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U.S. Secretary of State John Kerry (C-L) meets with Iranian Foreign Minister Mohammad Javad Zarif (2nd-R) in Vienna, Austria, July 1, 2015. Carlos Barria/AFP/Getty Images
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Will Tehran Be Given Access to the U.S. Dollar?

In one debate surrounding the JCPOA, it’s all about the Benjamins

Armin Rosen
April 15, 2016
Carlos Barria/AFP/Getty Images
U.S. Secretary of State John Kerry (C-L) meets with Iranian Foreign Minister Mohammad Javad Zarif (2nd-R) in Vienna, Austria, July 1, 2015. Carlos Barria/AFP/Getty Images

Although the Iran nuclear deal went into effect on January 16—“Implementation Day,” in the wonky parlance of what’s officially called the Joint Comprehensive Plan of Action (JCPOA)—it’s becoming increasingly clear that the U.S. and Iran don’t quite agree on what the landmark accord actually requires them to do.

This is partially by design. To its supporters, the genius of the JCPOA lies partially in the document’s elasticity: the agreement is notably cagey about what constitutes a violation of the deal, leaving an eight-member joint commission to resolve any disputes over compliance. The deal isn’t legally binding, and even supersedes a series of United Nations Security Council resolutions meant to restrain Iran’s nuclear program. Much is left to interpretation and diplomacy. It’s up to a future U.S. president—and to his or her Iranian counterparts—to decide, for instance, what kind of additional, non-nuclear sanctions against the Islamic Republic, or what kind of Iranian ballistic missile activity, falls within the letter and spirit of the deal.

But this flexibility comes at a cost. The deal’s vagueness risks enabling a dynamic in which the Iranians can claim that they’re owed more than they’re receiving under the present implementation of the deal, with Tehran daring the U.S. and its partners to scuttle the entire agreement over open questions of interpretation.

In fact, a roughly analogous scenario has already unfolded over the past month. On March 31, the Associated Press reported the U.S. was considering the creation of a mechanism for allowing Iran to convert Iranian riyals into dollars, something proscribed under the existing U.S. sanctions regime. Citing anonymous U.S. government officials, the AP reported that “the Treasury Department has prepared a general license permitting offshore financial institutions to access dollars for foreign currency trades in support of legitimate business with Iran, a practice that is currently illegal.”

The Iranians claim that the prohibition on dollar access falls under the broad rubric of “nuclear-related sanctions.” Dollar access would give the Iranian regime—which was mired in a ruinous hyperinflation spike in the early 2010s, thanks largely to the impact of international sanctions—the myriad benefits of possessing substantial amounts of access to the world’s reserve currency. The news comes amid reports that Tehran was unhappy with the pace of sanctions relief, and believed itself entitled to accessing the dollar under the agreement’s terms.

The Obama administration briefly appeared willing to accept Tehran’s argument that the deal allowed them to access the dollar—but that was before it triggered a political backlash in the states. Dollar access was the focus of a Senate Foreign Relations Committee hearing on April 5, while two Republican senators have introduced a bill designed to prohibit the Treasury Department from issuing general licenses that would allow Iran to purchase dollars offshore.

The dollar question could be a barometer of how Obama handles JCPOA interpretation disputes during the final year of his presidency. Is Obama willing to stretch the limits of the deal, and arguably surrender American leverage, in order to preserve one of his signature foreign policy achievements and incentivize Iran to abide by the agreement in the long-run? Or will he instead set a precedent for the U.S. dictating the contours and limits of the JCPOA to Iran?

Two speeches at the Foundation for Defense of Democracies’ annual Washington Forum on April 13 provided a glimpse into where the issue currently stands. In a video message to the forum, Maine Republican senator Susan Collins inveighed against the possibility of the administration allowing “dollarized transactions as an element of any trade in Iran without seeing any change in Iran’s non-nuclear nefarious behavior.” In her view, “Doing so would erode the coercive power of sanctions and undermine the rationale for imposing sanctions in the first place.”

“We should prohibit any direct or indirect access to the dollar unless Iran has ended its unacceptable behavior and compensated each of the families harmed by Iran’s support of terrorism as required by court orders,” Collins said, before alluding to a possible bipartisan effort to strengthen the sanctions regime if the administration moves towards allowing dollar access.

Adam Szubin, the Department of the Treasury’s acting undersecretary for terrorism and financial intelligence and one of the administration officials responsible for enforcing the Iran sanctions regime, addressed the dollarization issue during a speech later in the day. It was a misconception, Szubin told the forum, that Iran had received between a $100 billion and $150 billion windfall as a result of the deal. “And more recent claims that we are about to provide Iran access to the U.S. financial system is also untrue,” Zubin continued. “We will not allow access to the U.S. financial system and we will not restore the u-turn authorization,” he said, in reference to the practice of passing foreign currencies through a U.S. bank before offshoring the resulting dollar amounts, something Iran has been prohibited from doing since 2008.

Collins and Szubin were talking past each other. “Access to the dollar” is not the same thing as “access to the U.S. financial system.” And the Obama Administration can give Iran access to the dollar without restoring the u-turn, perhaps by granting a general license to a U.S. bank in order to permit it to capitalize offshore transactions involving the Iranian riyal.

As Collins and Zubin’s speeches showed, the dollarization issue isn’t going away. And the issue behind it—the struggle over how the biggest diplomatic breakthrough of Obama’s presidency will play out in reality—could be a feature of U.S. diplomacy for years to come.

Armin Rosen is a staff writer for Tablet magazine.

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