State Dept. Officials Wary Of Sanctioning Iran's Central Bank

As the US Senate is expected to approve legislation by Sens. Robert Menendez (D-N.J.) and Mark Kirk (R-Ill.) to cut off the Central Bank of Iran (CBI) from the global financial system as early as this Thursday, Undersecretary of State for Political Affairs Wendy Sherman and Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen warn that such a move could unintentionally benefit Iran since it is not a concerted international effort.

“Sanctions are always more effective when they are multilateral,” Sherman testified before the Senate Foreign Relations committee. “Iran is no exception.”

The  Menendez-Kirk legislation, an amendment to the military spending bill, would bar foreign financial institutions that purchase petroleum or petroleum products from the CBI from opening or maintaining correspondent operations in the US. While such legislation would freeze the CBI, Cohen and Sherman warn that it could inadvertently redound to Iran’s economic benefit.

“That threat, being focused on our closest allies, risks a dynamic with those governments and these banks, which is as likely to push them away and impede the ability to bring together a coordinated effort against Iran, as to generate it,” Cohen said. 

“We all agree with the impulse, the sentiment, the objective, which is to really go at the jugular of Iran’s economy,” Sherman further remarked.”[However,] there is absolutely a risk that in fact the price of oil would go up, which would mean that Iran would in fact have more money to fuel its nuclear ambitions, not less.”

“So what you’re really saying is,” Chairman John Kerry (D-Mass.) said in summation of Cohen and Sherman’s warning, “this is a very blunt instrument which risks adverse reaction, as opposed to a calculated, carefully orchestrated efforts that’s currently under way, and actually accomplish the very same end?”

“I think that’s exactly right,” Cohen replied.