John Kerry's Awkward Push For Investment In Iran

May 25, 2016
Originally published on May 26, 2016 2:25 pm

Secretary of State John Kerry has negotiated himself into the odd position of explaining to Western banks how they can do business in Iran.

As he tries to keep the Iran nuclear agreement on track in the final year of the Obama administration, Kerry has become personally involved in trying to help Iran get economic benefits out of the deal. That's no easy task and one that critics say is letting Iran off the hook.

Kerry huddled with European bankers in London on May 12 to tell them "legitimate business" is available to them in Iran. He took Treasury Department officials with him to "dispel any rumors" about how the U.S. will enforce its remaining sanctions on Iran.

His spokesman John Kirby insists this isn't lobbying or advocating for investment in Iran.

"It's about making sure legitimate questions by banking institutions get answered and honest concerns get addressed," Kirby wrote in an emailed statement.

In speaking to bankers, Kerry emphasized that "as long as they do their normal due diligence ... they're not going to be held to some undefined and inappropriate standard."

Many banks, though, are still wary of doing business in Iran. One reason, but not the only one, is that banks fear the possibility that U.S. sanctions could "snap back" if Iran violates the nuclear deal.

As promised, the U.S. has suspended sanctions under the terms of the nuclear agreement that Washington and other world powers negotiated with Iran last year.

However, the U.S. still considers Iran a state sponsor of terrorism and says it routinely violates the rights of its citizens. So there are still some U.S. economic sanctions in place over these issues, which are separate from the nuclear deal.

Banks Cite Multiple Risks

Stuart Levey, the chief legal officer for the bank HBSC, says his bank and others in Europe still have good reason to be reluctant to jump in.

"Governments can lift sanctions, but the private sector is still responsible for managing its own risk," Levey, a former Treasury undersecretary for terrorism and financial intelligence, pointed out in The Wall Street Journal a day after Kerry met with bankers in London.

"No one has claimed that Iran has ceased to engage in much of the same conduct for which it was sanctioned, including activity supporting terrorism and building and testing ballistic missiles," Levey wrote. He added that HSBC has no intention of doing any new business involving Iran.

Kerry's lobbying efforts have also raised eyebrows on Capitol Hill.

Ed Royce, a California Republican and chairman of the House Foreign Affairs Committee, accuses the Obama administration of "bending over backwards to accommodate Iran," rather than keeping up pressure to encourage Iran to change its behavior.

Kerry was taking "the odd step" of reassuring foreign firms that Iran is open for business, Royce told a recent congressional hearing, while "other administration officials go so far as to say that Iran economic growth is in our national security interest."

Iran agreed to limit its nuclear program in exchange for sanctions relief and the Obama administration argues that Tehran needs to see some economic benefits for the agreement to work.

Administration Says U.S. Is Now Safer

U.S. officials overseeing the deal say it has made the U.S. safer. Iran was a few months away from having enough material for a nuclear weapon, they argue, and now Iran is a year away from that.

"Since Iran has kept its end of the deal, we must uphold ours," says Adam Szubin, acting undersecretary for terrorism and financial intelligence. He told a House Foreign Relations Committee that Iran is already seeing the benefits, opening new bank accounts and gaining access to billions of dollars in reserves.

The nuclear deal has improved Iran's economic outlook, according to David Lipton, first deputy managing director of the International Monetary Fund, who visited Iran in mid-May.

His report predicts GDP growth of 4 percent to 4.5 percent over the medium term, as Iran boosts its oil exports and its banks reconnect to the international financial system. Inflation in Iran has declined from 45 percent in 2013 to around 8 percent recently, the IMF adds. Despite low oil prices, Iran's Oil Ministry is trying to ramp up production, exporting 2 million barrels per day in hopes of soon reaching 2.2 million barrels per day.

Iran needs investment, though, and that means access to the international financial system. That's where John Kerry's lobbying efforts fit in.

Kerry's critics say Iran needs to show that it is following international rules and reforming its economy if it wants foreign investment and it should not be up to the Obama administration to make that case.

The Financial Action Task Force, an international body that reports on the risks of money laundering and terrorist financing, remains "particularly and exceptionally" concerned about Iran's failure to live up to global standards.

