Hearing Wrap-Up: The Risks of Economic Engagement with Iran

May 12, 2016

Today the House Foreign Affairs Committee conducted a hearing focused on the risks of economic engagement with Iran in light of its support for terrorism, illicit ballistic tests, financial corruption and other misbehavior. The hearing featured testimony from Juan Zarate of the Financial Integrity Network, Mark Dubowitz of the Foundation for Defense of Democracies, and Elizabeth Rosenberg of the Center for a New American Security.

The Foreign Policy Initiative believes that the following quotes from the witnesses’ written testimony will be useful for policymakers and the general public as they consider the next steps in U.S. policy toward Iran.



The Imperative of Further Sanctions

“Sanctions need to be imposed to target Iran’s support for terrorism, ballistic missile program, support for the Assad regime in Syria and designated Shiite militias in Iraq, and human rights abuses. These steps are not a violation of the JCPOA, but rather an affirmation of the stated U.S. policy to ‘oppose Iran’s destabilizing policies with every national security tool available.’ Since the JCPOA was reached, the administration has only imposed a handful of new sanctions designations; only nine individuals and nine entities have been added to Treasury’s sanctions list as a result of Iran’s ongoing illicit activities. … [S]ince the JCPOA was concluded last summer, the administration has designated no individuals or entities for human rights abuses.” – Mark Dubowitz

“The dangers, challenges, and risks from Iran on a regional and global scale will only increase over time. In the wake of the JCPOA, Secretary of State Kerry stated that we will need to ‘push back’ against Iran’s provocative and dangerous policies and tactics. … Indeed, the United States will need to push back, especially against increasing risks and threats from Iran. To do this, the United States will want to use its financial and economic tools and strategies to make it harder, costlier, and riskier for Iran to threaten the United States and our allies. This will mean devising and deploying aggressive strategies to exclude key elements of the Iranian regime and the IRGC, Qods Force, and Ministry of Intelligence from the global financial and commercial system.” – Juan Zarate

“Beyond designating more targets, sanctions officials in the administration should pursue non-nuclear concerns with Iran by urging foreign counterparts to match U.S. sanctions measures related to Iran’s support for terrorism and use of ballistic missiles, as well as its human rights abuses. This includes outreach to European officials in the position to enhance EU sanctions lists to include more IRGC targets and entities involved in Iran’s ballistic missile program and support for terrorism.” – Elizabeth Rosenberg

The Risks of Doing Business with Iran

“Importantly, the nature of the regime, its control of the economy, and its willingness to use the financial system to pursue all its goals internally and externally has not changed. The Iranian system is corrupt, lacks transparency at all levels, and is centrally controlled by the regime. This – along with the uncertainty of how the JCPOA will unfold – ultimately creates enormous risk for legitimate international actors and companies considering doing business in or with Iran.” – Juan Zarate

“Iranian banks also lag behind many emerging market peers in compliance with global tax, financial reporting, capital requirements, and anti-money laundering standards, a fact tacitly acknowledged by Iranian financial overseers. The Financial Action Task Force has pointed out risks associated with Iran’s economy in grave terms, Transparency International ranks Iran 130 out of 168 on their corruption index, the World Bank’s Ease of Doing Business Ranking puts Iran at number 118 out of 189, and the International Monetary Fund has recently called attention to Iran’s troubled banking system. These various factors represent tremendous impediments to foreign investment in Iran and the creation of new commerce for the Iranian regime and people.” – Elizabeth Rosenberg

Iran’s Responsibility

“In remarks before the Carnegie Endowment for International Peace, Treasury Secretary Jack Lew argued that sanctions are an effective instrument to address illicit activities, but they must be lifted when the illicit behavior changes. This is an important principle, but the commentary surrounding these remarks misses a crucial detail: Iran has not addressed the underlying behavior that prompted many of the U.S. sanctions. … The future success of Iran’s economy depends on foreign investment and on Tehran’s ability to alleviate the concerns of international banks and companies that Iran is committed to ending its support for terrorism, missile development, and destabilizing regional activities, and to reducing the economic power of the Islamic Revolutionary Guard Corps and the supreme leader’s business empire. All of these issues increase the risks of investing in the Islamic Republic, regardless of what deal sweeteners the White House provides.” – Mark Dubowitz

“Alongside this additional sanctions implementation and coordination activity, U.S. policymakers and their European counterparts should also specifically and publicly identify Iran’s self-imposed financial problems. Doing so will make clear to Iran and the global community that Iran bears significant responsibility for improving its economic conditions, and that the removal of sanctions under the nuclear deal cannot independently deliver a windfall to Iran.” – Elizabeth Rosenberg

“In implementing the deal, the United States should not fall into the trap of helping Iran rehabilitate itself. Throughout this deal, the onus should remain solely on Iran to alleviate concerns about its activities, lack of transparency, and failure to meet heightened global standards of financial integrity in the banking and commercial worlds. Iran should not get a free pass on the necessary reforms, modernization, and accountability necessary for acceptance as a legitimate actor in the world – diplomatically and economically. This posture should force the Iranians to turn inward to determine how they can meet international expectations, instead of trying to compel the United States and Europe to alter their standards or dictate to the private sector where and with whom they should do business.” – Juan Zarate

Iran’s Access to the U.S. Financial System

“If the Obama administration grants Iran access to the world’s most important currency, U.S. sanctions will be severely undermined without any reciprocity. Tehran will receive yet another significant and unilateral concession. And Washington will have lost critical leverage to target Iran’s terror finance, missile activities, destabilizing regional aggression, systemic human rights abuses, and the financial and military backing of the Assad regime.” – Mark Dubowitz

“There have been reports that the United States might offer Iran the ability to access offshore dollar-clearing facilities, to allow for dollar-denominated transactions and ease Iran’s ability to trade internationally. Though such a maneuver would not allow Iran direct access to dollar clearing in the United States, it could be structured in a manner to create the same effect. Iranian trade would then be facilitated in a way not contemplated in the JCPOA. The United States should not be offering special exemptions or measures to assist Iran with access to dollars while Iran remains a leading state sponsor of terror, subject to serious sanctions, and designated as a ‘primary money laundering concern.’” – Juan Zarate

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