The Holes in the Iran Deal

And How to Plug Them

U.S. Secretary of State John Kerry meets with Iranian Foreign Minister Mohammad Javad Zarif, January 16, 2016. Kevin Lamarque / Reuters

When it was announced a year ago, the Iran nuclear deal stoked intense debate among pundits and policymakers about whether it would accomplish its core purpose: keep Iran from developing nuclear weapons. But in recent months, the criticism has shifted. As the sanctions unwind, observers have grown more concerned about whether Iran is getting the economic relief it had expected and how the unwinding might affect the remaining bans on Iran. 

Under the deal, the United States removed all nuclear-related sanctions on Asian and European business activities involving Iran, but kept them for American entities. The expectation was that Iran would experience a first wave of economic relief by renewing ties with Asian and European companies, without affecting the other non-nuclear sanctions maintained by Washington.

But much of this relief has not been forthcoming. Most multinational businesses have continued to avoid the Iranian market, largely due to the unwillingness of international banks to finance or otherwise facilitate Iran-related transactions.

U.S. Secretary of State John Kerry at the Iran talks in Vienna, Austria July 14, 2015. Leonhard Foeger / Reuters

Fearing the collapse of the agreement, deal supporters argue that the United States should lift sanctions that discourage foreign banks from transacting with Iran, such as the ban on dollar-clearing, which involves processing transactions in U.S. dollars. As Tyler Cullis of the National Iranian American Council notes, global banks “are having trouble dealing with the fact that their Iran-related transactions cannot dollar-clear a U.S. bank, thereby forcing them to screen off all Iran-related dealings.” Others—like Roger Cohen of The New York Times—have suggested that U.S. policymakers reach out directly to global banks to encourage them to transact with Iranian entities.

In recent months, the White House has moved forward with both suggestions. In early April, various media outlets reported that U.S. Treasury officials were developing a mechanism that would allow foreign banks to dollar-clear Iranian transactions. And in May, Secretary of State John Kerry met with the heads

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