Iran also gets poor marks on corruption. It is ranked 130th on Transparency International's Corruption Perception Index and 118th on the World Bank's Ease of Doing Business list. Sen. Elizabeth Warren, a Massachusetts Democrat who supports the nuclear deal, told a Senate banking hearing that issues like corruption explain why companies are so reluctant to invest in Iran.

"The United States should not fall into the trap of helping Iran rehabilitate itself," former Treasury Department official Juan Zarate told that same hearing.

"The onus should remain solely on Iran to alleviate concerns about its activities, lack of transparency and failure to meet heightened global standards of financial integrity," said Zarate, who is now chairman of the Financial Integrity Network.

Copyright 2018 NPR. To see more, visit


Secretary Of State John Kerry and his team are working hard to keep the Iran Nuclear Deal on track - perhaps too hard, critics say. The Obama administration sees the agreement as key to its foreign policy legacy. Some in Congress say Kerry is going too far by helping Iran reap the economic benefits of the arrangement. NPR's Michele Kelemen has more.

MICHELE KELEMEN, BYLINE: At a testy congressional hearing today, the House Foreign Affairs Committee chairman, Republican Ed Royce, complained that the Obama administration is walking on eggshells when it comes to Iran and even acting as Iran's business development promoter.


ED ROYCE: The State Department has taken it advocacy for Tehran to a new and disturbing level by trying to persuade major non-U.S. banks that doing Iran-related business is not only permitted but is actually encouraged.

KELEMEN: Secretary of State John Kerry met with European bankers earlier this month to persuade them that, as he put it, legitimate business is available to them in Iran. That's a case other officials have been making for months. The administration argues it has to do this to make sure Iran sees the benefits of cutting back its nuclear program.


ADAM SZUBIN: Since Iran is kept hit its end of the deal we must uphold our --

KELEMEN: That's Adam Szubin, a Treasure Department official who oversees sanctions. He told the House hearing that before the deal, Iran was a few months away from having enough nuclear material for a bomb. Now it's a year away. In return, the U.S. has suspended nuclear-related sanctions.


SZUBIN: Iran is already seeing benefits under this deal. It has been able to open new bank accounts. It's been able to gain access to billions of dollars in reserves, and its oil exports to Europe have recovered to about one half of their pre-sanctions levels.

KELEMEN: There are still non-nuclear-related sanction on Iran for things like human rights abuses and links to terrorists groups. And Tehran is blaming the U.S. for this slow pace of investment in the country.

But many U.S. lawmakers say that's not America's problem. At a Senate Banking Committee hearing yesterday, Massachusetts Democrat Elizabeth Warren pointed out there are many reasons companies are wary of investing in Iran.


ELIZABETH WARREN: If Iran complies with its obligations under the nuclear deal, they will get the sanctions relief that they bargained for. But Iran has a long history of money laundering, terrorist financing, corruption, which are among the reasons that Iran remains a pariah state in the eyes of the international community.

KELEMEN: So Senator Warren posed this question to a former Treasury Department official, Elizabeth Rosenberg, who was testifying.


WARREN: Ms. Rosenberg, instead of blaming the United States for its failure to emerge from economic isolation, what steps should Iran be taking if it wants to become a responsible member of the international financial and commercial system?

ELIZABETH ROSENBERG: Thank you for the question. To begin with, it could stop funding terrorism.

WARREN: Yeah. That would be a good one.

KELEMEN: Rosenberg, who's now with the Center for a New American Security, says Iran's provocative behavior scares off investors. She's also encouraging Iran to work with international banking regulators who set the standards to protect financial institutions from money laundering.

Another expert at the Senate hearing was Juan Zarate, a former Treasury Department official who now chairs an advisory firm called Financial Integrity Network. He says Iran has to clean up its act.


JUAN ZARATE: In putting the onus on Iran to resolve these issues themselves, to explain themselves to the market - that actually could promote reforms internally.

KELEMEN: Zarate argues that the Obama administration's lobbying efforts to help Iran's economy is doing the opposite - letting Iran off the hook. Michele Kelemen, NPR News, the State Department. Transcript provided by NPR, Copyright NPR.