Expert Tells Congress, Iran Deal May 'Neuter U.S. Ability' to Sanction Iran for Its Support of Terrorism

By Patrick Goodenough | July 31, 2015 | 5:12am EDT
Juan Zarate of the Foundation for Defense of Democracies' Center on Sanctions and Illicit Finance, testifies before the Senate Foreign Relations Committee on Thursday, July 30, 2015. (Video Image: SFRC)

(CNSNews.com) – A provision in the Iran nuclear agreement that commits the U.S. to refrain from jeopardizing the “normalization of trade economic relations” with Tehran may impede future efforts to restrain and respond to the regime’s bad behavior, lawmakers were told Thursday.

Iran sanctions expert Juan Zarate said in written testimony before the Senate Foreign Relations Committee that the U.S., in making such a commitment, “appears to have bound itself to restrict the type of effective tools it will use to affect Iranian behavior” such as support for terrorism, propping up the Assad regime in Syria, and human rights abuses.

Zarate, chairman and senior counselor at the Foundation for Defense of Democracies’ Center on Sanctions and Illicit Finance, pointed to a provision in the Joint Comprehensive Plan of Action (JCPOA) which states that the U.S. and E.U., “consistent with their respective laws, will refrain from any policy specifically intended to directly and adversely affect the normalization of trade and economic relations with Iran …”

“Though ‘non-nuclear’ sanctions were supposedly off the table, the spirit and letter of the agreement may actually neuter U.S. ability to leverage one of its most powerful tools,” Zarate told the panel.

The “normalization of economic relations with Iran” provision in the JCPOA, he said, “does great damage to that ability and to those powers.”

“In essence,” Zarate said in his submitted testimony, “the U.S. and her negotiating partners appear to have agreed to immunize Iran from any effective future financial or economic pressure – precisely the type that brought the regime to the table.”

Zarate, who until mid-2005 served as the first-ever assistant secretary for terrorist financing and financial crimes at the U.S. Treasury Department, said the JCPOA “shields Iran’s economy from any efforts to exclude it from the global commercial and financial order.”

“This power is at the heart of U.S. strategies post 9/11 to use financial and economic power to exclude rogue actors and illicit activities from the global order,” he added.

“This is a commitment we should not be making,” he said. “This is highly problematic if the U.S. hopes to maintain any ability to use financial and economic power and suasion to affect Iranian behavior in the future – either to ensure compliance with any agreement or confront other elements of Iranian behavior.”

The JCPOA’s provisions have been enshrined in a new U.N. Security Council resolution adopted on July 20 – ahead of Congress’ legally-mandated review of the deal.

Zarate noted that the new resolution’s preamble reiterates the intent of the economic normalization provision with a clause that says, “Emphasizing that the JCPOA is conducive to promoting and facilitating the development of normal economic and trade contacts and cooperation with Iran, and having regard to States’ rights and obligations relating to international trade.”

He also raised concerns that the new UNSC resolution – which replaces a series of earlier ones imposing sanctions on Iran – allows other parties to review U.S. financial or other measures affecting the Iranian economy.

In any future action to sanction Iranian behavior, the U.S. could be left looking isolated.

“If the United States now commits to the normalization of economic and trade relations, it may also be committing to a rehabilitation of the Iranian regime in the eyes of the global financial and commercial community,” he said.

“This proves highly problematic and undermines U.S. credibility and power internationally if this is done without concern for the underlying concerns that drove its isolation in the first place – proliferation, support for terrorism, and development of weaponry and programs of concern controlled by the IRGC [Islamic Revolutionary Guards Corps].”

Other sanctions avenues

Thursday’s hearing focusing on sanctions was the latest in a series by various House and Senate committees examining the deal negotiated between Iran and the P5+1 group – the U.S., Britain, France, Russia, China and Germany – and announced on July 14.

Congress has until mid-September to review and potentially vote on the agreement.

The second witness at the hearing, Richard Nephew of the Center on Global Energy Policy at Columbia University, argued – as the Obama administration has – that the U.S. has plenty of other sanctions tools at its disposal notwithstanding the relief to be provided under the JCPOA.

“The United States retains a number of sanctions authorities that will continue to damage Iran’s ability to engage in terrorism financing, as well as to exact consequences for violations of Iranian human rights and other destabilizing activities,” he said in his testimony.

Nephew, who has held positions at the departments of State and Energy and the National Security Council, said the U.S. could still use secondary sanctions under the Comprehensive Iran Sanctions, Accountability and Divestment Act “to pressure banks and companies against doing business with the IRGC, Qods Force, Qassem Soleimani, and Iran’s military and missile forces.”

As such, he said the fact that U.N. and E.U. sanctions against those targeted entities and individuals will be lifted under the JCPOA was mostly “symbolic.”

“Practically, these entities and individuals will find their international business activities stymied due to the centrality of the United States in global finance until they correct their own behavior in the eyes of the United States.”

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