The Associated Press has revealed the Obama administration is planning to provide Iran with another wave of sanctions relief, because…well because the Iranians are demanding it , and threatening to kill the P5+1 deal if their latest demands are not met.Lawmakers (primarily Republicans) are gearing up to block the administration’s planned extra concession.

The Iranians started  demanding new concessions a few weeks ago specifically the lifting of the banking related sanctions, the demands beginning with the Supreme Leader:

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The Iranian calls for relief were then taken up by some of the  Iran deal supporters. These concessions go way beyond the nuclear-related sanctions lifted by the summer deal, and include giving Iran access to U.S. financial markets and the dollar.

Yet as Rep. [score]Edward Royce[/score] (R., Calif.) noted in a March 22 letter to the White House, Mr. Lew, during a Financial Services Committee hearing earlier that day, “appeared to leave the door open” to Iran getting access to the U.S. financial system. Mr. Royce reminded Mr. Lew of what he said last year, then said he had “received reports from the administration that it is now considering providing Iran with access to the U.S. financial systems.” He repeatedly pressed Mr. Lew: “Specifically, are you considering permitting Iranian banks to clear transactions in dollars with U.S. banks or foreign financial institutions including offshore clearing houses?”

Last year the administration swore they wouldn’t let Iran have access to the American financial system but now according to the Associated Press Obama is preparing to collapse.

Mark Dubowitz and Jonathan Schanzer – executive director and vice president for research at the Foundation for Defense of Democracies have a new piece in the WSJ explaining the debate over this new concession.. Schanzer linked to it on Twitter this morning and summarized the argument by saying: allowing Iran access to the U.S. dollar would be “a total implosion of US financial policy on Iran.”

According to the article:

  • The administration ruled out letting Iran dollarize until the Iranians made their new demand – Treasury Secretary Jacob Lew was adamant during a congressional grilling last July. “Iranian banks will not be able to clear U.S. dollars through New York,” he told the Senate Foreign Relations Committee, or “hold correspondent account relationships with U.S. financial institutions, or enter into financing arrangements with U.S. banks.”… What explains this possible reversal? Most likely, Iran demanded it. Secretary of State John Kerry and Foggy Bottom, always fearful that Tehran will walk away from the nuclear deal, may be ready to comply.
  • The administration ruled out letting Iran dollarize for a good reason: it will nuke the U.S. greenback and poison the global financial system – Congress is getting ready for a fight. It’s not hard to understand why. The Financial Action Task Force, a global antiterrorism finance body, maintains a severe warning about Iranian financial practices. Last month it warned that Iran’s “failure to address the risk of terrorist financing” poses a “serious threat… to the integrity of the international financial system.” The Treasury Department also recognizes the danger, in 2011 labeling the Islamic Republic a “jurisdiction of primary money laundering concern.” That finding, which remains in place, cites Iran’s “support for terrorism,” and “illicit and deceptive financial activities.”

The Obama administration will likely justify the latest concession by claiming that letting Iran trade in dollars helps monitor the deal and gives the U.S. leverage to enforce it. But in their WSJ article Dubowitz and Schanzer destroy those arguments. The biggest reason to oppose it is the Treasury Department which long ago decided the cost of giving Iran access to the U.S. financial system outweighed the intelligence benefits.

And monitoring will be of little use.  The Iranians aren’t stupid, they won’t directly use their dollars for their nefarious purposes because they know we’d be looking at them– but will instead use the newfound credibility that dollar access gives their banks for those purposes. The U.S. won’t gain any new leverage because Iran will keep their dollars where the US can’t get them. In fact the administration argument on leverage is backwards: Obama officials told Congress over the summer that access to the dollar was being withheld specifically to provide the U.S. with leverage over non-nuclear activities – ballistic missiles, terrorism, human rights, etc – so “why throw away that leverage in exchange for no new concessions?”

In the end Dubowitz and Schanzer remind us of the more devastating political optics: the administration told Congress that it had made a final set of concessions to Iran and promised that access to the dollar would never be granted, then the Iranians came back and demanded access to the dollar, and now the administration is collapsing.

Lawmakers (at least the GOP ones) are gearing up to block the administration’s planned capitulation.he Washington Free Beacon this morning has a roundup of the first wave of reactions, which are coming mostly from Republicans. The Free Beacon Spoke to:

  • Sen. [score]Mark Kirk [/score](R-Ill) who said the concession violates U.S. law and undermines global efforts against money laundering — “Any administration effort to get foreign financial institutions or foreign-based clearing houses to enable Iran’s terror-sponsoring regime to conduct transactions in U.S. dollars ignores American laws and the Financial Action Task Force… Such an effort would benefit Iran’s terror financiers while fundamentally undermining the USA PATRIOT ACT 311 finding that Iran’s entire financial sector is a jurisdiction of primary money laundering concern… [It would also undermine] the Financial Action Task Force’s ongoing calls for international countermeasures to protect financial sectors from Iran’s terrorist financing.”

Rep. [score]Ron DeSantis[/score] (R-FL) said the concessions will dismantle the remaining U.S. sanctions. “Further sanctions relief would mark the death knell for U.S. sanctions and would represent a boon to the Iranian regime and its Revolutionary Guard Corp… The lengths to which the Obama administration is willing to go to empower Iran is breathtaking.”

  • Rep. [score]Peter Roskam[/score] (R-Ill) “[The] administration has lost all credibility on Iran… President Obama and Secretary Kerry have played the pied piper so many times now… Western companies have to make the determination themselves whether or not they want to make their employees and shareholders complicit in funding terrorism.”
  • Rep. [score]Mike Pompeo [/score] (R-CA) said the latest Administration move enables Iranian terrorism — “As if a windfall of over $100 billion in sanctions relief was too small, and the massive cash influx into Iran from new business deals too paltry, President Obama appears to be looking for ways to make further concessions to Iran… American and international businesses can’t ignore the Islamic Revolutionary Guard Corps’ vast control of the Iranian economy and the threat Iranian banks pose to the international financial system.”

For the Democrats this issue can be toxic. They voted for the P5+1 nuclear deal over   because the President assured them, personally, via letter that the administration would work with Congress to push back against Iran on ballistic missiles, human rights, terrorism, etc. With the destruction of these sanctions the  administration will eliminate the basis for sanctions against ballistic missiles, human rights, terrorism, etc. Even if the administration’s concessions are limited to the financial sanctions only an the rest of the sanctions regime does not “collapse the Iranians will be insulated from their effects, which is exactly why Tehran is demanding these new concession now.