About the authors: David F. Eisner, formerly a Wall Street executive and corporate CEO, served as the assistant secretary for management at the U.S. Department of the Treasury in 2018-2021. Richard Goldberg, senior advisor at the Foundation for Defense of Democracies, served as the director for countering Iranian weapons of mass destruction for the White House National Security Council in 2019-2020.
As indirect talks between the United States and Iran continue in Vienna, business leaders around the world are watching to see if President Joe Biden will lift U.S. sanctions on the world’s leading state sponsor of terrorism. If he does, multinational corporations should think twice before jumping into any deals.
Bipartisan support for terrorism sanctions against Iran goes back to 1984, when the United States first designated the Islamic Republic as a state sponsor of terrorism. Since then, Congress and every U.S. president have repeatedly reaffirmed U.S. policy opposing Iran’s sponsorship of international terrorism.
In 2017, while the United States remained a participant in the Iran nuclear deal, the Joint Comprehensive Plan of Action, Congress passed bipartisan legislation that mandated sanctions against entities tied to the Islamic Revolutionary Guard Corps. This legislation was enacted in response to the IRGC’s longstanding support of international terrorism and related nefarious activities, such as money laundering. The United States withdrew from the JCPOA in 2018. In 2019 and 2020, the U.S. Treasury Department implemented the 2017 legislation and imposed sanctions on a wide range of Iranian entities, including Iran’s central bank and national oil company, as well as its financial and energy sectors. Despite their differences over the JCPOA, Democrats and Republicans agreed on one basic principle: Nothing should prevent the U.S. from imposing terrorism sanctions on the Islamic Republic.
By the time the Biden administration took office, more than 300 Iran-connected companies, institutions, and individuals were sanctioned explicitly for their support for terrorism and the IRGC. These sanctions put enormous pressure on Tehran’s terror-related budgets, with news reports of the Iran-funded Lebanese militia Hezbollah even pleading for local donations.
During Secretary of State Antony Blinken’s nomination hearing before the Senate Foreign Relations Committee, a senator asked him whether he believed it was in America’s national security interest to lift these terrorism sanctions. Blinken responded, “I do not. And I think there is nothing, as I see it, inconsistent with making sure that we are doing everything possible—including the toughest possible sanctions—to deal with Iranian support for terrorism.” Blinken continued, “we will continue non-nuclear sanctions as a strong hedge against Iranian misbehavior in other areas.” Indeed, an Obama White House publication even pledged that under the JCPOA, “non-nuclear sanctions (such as for terrorism) must remain in effect and be vigorously enforced.”
As promised during his campaign, President Joe Biden made rejoining the JCPOA a priority of his administration. After months of Iranian intransigence, the Biden administration backed down from Blinken’s commitment to defend U.S. terrorism sanctions, and, according to the Wall Street Journal, offered to lift sanctions on the central bank, oil company, and other key banks, companies, and sectors that finance the IRGC. Reporters asked the State Department how it could suspend terrorism sanctions without Iran’s halt of its terror sponsorship. A State Department official responded that the Trump administration had imposed these sanctions illegitimately. Terrorism sanctions weren’t terrorism sanctions, the Biden administration claimed; they were politically imposed to block a future administration from rejoining the JCPOA.
Anyone who has served at high levels in the Treasury Department knows that to be untrue. Every potential sanctions package is subjected to an intense and lengthy interagency approval process. Targets take months to develop. Teams of intelligence, sanctions, and legal experts review and finalize every designation. It is simply not possible to impose terrorism sanctions without clear and indisputable evidence of support for terrorism.
When confronted with that reality by the media, the Biden administration stopped calling terrorism sanctions illegitimate and pivoted to a new message: Terrorism sanctions could be inconsistent with the economic benefits promised to Iran under JCPOA. In other words, if terrorism sanctions are lifted, it will not be because of any change in behavior but simply to deliver economic relief to the regime.
The 300-plus sanctioned entities and individuals that nonpolitical career experts at the Treasury Department have determined to be bad actors will still be terror-aiders and money launderers. The administration’s implicit and contradictory message to corporate risk managers, executives, and directors is this: If the U.S. suspends any terrorism sanctions on Iran, the private sector should be on notice that all firms receiving sanctions relief remain tied to terrorism and money laundering.
No responsible fiduciary would knowingly expose his company to such illicit activity. To do so could put legitimate businesses at odds with regulations governing anti-money laundering and countering financing of terrorism. Negative publicity, controversy levels, and risk scores would increase. The legal, financial, and reputational risk of doing business with known supporters of terrorism would be extraordinary—particularly if Republicans were to reverse Biden’s policy after taking control of Congress in 2022 or the White House in 2024.
Removal of terrorism sanctions on Iran would be a big mistake. But it would be an even bigger mistake for any firm to knowingly do business with terrorists and money launderers just because it became convenient for the Biden administration to temporarily remove these formal labels. Calling a grizzly bear a “teddy” does not make it any less of a killer.
Guest commentaries like this one are written by authors outside the Barron’s and MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to [email protected]