US treasury secretary hints at letting Iran trade in dollars

WASHINGTON // The US treasury secretary seems to be laying the groundwork to let Iran begin trading in dollars, after a landmark accord with the West last year saw the country limit its nuclear programme in exchange for the lifting of sanctions.

Jack Lew said in Washington on Wednesday that US sanctions should not be used lightly, though a Republican-controlled Congress remains against easing restraints on Tehran.

“We must be conscious of the risk that overuse of sanctions could undermine our leadership position within the global economy, and the effectiveness of our sanctions themselves,” he told The Carnegie Endowment for International Peace.

Mr Lew said Washington must be willing to ease sanctions when they have actually worked, even if this is delicate in the case of Iran.

After the historic accord of July 2015 among Iran and major western powers to lift sanctions previously imposed because of Iran’s nuclear programme — which the West feared was aimed at building a bomb — Tehran has kept is word, Mr Lew said.

And now it is up to the United States to keep its word, he added.

However, non-nuclear-related sanctions against Iran that were imposed because of what the US says is its support for terrorism and regional destabilisation, remained in force, Mr Lew said.

He added that the US administration had explained to the foreign business community what it now can and cannot do in Iran, making implicit reference to the worries of European banks.

Mark Dubowitz, of the Foundation for Defence of Democracies, said Mr Lew’s remarks signalled that the Obama administration is preparing to make a major concession to Iran by giving it access to the US dollar. He said this change would be adamantly opposed by the US Congress.

“It seems clear to me that the administration is seriously considering giving Iran access to the use of the US dollar for business transactions,” Mr Dubowitz said.

At issue are operations called U-turn transfers, which would allow Iranian and foreign banks to engage in financial transactions in dollars by having access to offshore clearing houses.

The United States banned these transfers — which involved US financial institutions as intermediaries — in 2008.

Last week, Ed Royce, chairman of the US House of Representatives Committee on Foreign Affairs, wrote a letter to US president Barack Obama expressing concern that licenses might be granted that would allow such dollar transactions.

Mr Dubowitz said Mr Lew’s tone suggests that the US treasury is paving the way for a future easing of sanctions, as Iran is complaining that the US has only stopped punishing Iran on paper, not in actual fact.

Iran’s Supreme leader, Ayatollah Ali Khamenei, accused the US last week of not fulfilling its commitments in the nuclear deal. He said Europe is wary of doing business with Iran, out of fear of the US.

But Patrick Clawson, research director at the Washington Institute, which specialises in the Middle East, said the US treasury secretary’s comments speak more than anything to the domestic battle with the US congress.

Mr Clawson said opening the way for an easing of sanctions would be very difficult for the Obama administration.

He said Mr Lew’s comments were directed rather at dissuading Congress from approving new sanctions against Iran.

* Agence France-Presse