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White House and Senate Gear Up for Tangle Over Iran Central Bank Sanctions

By Sara Sorcher

National Journal

U.S. Treasury Secretary Timothy Geithner, shown last month, warned in a letter that any sanctions targeting Iran's central bank must be implemented in coordination with Washington's allies to be effective (AP Photo/Manuel Balce Ceneta). U.S. Treasury Secretary Timothy Geithner, shown last month, warned in a letter that any sanctions targeting Iran's central bank must be implemented in coordination with Washington's allies to be effective (AP Photo/Manuel Balce Ceneta).

WASHINGTON -- The White House and the Senate are gearing up for another tangle over an amendment adopted within the massive defense authorization bill: The widely popular congressional push to cut off Iran's central bank from the world's financial system (see GSN, Dec. 1).

The Obama administration has already threatened to veto the defense bill that contains the controversial detainee provisions requiring mandatory military custody for some terrorism suspects -- and Treasury and State Department officials on Thursday made it very clear that they're also unhappy with an amendment by Senators Mark Kirk (R-Ill.) and Robert Menendez (D-N.J.) that would prohibit any foreign financial institution that does business with the Central Bank of Iran from doing business with the United States. The amendment passed Thursday evening by a vote of 100-0.

This move to impede Iran’s ability to process payments for the roughly $90 billion in oil and gas it sells each year is one the administration says it ultimately supports -- just not right now.

In a letter to Senate Armed Services Committee Chairman Carl Levin (D-Mich.), Treasury Secretary Timothy Geithner said the administration supports “properly designed” and “well-targeted sanctions” against the CBI. But without coordinated action with U.S. allies, the amendment could negatively affect Washington’s friends and largest trading partners, Geithner wrote. “Rather than motivating these countries to join us in increasing pressure on Iran, they are more likely to resent our actions and resist following our lead—a consequence that would serve the Iranians more than it harms them.”

Pressure to take further action to thwart Iran’s nuclear-weapons program has grown to fever pitch in Congress since the recent release of an International Atomic Energy Agency report detailing Iran’s progress toward mastering the technical challenges of building a nuclear bomb, and the alleged Tehran-backed plot to assassinate Saudi Arabia’s ambassador and bomb embassies in Washington. “To not pass this amendment is leaving the door open to Iran’s runaway nuclear ambitions,” Menendez said on the Senate floor on Thursday.

Even as she admitted that the “irony of this amendment” is that the administration and senators are on the same page when it comes to going after the "jugular" of Iran’s economy, Undersecretary of State for Political Affairs Wendy Sherman warned that effectively cutting off Tehran from the global oil market under this timeline could spike the price of oil. “[This] would mean Iran would in fact have more money to fuel its nuclear ambitions, not less,” she told a Senate Foreign Relations committee panel.

Menendez said he is “extremely disappointed” with the administration’s opposition after making a "good faith effort" to assuage the White House's concerns. “The original amendment had no waivers whatsoever. Maybe we should have allowed that to stand,” he said angrily.

On the Senate floor, Kirk said that the White House's fears should have been addressed by compromise language giving the president the ability to waive petroleum sanctions -- which apply only to central banks -- if he determines there is not enough alternative oil supply to avoid negative effects in the market. The amendment also includes an overall national-security waiver.

Sidestepping the popular sanctions under the national-security waiver would be particularly uncomfortable for the administration, which has said that it is still actively considering additional sanctions against the Iran's central bank.

Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen said that the administration believes some “important changes” should be incorporated into the amendment to “ensure that it operates in the way it is designed.” He didn’t specify what those would be.


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