Tuesday.


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