The view from Treasury.

Photographer: Andrew Harrer/Bloomberg

Obama's New Answers on Iran Fall Flat

Josh Rogin is a former Bloomberg View columnist.
Read More.
a | A

Top Obama administration officials have released new details about how they would lift most sanctions against Iran. Those are unnerving some experts, who doubt the administration’s claims about the sanctions will hold up.

In speeches last week to a conference at the Washington Institute for Near East Policy, Treasury Secretary Jack Lew and Vice President Joe Biden revealed new details about the end of most sanctions against Iran if a nuclear deal is reached. The officials also claimed that most of the sanctions, including multilateral sanctions, could be snapped back into place if Iran cheated, and they argued that giving Iran tens of billions of dollars in cash won’t dramatically increase Iran’s spending on terrorism and other nefarious activities.

Lew spoke to a private meeting of Washington Institute members last Wednesday, after which Treasury posted his remarks. He said that President Obama planned to use his own authority to suspend sanctions against Iran’s oil, banking and trade sectors after Iran complied with the initial parts of the deal and that Congress wouldn’t actually be asked to lift sanctions during his presidency.

“Only after many years of compliance would we ask Congress to vote to terminate sanctions, and only Congress can terminate legislative sanctions,” he said.

Lew said this suspension, rather than a legislative repeal of sanctions, would allow the administration to quickly reinstate U.S. sanctions if Iran is caught cheating. He also said that United Nations sanctions would be able to snap back easily and no single nation would be able to stop that.

“We have made it abundantly clear that if Iran breaks its commitment, it will face once again the full force of the multilateral sanctions regime,” he said. “The snapback would not be vulnerable to a veto by an individual P5 member, including China and Russia.”

That explanation directly conflicts with what Iranian Foreign Minister Javad Zarif told an audience at New York University earlier that day. Zarif said that UN sanctions would be lifted within days of an agreement being signed and that all sanctions would be permanently lifted, including Congressional sanctions, once Iran met its initial obligations.

Treasury officials told me that Lew’s statements were in line with previous administration explanations about how sanctions would be suspended and potentially put back into place later. But the Washington Institute’s Matt Levitt, a former Treasury official who moderated the April 29 event with Lew, said that once sanctions are suspended, especially the multilateral sanctions, there’s no easy way to put them back into place.

“No one should be fooled into thinking there will be any automaticity here,” he said. “If we thought Iran was cheating, the debate then moves to whether there was in fact a violation. You can see a situation where Russia and China will dispute whether there is in fact a violation.”

Levitt and other experts also noted that Lew said the sanctions on one specific part of the Iranian regime, the Quds Force of the Iranian Revolutionary Guard Corps, will stay in place. Treasury considers it linked to terrorism.

Lew didn’t say anything about the rest of the Revolutionary Guard, which is sanctioned for both proliferation and human rights violations and controls as much of a third of the Iranian economy through shell companies in mining, banking and oil. It stands accused of directing huge amounts of illicit activity around the region.

“Lew is signaling that the administration is planning on delisting IRCG banks, energy companies and shipping companies, and perhaps the entire IRGC,” said Mark Dubowitz, executive director of the Foundation for Defense of Democracies.

Hagar Chemali, a Treasury spokeswoman, told me Lew was not stating directly that the entire IRGC would be free from sanctions if a nuclear deal were signed.

“As we have stated numerous times, sanctions related to Iran’s support for terrorism, human rights and other destabilizing behavior will remain in force,” she said. “It would be a mistake to pre-judge any other potential future actions.”

Several experts said that in order for Iran to receive the sanctions relief it seeks as part of a deal, most if not all of the IRGC sanctions would have to go. That could allow for a huge expansion of the group’s influence and activities.

“Isolating the Quds force from the rest of the IRGC ignores the fact that there is a vast IRGC infrastructure that has been involved in human rights violations, proliferation, and terrorism,” said Jonathan Schanzer of the Foundation for Defense of Democracies.  “It leaves the IRGC with a great deal of room to maneuver.”

The exact amount of money Iran would receive after a deal is signed is also in dispute, but Lew said not to worry about that either: Iran has between $100 billion and $140 billion of oil revenue frozen in foreign banks. $30 billion to $50 billion could be released to Iran right after signing a deal, according to Congressional officials who have been briefed on the negotiations. But Lew said Iran was likely to spend that cash on domestic needs and not on terrorism or support for violence.

“President Rouhani was elected on a platform of economic revitalization, and Iranians are demanding proof that engagement with the international community will produce tangible economic benefits,” Lew said. “As a result, Iran is expected to use new revenues chiefly to address those needs, including by shoring up its budget, building infrastructure, maintaining the stability of the rial, and attracting imports.”

Lew also said that Iran has lost so much money to the sanctions, it would take the Iranian government years to recoup those losses. Levitt disagreed and said that the Iranian economy doesn’t have to recoup losses like a business would.

“It’s a cute argument, but it misses the point,” said Levitt. “I don’t think the argument is going to sway people in the region, particularly the Gulf states, who are very worried about the near-term release of significant amounts of money that will empower Iran to do all sorts of things.”

Dubowitz sees the same risk: “When you give bad people bad money, they use it for bad things.”

Biden, in his April 30 speech at the Washington Institute, made a more emotional argument for the deal, praising the administration’s work to build up sanctions against Iran and the progress of the negotiations so far.

“It’s true that Iran could try to cheat, whether there’s a deal or not,” he said. “Now they didn’t cheat under the interim deal — the Joint Plan of Action — as many were certain they would.”

That record of good behavior is debatable. Iran stands accused of violating the interim deal in a number of ways and also reportedly violated other parts of the existing sanctions regime, including by expanding an illicit nuclear procurement network that operates through two blacklisted firms.

Under the deal being discussed, Biden said, Iran would allow inspectors to visit “not only declared nuclear facilities, but undeclared sites where suspicious, clandestine work is suspected.” He said the the international community would have “the ability to challenge suspect locations.”

Experts following the talks say the Iranians have ruled out any access to military sites, which makes Biden’s pitch a little weak.

“Having the ability to ‘challenge’ suspect sites is not the same thing as getting access to them, which is the key thing,” particularly when the Iranians have taken military installations off the table, said Eliot Cohen, who served as State Department Counselor during the George W. Bush administration.

The speeches by Lew and Biden constituted the administration’s most assertive effort to date to detail their thinking about how sanctions will be lifted. The two officials seemed to be eager to get ahead of any and all the criticisms they are anticipating. But they did not. Unless the nuclear talks shift significantly before the June 30 deadline, the administration will continue to face questions it can’t answer.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Josh Rogin at joshrogin@bloomberg.net

To contact the editor on this story:
Philip Gray at philipgray@bloomberg.net