Stage set for new Iran sanctions fight

Stage set for new Iran sanctions fight

It’s a rare moment of bipartisan unity: The Obama administration and both congressional Democrats and Republicans all agree that new measures are needed to stop Iran’s nuclear ambitions. But that’s where the agreement ends; battle lines are now set for a fight in December over the path forward on Iran sanctions.

The Obama administration is under serious congressional pressure to tighten the noose on Iran following the foiled Iranian plot to assassinate the Saudi Ambassador to the United States Adel al-Jubeir and the new International Atomic Energy Agency (IAEA) report that confirms Iran’s nuclear weapons program. The leading idea on Capitol Hill is to sanction the Central Bank of Iran (CBI), which stands accused of facilitating all sorts of illicit activities. The question is whether to try to punish the CBI or to try to collapse it altogether, a move that risks negative effects for the world oil markets and the U.S. economy.

Sen. Mark Kirk (R-IL) is leading the charge for collapsing the CBI and trying to bring down the whole Iranian economy. In August, more than 90 senators signed a letter to President Barack Obama, written by Kirk and Sen. Chuck Schumer (D-NY), which stated, "The time has come to impose crippling sanctions on Iran’s financial system by cutting off the Central Bank of Iran."

Earlier this week, Kirk introduced an amendment to the defense authorization bill, which is on the floor now, that would force the administration to cut off from the U.S. financial system any bank that does business with the CBI. The administration, led by Treasury Undersecretary David Cohen, has been lobbying against the Kirk amendment because they believe it could risk harm to the U.S. economy.

Kirk’s language already has a lot of support, including co-sponsorship from Sens. Joe Manchin (D-WV), Dean Heller (R-NV), John Tester (D-SD), Roy Blunt (R-MO), Jon Kyl (R-AZ), Pat Roberts (R-KS), John Barrasso (R-WY), Marco Rubio (R-FL), Scott Brown (D-MA), Dan Coats (R-IN), John Cornyn (R-TX), and David Vitter (R-LA). 

There are two risks to the Kirk strategy: one is that other countries’ central banks might decide to react negatively and stop doing business with the United States, another is that bringing down Iran’s economy would disrupt world oil markets, raising the price of energy.

"We are eager to work with Congress to develop new authorities to amplify our pressure on Iran, but it is critically important that the steps we take do not destabilize the U.S. and global economy while potentially benefiting Iran," a Treasury Department spokesman told The Cable.

A senior GOP Senate aide responded to that argument today, telling The Cable, "Treasury should go back and model the cost to the U.S. economy and the world economy of an Israeli strike on Iran."

Earlier this week, the administration held a closed-door meeting with Kirk, Schumer, Banking Committee Chairman Tim Johnson (D-SC), and Sen. Robert Menendez (D-NJ), who is the unofficial Democratic lead on the issue. They tried to work out a compromise but failed. Senate Majority Leader Harry Reid (D-NV) tried to keep the Kirk amendment off of the defense bill, but Senate Minority Leader Mitch McConnell (R-KY) maneuvered to make sure it would get a vote.

So today, Menendez introduced his counter amendment, which has the support of Schumer, Reid, and Sens. Robert Casey (D-PA), Kirstin Gillibrand (D-NY), Sherrod Brown (D-OH), Frank Lautenberg (D-NJ), Ben Cardin (D-MD), and Bill Nelson (D-FL).

"This amendment will require the president to make a determination about whether the Central Bank of Iran’s conduct threatens the national security of the United States or its allies based on its facilitation of the activities of the Government of Iran that threaten global or regional peace and security," Menendez said Friday on the senate floor.

But critics point out that the Menendez language would give the president broad waiver authority to exempt central banks from other countries from the penalties of doing business with the CBI, a waiver some senate Republicans believe takes the teeth out of the measure.

"The Kirk amendment is the only bipartisan amendment currently under consideration and it would impose crippling sanctions on the CBI without creating loopholes for the administration to take advantage," a senior GOP senate aide told The Cable. "If you’re looking for an alternative to give the president a way out, you can go with a partisan amendment, which is the one [Menendez] filed today."

The administration hasn’t fully endorsed the Menendez amendment, but they like it better than the Kirk language, one Democratic Senate aide told The Cable. The administration has a long record of opposing any congressional efforts that force its hand on how to apply sanctions.

The issue will probably come to a head when Congress returns from Thanksgiving recess. Some in the Senate are working hard to bring the two camps together.

"The bottom line is that there is an overwhelming bipartisan supermajority in the U.S. senate for going after the CBI," one senior Senate aide told The Cable today. "At the end of the day, when the dust settles, it will be the job of people on both sides to sit down together and come up with a common approach that allows Democrats and Republicans to do this. That’s what we all know needs to happen."

In statement given to The Cable today, Kirk indicated a willingness to seek a compromise.

"We’ve always worked these issues out before and we will do so again," Kirk said. "The bottom line is that we all agree that we should mandate crippling sanctions against the Central Bank of Iran."