In 2016, Tehran got OK to skirt sanctions

Obama-era permit would have let Iran convert funds to dollars

WASHINGTON — After striking an elusive nuclear deal with Iran, the Obama administration found itself in a quandary in early 2016: Iran had been promised access to its long-frozen overseas reserves, including $5.7 billion stuck in an Omani bank.

To spend it, Iran wanted to convert the money into U.S. dollars and then euros, but top U.S. officials had repeatedly promised Congress that Iran would never gain access to America’s financial system.

Those assurances notwithstanding, the Obama administration secretly issued a license to let Iran sidestep U.S. sanctions for the brief moment required to convert the funds through an American bank, an investigation by Senate Republicans released Wednesday showed. The plan failed when two U.S. banks refused to participate.

Yet two years later, the revelation is reigniting the bitter debate over the nuclear deal and whether former President Barack Obama was too eager to grant concessions to Tehran.

“The Obama administration misled the American people and Congress because they were desperate to get a deal with Iran,” said Sen. Rob Portman, R-Ohio, who chairs the Senate panel that conducted the investigation.

And Republican Rep. Ed Royce, the House Foreign Affairs Committee chairman, accused Obama of trying to “hide a secret push to give the ayatollah access to the U.S. dollar.”

The Treasury Department license, issued in February 2016 and never disclosed, would have allowed Iran to convert $5.7 billion it held at Oman’s Bank of Muscat from Omani rials into euros by exchanging them first into dollars. If the Omani bank had allowed the exchange without such a license, it would have violated sanctions that bar Iran from transactions that touch the U.S. financial system.

The situation resulted from the fact that Iran had stored billions in Omani rials, a currency that’s notoriously hard to convert.

“Yikes,” one former Treasury official told colleagues in an email, as described by the report. “It looks like we committed to a whole lot beyond just allowing the immobilized funds to settle out.”

The Obama administration approached two U.S. banks to facilitate the conversion, the report said, but both refused, citing the reputational risk of doing business with or for Iran.

Issuing the license was not illegal. Still, it went above and beyond what the Obama administration was required to do under the terms of the nuclear agreement, in which the U.S. and world powers gave Iran billions of dollars in sanctions relief in exchange for curbing its nuclear program.

The license issued to Bank Muscat stood in stark contrast to repeated public statements from the Obama White House, the Treasury and the State Department, all of which denied that the administration was allowing Iran access to the U.S. financial system. According to the report, Iran is believed to have found other ways to access its money, possibly by exchanging it in smaller quantities through another currency.