On Senate Floor, Portman Discusses the Permanent Subcommittee on Investigations’ Report on Iran’s Access to U.S. Financial System
WASHINGTON, D.C. – U.S. Senator Rob Portman (R-OH) delivered remarks on the Senate floor last evening highlighting the release of his investigative report from the Permanent Subcommittee on Investigations, (PSI) which he chairs. The report details, for the first time, how the Obama administration secretly granted a specific license authorizing the conversion of Iranian assets worth billions of U.S. dollars using the U.S. financial system—despite repeated assurances to the public and Congress that Iran would not be granted access to the U.S. financial system. The Obama administration then asked two U.S. banks to execute the transactions, and they refused to do so. The report outlines key findings and recommendations designed to prevent this from happening in the future.
Said Portman in his speech: “Shortly after issuing the specific license to use the U.S. financial system to convert the rials, a Treasury official wrote in an email on the matter, quote, ‘I think we earned the right to never discuss this matter ever again.’ I disagree. I think we have to talk about this—and to talk about how, before, during, and after Treasury and State Department officials testified in front of Congress that Iran would not have access to the U.S. financial system, they worked behind the scenes to allow exactly that. We have to talk about this to be sure it doesn’t happen again.”
A full transcript of his remarks can be found below and a video can be found here.
"Today I want to talk about new information regarding the Iran nuclear deal negotiated by the Obama administration—otherwise known as the Joint Comprehensive Plan of Action, or JCPOA. This is an agreement that was reached by the Obama administration and voted on after the fact by this body, and a majority of members in the House and the Senate chose to oppose the agreement, but not enough to be able to stop it. It went into effect and has gotten some play recently as the administration has pulled out the United States’ involvement in that agreement.
“What I’m going to talk about this evening is new information that has come from the Permanent Subcommittee on Investigations, which I chair. We began an investigation into one aspect of the JCPOA nearly two years ago based on information we received that, despite the Obama administration’s claims to the contrary, there may have been an undisclosed arrangement with Iran to grant them access to the U.S. financial system.
“Recall that the basic deal with Iran was that, in exchange for Iran agreeing to certain limitations related to its nuclear arsenal, including limiting the new production of enriched uranium for 15 years, the United States and members of the United Nations Security Council agreed to lift some economic sanctions on Iran. That was the basic construct of the agreement.
“As part of that agreement, which included ongoing deadlines that needed to be met over a period of years, the United States lifted what are often referred to as ‘secondary sanctions.’ These are sanctions on foreign entities and countries that do business with those under U.S. sanction—in this case Iran.
“So, under the Iran deal, other countries were now allowed to freely do business with Iran without the risk of the U.S. imposing sanctions on them. Iran was also allowed to access money that was frozen abroad in other countries because the threat of U.S. sanctions against cooperating foreign partners no longer existed.
“At the same time, really because of all of the non-nuclear concerns regarding Iran—including support of terrorism, human rights violations, ballistic missile development, and basic destabilization of the region—primary U.S. sanctions against Iran remained in place.
“This means Iran was still banned from directly accessing the U.S. financial system, and banks and other private institutions were still banned from accessing the U.S. financial system on behalf of Iran. This is a big deal, that’s sort of the one thing that any country who is sanctioned really wants is access to our financial system because it is so intertwined with the rest of the world. They were still banned from access to our financial system.
“This was a key point that the Obama administration made clear throughout negotiations with Iran. They repeatedly provided assurances to the American people that Iran would not be granted access to the U.S. financial system. They made the same claims publicly before congressional committees and in testimony up here.
“On July 23, 2015, before the deal was implemented, a senior Treasury official explained that, quote, ‘Iranian banks will not be able to clear U.S. dollars through New York, hold correspondent account relationships with U.S. financial institutions, or enter into financing arrangements with U.S. banks.’ The testimony further stated, quote, ‘Iran, in other words, will continue to be denied access to the world’s largest financial and commercial market.’
