WASHINGTON—The Obama administration is preparing to give Iran limited access to U.S. dollars as part of looser sanctions on Tehran, according to congressional staff members and a former American official briefed on the plans.
Executives at European and Asian banks have said in recent interviews that they remain reluctant to conduct any financial transactions with Iran due to fears they might run afoul of the U.S. Treasury and its regulations that ban dollar dealings with Iranian firms. Most major international trade, particularly in oil and gas, is conducted in U.S. dollars.
The Treasury is considering how to issue licenses to offshore dollar clearing houses for specific Iranian financial institutions, an approach that wouldn’t require the involvement of American banks, according to the congressional officials. The clearing houses, likely involving select foreign banks, would conduct the dollar transactions instead, shielding the U.S. financial system from any direct contact with Iran, these officials said.
“They are looking at a couple mechanisms to allow for this dollar trade, stopping short of normalizing banking transactions,” said a congressional banking official briefed by the administration on its plans,
Members of Congress from both parties have rapped reports that the White House is preparing to provide Iran with access to the U.S. dollar.
Lawmakers argued in letters to the administration this week that such a step risked undermining U.S. sanctions campaigns around the world, which are predicated on using the heft of the U.S. financial system to punish America’s adversaries. Iran, they stressed, continues to support terrorism and is developing ballistic-missile capabilities, despite moving to scale back its nuclear program.
Republican Sens. Marco Rubio of Florida and Mark Kirk of Illinois wrote Mr. Lew on Wednesday seeking assurances that Iran wouldn’t be granted dollar access. Their offices said they haven’t received responses.
In a letter to President Barack Obama on Thursday, Rep. Brad Sherman (D., Calif.), said, “I believe this will set bad precedent, and it will not be the last time the Iranians and/or their business partners receive additional relief not contemplated” under the nuclear deal.
Senior members of Congress on Thursday also released statements voicing concern about the proposed arrangement.
House Speaker Paul Ryan said that the administration should abandon the dollar-access idea.
And House Democratic Whip Steny Hoyer, who gave qualified support to ending the sanctions regime during congressional debates, said he was opposed to granting Tehran any new relief “without a corresponding concession. We lose leverage otherwise, and Iran receives something for free.”
Iran has conducted a string of ballistic-missile tests in recent months that the Obama administration said were “inconsistent” with a United Nations Security Council resolution, though it stopped short of charging Tehran with a violation. U.S. officials also believe Iran is a major supplier of arms and funding for the Bashar al-Assad regime in Syria and the Houthi militia in Yemen.
Since the agreement went into force in January, Iran has scaled back its nuclear activities. The U.S., however, has maintained penalties on Iranian defense and missile firms and individuals allegedly involved in human-rights abuses.
Iranian officials have increasingly complained that the ongoing U.S. penalties are prohibiting Iran from conducting normal business with a flood of European, Asian and Middle East companies that have sought to enter the Iranian markets.
Mr. Lew and other U.S. officials said in the months after the nuclear agreement that Iran would continue to be denied any access to the U.S. financial system. This included blocking Iranians from establishing accounts at American banks or conducting dollar trade through European or Asian banks.
“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 financial arrangements with U.S. banks,” Mr. Lew said last summer.

Source: Wall Street Journal, April 1