More US Concessions, Iranian Aggression

By Tzvi Kahn

Foreign Policy Initiative

October 18, 2016

The Obama administration’s concessions to Iran — and Tehran’s aggression against the United States — continue.

On October 7, the Treasury Department loosenedrestrictions on Iran’s ability to trade with U.S. dollars, a step the July 2015 nuclear deal in no way requires. On October 9 and 12, Iran-backed Houthi rebels firedmissiles at the USS Mason, an American Arleigh Burke-class destroyer, off the coast of Yemen. prompting the vessel to retaliate by destroying Houthi radar installations. These two events are a telling metaphor for U.S.-Iranian relations since the nuclear accord: As Washington strives to accommodate Tehran’s evolving economic demands, the regime’s belligerence increases.

According to the Treasury Department, the latest American allowances permit foreign financial institutions to process transactions denominated in U.S. dollars, and reverse longstanding U.S. policy prohibiting foreign companies from conducting business with an entity “that is minority owned, or that is controlled in whole or in part, by an Iranian or Iran-related person” on the U.S. sanctions list. Washington also no longer expects foreign banks “to repeat the due diligence its customers have performed on an Iranian customer unless” they have “reason to believe that those processes are insufficient.”

These concessions will enable the economic growth and illicit financial practices of the Islamic Revolutionary Guard Corps (IRGC), the regime’s praetorian guard. The IRGC manages Iran’s nuclear and ballistic missile programs, bears responsibility for many of its human rights abuses, and spearheads its expansionary ambitions throughout the Middle East. Dubbed by the Treasury Department as Iran’s “most powerful economic actor,” the IRGC controls as much as 40 percent of Iran’s economy, giving the organization enormous political and domestic influence.

Last year, the Obama administration repeatedly and explicitly pledged to refrain from offering Iran direct or indirect access the dollar — a restriction it presented as an effective method, in the wake of the nuclear deal’s lifting of international sanctions, to combat the regional instability that the IRGC fosters. At the same time, President Obama said in an August 2015 letter that the United States “will maintain powerful sanctions” that address Iran’s “destabilizing role in Yemen,” among other misbehavior, and will “deploy new sanctions to address those continuing concerns, which we fully intend to do when circumstances warrant.”

The administration also promised that it would enforce the U.N. Security Council’s injunction on Iranian support for the Houthis. “Iran is not allowed to send weapons to the Houthi in Yemen,” Secretary of State John Kerry said days after the nuclear deal’s finalization in July 2015. “There’s another U.N. resolution about that. It has to be enforced. So we are going to engage with others in making sure that we hold Iran accountable to standards that it must be expected to live up to.”

Nevertheless, the Obama administration has remained largely passive as Iran continued to ship arms to Houthi rebels. Since September 2015, U.S. navy ships or allied forces have intercepted at least fourweapons-laden Iranian ships bound for Yemen. In April 2016, in response to the latest interdiction, White House Press Secretary Josh Earnest declared that Iran’s behavior “is not at all consistent with U.N. Security Council resolutions,” and that America and its international partners “will take a close look at this incident, consider the available evidence, and if and when it’s appropriate, raise this for other members of the [U.N.] Security Council.” To date, however, the council has yet to consider the issue.

In this context, the new American concessions are further evidence that the administration, for the remainder of its term, has no intention of fulfilling its promises. Likewise, by enabling the IRGC to access the dollar and thereby weakening the non-nuclear sanctions architecture, the U.S. move constricts the ability of President Obama’s successor to impose economic penalties on Iran for its terrorism, human rights abuses, and ballistic missile tests.

Most troublingly, Washington’s refusal to challenge Iranian antagonism has emboldened Tehran’s Yemeni proxies to open a new front that directly threatens the lives of American sailors. Last week, the Pentagoninsisted that it has no interest in assuming a greater role in the increasingly bloody Saudi-led war in Yemen, which Washington has reluctantly supported by providing fuel and intelligence. But continued Houthi attacks risk forcing America’s hand.

On Sunday, the U.S. Navy said it was investigating a possible third missile attack against the USS Mason, suggesting that its earlier response was insufficient to discourage the Houthis. This followed Tehran’sannouncement last week that it had sent a flotilla of warships to Yemen’s southern coast in an ostensible effort to deter further U.S. action against the rebels. The Obama administration has not shown that it has a coherent strategy to respond to these developments.

Iran’s strategy, by contrast, appears to be self-evident: Tehran and its proxies view the waning days of the Obama administration as an opportunity to pursue their interests with impunity. President Obama, the regime probably reasons, would hardly seek to escalate tensions with Iran, thereby threatening the nuclear deal, his signature foreign policy achievement, just as he leaves office. The next administration will suffer the consequences of this approach, taking power with fewer non-military options to counter Iranian aggression.