Details of Obama Administration’s ‘Secret Authorization’ to Iran Revealed in Senate Report

The United States Senate’s Permanent Subcommittee on Investigations has recently released a report stating that the Obama administration had granted a secret authorization to the Islamic Republic of Iran to convert rials through American financial institutions into euros. The report comes despite earlier statements by the U.S. Treasury Secretary under the Obama administration before Congress that Iran would never be allowed access to the American financial system.

According to the detailed report of the United States Senate’s Permanent Subcommittee on Investigations, the Obama administration’s Treasury Department issued a specific license on February 24, 2016, to Muscat Bank in Oman that allowed Iranian rials to be converted into euros through American financial institutions.

Despite issuing this license for the conversion of $5.7 billion, the plan failed because no American bank was willing to cooperate. The report states that the Islamic Republic of Iran ultimately managed to convert this substantial sum worth $6.7 billion through other channels.

Iran reached a nuclear agreement with the P5+1 countries in July 2015, and the agreement entered into force in December of that year.

Under this agreement, in exchange for limiting Iran’s nuclear activities, United Nations sanctions and secondary American sanctions were suspended. In America, this meant that American individuals and entities still could not cooperate with Iran or with a third party acting on Iran’s behalf. For this reason, American banks were extremely cautious regarding Iran. American banks are subject to primary sanctions that have nothing to do with nuclear issues, under which they cannot convert any currency for Iran.

In 2015, Jack Lew, the U.S. Treasury Secretary at the time, appeared before Congress along with Secretary of State John Kerry and Energy Secretary Ernest Moniz and assured American lawmakers that these first-tier sanctions remain in force and Iran would not have access to the American financial system.

The report of the Homeland Security and Governmental Affairs Committee, one of the subcommittees of the U.S. Senate, now shows that America provided the Islamic Republic of Iran the ability to access the American financial system, but no bank was willing to take advantage of that opportunity.

What was the story behind the Obama administration’s authorization?

According to the report, under the initial agreement that came into force in December 2015, the Islamic Republic of Iran transferred $13.4 billion of its oil revenues from the sanctions period to specific bank accounts. Of this amount, $8.8 billion was deposited in Muscat Bank in Oman. Three days after the agreement came into force, Muscat Bank in Oman informed the U.S. Treasury that it needed access to dollars.

They said that Iran’s Central Bank wanted to convert $5.7 billion of that money that was held at Muscat Bank into euros. There was a problem. The U.S. dollar was the backing of the Omani rial, so in order for the Islamic Republic of Iran to reach euros, the money had to flow through the American financial system.

This is when the U.S. Treasury issued a special license to Muscat Bank so it could fulfill Iran’s request. It then tried to persuade two U.S. banks serving as correspondents to Muscat Bank to conduct this currency conversion.

A State Department official even suggested to his colleagues that if the banks refused, they should tell them that Secretary of State John Kerry or Treasury Secretary Jack Lew would contact them.

But in the end, neither of the two banks was willing to convert Iran’s money, which was in Omani rials, to dollars and then to euros.

The Senate report states this was not an isolated incident, and Mohammad Javad Zarif, the Islamic Republic of Iran’s Foreign Minister, repeatedly complained about such problems.

The American Senate committee’s report revealed an exchange of correspondence in this regard between senior officials of both countries’ foreign ministries.

The report, without naming the U.S. State Department official, stated that after issuing the license to Muscat Bank, this official wrote to his counterpart that America had acted beyond its obligations under the agreement, since even after the agreement, Iran’s access to the American financial system and the dollar remained prohibited.

The U.S. State Department also believes that Iran gradually converted that amount directly with European banks into euros; an option that was more difficult than the American proposal.

The Treasury Department even examined conditions for issuing a general license for converting Iranian rials to dollars for a short period, but after 200 trips and meetings with the banking sector worldwide, banks were unwilling to take the risk; therefore, this idea was also abandoned.

The congressional report states that although the Obama administration granted such concessions to the Islamic Republic, senior officials from the Treasury Secretary to the Deputy for combating financial corruption and State Department officials gave negative answers to Congressional members’ questions about whether Iran had access to the American financial system.

Source: Voice of America