“On August 5, 2015, the Acting Under Secretary of Treasury for Terrorism and Financial Intelligence, testified before the U.S. Senate Committee on Banking, Housing, and Urban Affairs that, quote, ‘Iran will be denied access to the world’s most important market and unable to deal in the world’s most important currency,’ referring to the U.S. financial system and the U.S. dollar. He also stated that, quote, ‘Iranian banks will not be able to clear U.S. dollars through New York, hold correspondent account relationships with U.S. financial institutions, or enter into financing arrangements with U.S. banks.’
“These claims were very clear, the U.S. financial system was not to be used. Despite these claims, the next year, just after implementation of the deal had begun, we started hearing reports that the Obama administration was considering changing course on this policy.
“This obviously raised a lot of concern from members of Congress on both sides of the aisle because the Iranian regime remained a state sponsor of terrorism, the number one state sponsor of terror. It continued to threaten ballistic missile activities, and it continued to commit egregious violations of human rights as it does today. In fact, in July of 2016, a bipartisan group of 35 Senators sent a letter to President Obama expressing deep concern over the rumors that Iran might be granted access to the U.S. dollar.
“It was about that time when we started our investigation in the Permanent Subcommittee on Investigations. Today, after a nearly two-year investigation, we unveiled a report which detailed, for the first time, how despite their claims to the contrary, the Obama administration secretly granted a specific license authorizing the conversion of Iranian assets worth billions of U.S. dollars using the U.S. financial system.
“Remember that this happened despite repeated assurances to the public and Congress that Iran would not be granted access to the U.S. financial system. Specifically, the Obama administration asked two U.S. banks to execute the transactions. Fortunately, these two big multinational banks refused to do so. The report outlines key findings and recommendations designed to prevent this from happening in the future.
“What funds are we talking about? Before the Iran deal was implemented, Iran transferred roughly $13.4 billion in oil revenue assets to bank accounts overseas. Iran deposited $8.8 billion of that oil revenue in one account at Bank Muscat in Muscat, Oman.
“Three days after Implementation Day of the JCPOA, on January 19, 2016, Bank Muscat contacted the Office of Foreign Assets Control, or OFAC, the agency within the Treasury Department responsible for enforcing U.S. sanctions. They did this on behalf of the Central Bank of Iran. This is the Oman bank contacting the U.S. Treasury Department saying, ‘We need your help.”
“Bank Muscat sought to convert $5.7 billion in Omani rials into euros on behalf of Iran. Because the rial is pegged to the U.S. dollar, the most efficient conversion was with an intermediary step through a U.S. bank using U.S. dollars. Iran was eager to convert this money into a more universal currency and was adamant about getting this done quickly.
“Despite its public stance that it would not provide Iran access to the U.S. financial system and U.S. banks, on February 24, 2016, OFAC issued a specific license to Bank Muscat authorizing Iranian assets worth roughly $5.7 billion to flow through the U.S. financial system.
“Today I heard some say that this specific license was just a narrow exemption or just a minor fix. To that, I’d direct you to an email from a Bank Muscat official, which said that the license was, quote, ‘a gigantic breakthrough which has assured Iran of almost full global financial inclusion.’ That doesn’t sound like a narrow fix to me.
“Anyone suggesting that the specific license didn’t grant Iran access to the U.S. financial system hasn’t read this PSI report—or read the Obama administration’s emails we cite in it.
“Don’t just take my word for it, though, as one State Department official wrote to his Iranian counterpart, quote, ‘OFAC informed Bank Muscat and the Central Bank of Oman today that they have a license to convert Iranian assets in its accounts to euros through the U.S. financial system.’
“Members of the Obama administration clearly understood that this was wrong and not part of the Iran deal. A senior State Department official wrote at the time, in 2016, that the transaction was, quote, ‘prohibited by U.S. sanctions that are still in place and which we were clear we would not be removing as part of the JCPOA.’ That same official wrote that granting the transaction, quote, ‘exceeded’ the JCPOA commitments because it authorized the use of the U.S. financial system.
“Let me repeat that so this is crystal clear. The Obama administration State Department completely understood that this concession—that giving Iran access to the U.S. financial system was, quote, ‘prohibited by U.S. sanctions’ that, quote, ‘we were clear we would not be removing.’ These aren’t my words or the words of the subcommittee. These are the words of a senior State Department official at the time. There was no confusion here.
