"We understand that the administration is drafting rules to guide the implementation of the law and we hereby seek to convey the legislative intent underlying certain terms and phrases in the amendment and to ensure that the positive developments that have occurred as a result of the amendment are buttressed by the administrative rules," Kirk and Menendez wrote in a letter on Thursday to Treasury Secretary Timothy Geithner.
The legislation President Obama signed into law on New Year's Eve seeks to penalize any foreign financial institution that does business with the CBI, but gives the administration both an overall national-security waiver and the ability to waive petroleum sanctions if there is not enough oil available from alternative sources to avoid negative effects on the market (see GSN, Jan. 3). Kirk and Menendez said they interpret this language to mean that a waiver in the national security interest should be required for each foreign financial institution doing business with the CBI -- clarifying “it was not our intent” that Obama should be able to waive the raft of sanctions with just one single report to Congress.
Kirk's and Menendez’s original amendment to the defense authorization bill, which passed the Senate 100-0, sought to completely cut off foreign financial institutions doing business with the CBI from doing business with the U.S. The language was tweaked in conference committee to allow the Obama administration the more vague option to "impose strict conditions" on those accounts. Kirk and Menendez are now calling for the administration to use the Comprehensive Iran Sanctions, Accountability, and Divestment Act signed into law last year as the "baseline standard" to define "strict conditions." The bill allows the administration to make "exceptions" when it comes to imposing sanctions on oil transactions for a foreign financial institution if it has "significantly reduced its volume of crude oil purchases from Iran."
The senators agreed with a recommendation by the Foundation for Defense of Democracies defining "significant" as a minimum of 18 percent in purchase reduction.
"An unevenly applied interpretation would also call into question the seriousness of the sanctions policy and send mixed signals to both Iran and our allies," they wrote.
The White House initially opposed these Iran sanctions when they were introduced as an amendment to the defense authorization bill. At the time, administration officials insisted they support well-targeted sanctions against the CBI but need coordinated action with U.S. allies -- so that the measures don't fragment the international coalition working to isolate Iran, inadvertently spike oil prices, and cause unstable markets, or otherwise negatively affect Washington’s allies and trading partners. Now that the new sanctions are law, Geithner traveled to China and Japan last week to shore up support for them.
"The stronger the administration is on imposing sanctions, the lower the chances are of any military conflict," Kirk told National Journal on Tuesday.
"What we have seen for the last month is the sanctions policy already is working," Kirk said, citing a 25 percent decline in the value of the Iranian Rial against the U.S. dollar, and indications that Japan, South Korea, and India are contemplating reductions of their Iranian oil purchases. Even China is negotiating for significant price reductions, while the European Union is showing signs it will approve an Iranian oil embargo and its own sanctions against the CBI, he noted.
"I do not think that we should snatch defeat from the jaws of victory,” Kirk said. "It’s clear we’ve got growing pressure on Iran as long as the administration hangs tough. On the other hand, if the administration goes weak on Iran and guts the sanctions that were unanimously passed by the Senate, then they’ve condemned the Middle East to an Israeli-Iranian war."