Obama administration officials are considering easing restrictions that prohibit U.S. dollars from being used in business deals with Iran to ensure Tehran gets economic relief promised under its nuclear deal with world powers.
The move has not been officially announced but it was disclosed to Reuters and the Associated Press on March 31 by anonymous officials, who said the Treasury Department is considering allowing banks outside the United States to have limited access to the U.S. currency to support legitimate business deals with Iran.
The move likely would help Iran's troubled economy. Tehran has complained that continuing U.S. restrictions on banks have prevented it from getting the full benefit of economic relief that was supposed to come from the lifting of nuclear-related sanctions in January.
The move would be contentious in Congress, however, where Republicans and some Democrats say the administration promised to maintain a strict ban on dollars along with other nonnuclear penalties on Iran when it sought congressional approval of the nuclear accord last year.
"These reports are deeply concerning, to say the least," House Speaker Paul Ryan said on March 31. "As Iran continues to undermine the spirit of its nuclear agreement with illicit ballistic-missile tests, the Obama administration is going out of its way to help Tehran reopen for business. The president should abandon this idea."
The nuclear pact provided Iran with billions of dollars in sanctions relief for curtailing programs that could lead to nuclear weapons. But the Iranians say they haven't benefited to the extent envisioned because of other U.S. restrictions linked to human rights, terrorism, and missile development concerns.
Because of its status as the world's dominant currency, the dollar often is used in global commerce, particularly in money conversions. Iran's economy is highly dependent on oil exports, for example, yet nearly all global oil sales are denominated in U.S. dollars.
The predominance of the dollar means that a large portion of global trade deals have to go through the U.S. financial system, if only fleetingly, when payments are made.
But current U.S. policy bars foreign banks from clearing dollar-based transactions with Iran through U.S. banks.
That has made Asian and European banks wary of starting up business again with Iran, especially because U.S. regulators have levied billions of dollars in fines in recent years against big European banks for violations of the U.S. restrictions.
That would change if the administration eases the curbs. One way to do so, sanctions experts said, would be for the Treasury Department to issue a license allowing U.S. banks to send dollars to an offshore facility, from which foreign, non-Iranian banks could withdraw dollars to facilitate legal trade with Iran.
The ban would still apply if the final payment was intended for an Iranian individual or business on a U.S. sanctions blacklist.
In speech on U.S. sanctions policy on March 30, U.S. Treasury Secretary Jacob Lew acknowleged that U.S. restrictions are viewed as overly burdensome by other nations, even allies, and warned that "sanctions overreach" risked driving business away from the United States, and hurting the dollar's status as the world's reserve currency.
He suggested that other nations and businesses might start to do business in currencies other than the dollar to avoid running into U.S. sanctions, a development that eventually would lead to a diminishment of the dollar's role in global finance.
With reporting by AP and Reuters