The Obama administration may be preparing to provide a degree of relief from current US "dollar-clearing" sanctions applicable to transactions involving Iran, but where both parties to a funds transfer are non-US persons.
These types of transactions are sometimes referred to as "U-turn" transfers. The prohibition on dollar clearing for most transactions involving parties in Iran has posed a significant obstacle for non-US persons and companies seeking to re-engage with Iranian counterparties following implementation of the Joint Comprehensive Plan of Action (the "JCPOA"), the recent nuclear-related agreement between Iran and the P5+1 nations.
In November of 2008, the US Department of Treasury amended the Iranian Transactions Regulations to prohibit US financial institutions from processing Iran-related U-turn transfers, subject to certain limited exceptions. The JCPOA, which came into effect in January 2016 and relaxes certain US, European Union and United Nations Security Council sanctions against Iran, does not address Treasury's prohibition against U-turn transfers. In fact, at hearings before Congress concerning the JCPOA in 2015, high-ranking Treasury officials testified that Iran would not be granted access to dollar-clearing services. It is not clear what form of guidance may be forthcoming, but reports suggest that the Obama administration is considering granting licenses to offshore dollar clearing houses for certain foreign financial institutions, thus potentially facilitating the clearing of Iran-related dollar transactions without the use of US correspondent banking institutions.
The Administration's reported consideration of relaxing dollar-clearing restrictions may in part be intended to address concerns that US sanctions, among other factors, could undermine the dollar's attractiveness as the preferred currency for many international business transactions. In a speech at the Carnegie Endowment for International Peace in Washington, DC, on 30 March 2016, Treasury Secretary Jacob Lew said that, "The risk that sanctions overreach will ultimately drive business activity from the US financial system could become more acute if alternatives to the United States as a center of financial activity . . . assume a larger role in the global financial system." In March, Iranian Supreme Leader Ayatollah Khamenei acknowledged that Iran's financial sector is "still facing problems" notwithstanding the JCPOA because "[banks] are afraid of the United States."
The reports have provoked responses from both sides of the aisle in Congress. Senators Marco Rubio of Florida and Mark Kirk of Illinois introduced legislation on 6 April 2016 to bar the Treasury from permitting Iran-related U-turn transfers, and they and others have written to the Obama administration publicly criticizing the proposal. House Democratic Whip Steny Hoyer of Maryland issued a statement on 31 March 2016 voicing the concern that the proposed licensing scheme would undermine US leverage in the midst of ongoing talks concerning Iran's nuclear missile program and role in financing global terrorism. The implementation of the JCPOA and related sanctions regulations, such as any potential dollar-clearing license scheme, is likely to be significantly affected by the upcoming presidential election.
It is important to note that U-turn restrictions remain in place; thus, unless and until the Administration acts, the use of US dollars in Iran-related transactions will generally continue to be problematic under relevant US sanctions.