“Shortly after issuing the specific license to use the U.S. financial system to convert the rials, a Treasury official wrote in an email on the matter, quote, ‘I think we earned the right to never discuss this matter ever again.’
“I disagree. I think we have to talk about this—and to talk about how, before, during, and after Treasury and State Department officials testified in front of Congress that Iran would not have access to the U.S. financial system, they worked behind the scenes to allow exactly that. We have to talk about this to be sure it doesn’t happen again.
“Following the issuance of the specific license, OFAC contacted these two U.S. banks urging them to convert Iran’s rials to U.S. dollars. It appears the administration was becoming desperate—Iran was making public and private claims that they were not getting the benefit of the deal the expected and asserting the deal could fall apart.
“We discovered an email where a State Department official even suggested that the Secretary of State or the Secretary of Treasury should contact the U.S. banks themselves and encourage them to facilitate the conversion.
“We have no evidence that they did so. Both U.S. banks declined to complete the transaction. According to the banks, they refused due to compliance, reputational, and legal risks associated with doing business with Iran. They did the right thing.
“Because the U.S. banks were unwilling to convert the funds despite the requests from the Obama administration, ultimately, Bank Muscat was unable to effectuate the conversion using the U.S. dollar.
“The State Department has told us that Iran, over time, converted the funds into euros in small increments using European banks. The only reason the transaction wasn’t executed through the U.S. financial system was because the two U.S. banks refused, even though the administration asked them to help convert the money.
“After the Iran Deal was implemented—and after the Treasury Department had issued a specific license—the Obama administration continued to maintain the false notion that it had not provided Iran access to the U.S. financial system.
“On April 5, 2016, Ambassador Thomas Shannon said, quote, ‘there is no exchange of dollars inside the U.S. financial system, and we have not allowed an access to our larger financial system.’
“On May 25, 2016, Acting Under Secretary of Treasury for Terrorism and Financial Intelligence Szubin said, quote, ‘But Secretary Lew has said exactly what I have said here today, and I know he was looking forward to me being here to be able to relay his views on this. Iran will not have access to our financial system.’
“On June 7, 2016, Treasury wrote a letter to Senators Kirk and Rubio saying, quote, ‘The administration has not been and is not planning to grant Iran access to the U.S. financial system.’
“Time after time—before, during, and after the Iran Deal, the Obama administration misled the American people and misled Congress on this point. I believe it was because the administration was so eager to make this deal work. They wanted to keep Iran in this deal.
“Our report also shows that the State Department and Treasury Department held at least 200 meetings or ‘roadshows’ around the world to encourage other countries to do business with Iran. In the roadshows, Treasury Department officials also downplayed any potential future penalties or fines that might result from sanctions.
“During one roadshow, the head of OFAC told the audience that, quote, ‘95 percent of the time OFAC sees an apparent violation it results in a simple warning letter or no enforcement action.’ So this is the head of the agency at Treasury responsible for enforcing these sanctions saying 95 percent of the time it results in a simple warning letter or no action.
“We should not be telling anyone that we only enforce sanctions—one of our most important foreign policy tools—just five percent of the time.
“One European regulator who attended an OFAC roadshow commented that foreign financial institutions felt ‘political pressure’ to conduct business with Iran and Iranian companies. Sanctions are a vital foreign policy tool, and yet in this case the Obama administration seemed to be sending the wrong message about their enforcement and effectiveness.
“The PSI report released today outlines key transparency recommendations to ensure these undisclosed side deals never happen again, including requiring the current administration to keep congressional committees of jurisdiction up to date on the status of any future negotiations with Iran, disclosing to Congress any specific licenses that are proposed, and putting in place stronger enforcement of U.S. sanctions.
“Going forward, this report also underscores how important the U.S. financial system is to global finance markets, and it gives us a substantial amount of leverage in negotiations—we should choose to use it.
“We now have an opportunity to fix the fundamental flaws in the Iran deal and put in place a strong agreement that truly protects America’s national security interests and the interests of our allies in the region.
“Recall that the Iran deal was opposed by a bipartisan majority of this body.
“I support our efforts to work with our European allies to put in place a better deal that truly represents America’s national security interests and the interests of our allies in the region. I hope this report helps us to avoid the kinds of problems that happened last time, the next time around.”