WASHINGTON (AP) - After striking an elusive nuclear deal with Iran, the Obama administration found itself in a quandary in early 2016: Iran had been promised access to its long-frozen overseas reserves, including $5.7 billion stuck in an Omani bank.
To spend it, Iran wanted to convert the money into U.S. dollars and then euros, but top U.S. officials had repeatedly promised Congress Iran would never gain access to America's financial system.
Those assurances notwithstanding, the Obama administration secretly issued a license to let Iran sidestep U.S. sanctions for the brief moment required to convert the funds through an American bank, an investigation by Senate Republicans released Wednesday showed. The plan failed when two U.S. banks refused to participate.
Yet two years later, the revelation is re-igniting the bitter debate over the nuclear deal and whether former President Barack Obama was too eager to grant concessions to Tehran.
"The Obama administration misled the American people and Congress because they were desperate to get a deal with Iran," said Sen. Rob Portman, R-Ohio, who chairs the Senate panel that conducted the investigation.
And Republican Rep. Ed Royce, the House Foreign Affairs Committee chairman, accused Obama of trying to "hide a secret push to give the ayatollah access to the U.S. dollar."
Not so, former Obama administration officials said, arguing the decision to grant the license adhered to the spirt of the deal, which included allowing Iran to regain access to foreign reserves that had been off-limits because of U.S. sanctions. They said the public assurances that Iran would be kept out were intended to dispel incorrect reports about nonexistent proposals that would have gone much farther by letting Iran actually buy or sell things in dollars.
The former Obama officials disputed the momentary access to U.S. banks to convert funds through the dollar constituted "access to the U.S. financial system." What's more, they dismissed the report as another example of a faulty approach to Iran policy by Republicans and by President Donald Trump, who last month withdrew the U.S. from the landmark 2015 nuclear accord.
"They continue to malign the deal in an effort to justify President Trump's unjustifiable decision," said Ned Price, who was Obama's White House National Security Council spokesman, referring to GOP lawmakers.
Still, the report by the Senate Permanent Subcommittee on Investigations sheds light on the delicate balance the Obama administration sought to strike after the deal, as it worked to ensure Iran received its promised benefits without playing into the hands of the deal's opponents. Amid a tense political climate, Iran hawks in the U.S., Israel and elsewhere argued that the United States was giving far too much to Tehran and the windfall would be used to fund extremism and other troubling Iranian activity.
The Treasury Department license, issued in February 2016 and never disclosed, would have allowed Iran to convert $5.7 billion it held at Oman's Bank of Muscat from Omani rials into euros by exchanging them first into dollars. If the Omani bank had allowed the exchange without such a license, it would have violated sanctions that bar Iran from transactions that touch the U.S. financial system.
The situation resulted from the fact Iran had stored billions in Omani rials, a currency that's notoriously hard to convert. The U.S. dollar is the world's dominant currency, so allowing it to be used as a conversion instrument for Iranian assets was the easiest and most efficient way to speed up Iran's access to its own funds.
"Yikes," one former Treasury official told colleagues in an email, as described by the report. "It looks like we committed to a whole lot beyond just allowing the immobilized funds to settle out."
The Obama administration approached two U.S. banks to facilitate the conversion, the report said, but both refused, citing the reputational risk of doing business with or for Iran.