Some senior U.S. officials involved in the implementation of the Iran
nuclear deal have privately concluded that a key sanctions relief
provision – a concession to Iran that will open the doors to tens of
billions of dollars in U.S.-backed commerce with the Islamic regime –
conflicts with existing federal statutes and cannot be implemented
without violating those laws, Fox News has learned.
At issue is a passage tucked away in ancillary paperwork attached to
the Joint Comprehensive Plan of Action, or JCPOA, as the Iran nuclear deal is formally known. Specifically, Section 5.1.2 of
Annex II
provides that in exchange for Iranian compliance with the terms of the
deal, the U.S. “shall…license non-U.S. entities that are owned or
controlled by a U.S. person to engage in activities with Iran that are
consistent with this JCPOA.”
In short, this means that foreign subsidiaries of U.S. parent
companies will, under certain conditions, be allowed to do business with
Iran. The problem is that the
Iran Threat Reduction and Syria Human Rights Act (ITRA), signed into law by President Obama in August 2012, was explicit in closing the so-called “foreign sub” loophole.
Indeed, ITRA also stipulated, in Section 218, that when it comes to
doing business with Iran, foreign subsidiaries of U.S. parent firms
shall in all cases be treated exactly the same as U.S. firms: namely,
what is prohibited for U.S. parent firms has to be prohibited for
foreign subsidiaries, and what is allowed for foreign subsidiaries has
to be allowed for U.S. parent firms.
What’s more, ITRA contains language, in Section 605, requiring that
the terms spelled out in Section 218 shall remain in effect until the
president of the United States certifies two things to Congress: first,
that Iran has been removed from the State Department’s list of nations
that sponsor terrorism, and second, that Iran has ceased the pursuit,
acquisition, and development of weapons of mass destruction.
Additional executive orders and statutes signed by President Obama, such as the
Iran Nuclear Agreement Review Act, have reaffirmed that all prior federal statutes relating to sanctions on Iran shall remain in full effect.
For example, the review act – sponsored by Sens. Bob Corker
(R-Tennessee) and Ben Cardin (D-Maryland), the chairman and ranking
member, respectively, of the Foreign Relations Committee, and signed
into law by President Obama in May – stated that “any measure of
statutory sanctions relief” afforded to Iran under the terms of the
nuclear deal may only be “taken consistent with existing statutory
requirements for such action.” The continued presence of Iran on the
State Department’s terror list means that “existing statutory
requirements” that were set forth in ITRA, in 2012, have not been met
for Iran to receive the sanctions relief spelled out in the JCPOA.
As the Iran deal is an “executive agreement” and not a treaty – and
has moreover received no vote of ratification from the Congress,
explicit or symbolic – legal analysts inside and outside of the Obama
administration have concluded that the JCPOA is vulnerable to challenge
in the courts, where federal case law had held that U.S. statutes trump
executive agreements in force of law.
Administration sources told Fox News it is the intention of Secretary
of State John Kerry, who negotiated the nuclear deal with Iran’s
foreign minister and five other world powers, that the re-opening of the
“foreign sub” loophole by the JCPOA is to be construed as broadly as
possible by lawyers for the State Department, the Treasury Department
and other agencies involved in the deal’s implementation.
But the apparent conflict between the re-opening of the loophole and
existing U.S. law leaves the Obama administration with only two options
going forward. The first option is to violate ITRA, and allow foreign
subsidiaries to be treated differently than U.S. parent firms. The
second option is to treat both categories the same, as ITRA mandated –
but still violate the section of ITRA that required Iran’s removal from
the State Department terror list as a pre-condition of any such
licensing.
It would also renege on the many promises of senior U.S. officials to
keep the broad array of American sanctions on Iran in place. Chris
Backemeyer, who served as Iran director for the National Security
Council from 2012 to 2014 and is now the State Department’s deputy
coordinator for sanctions policy,
told
POLITICO last month “there will be no real sanctions relief of our
primary embargo….We are still going to have sanctions on Iran that
prevent most Americans from…engaging in most commercial activities.”
Likewise, in a
speech
at the Washington Institute for Near East Policy last month, Adam
Szubin, the acting under secretary of Treasury for terrorism and
financial crimes, described Iran as “the world’s foremost sponsor of
terrorism” and said existing U.S. sanctions on the regime “will continue
to be enforced….U.S. investment in Iran will be prohibited across the
board.”
Nominated to succeed his predecessor at Treasury, Szubin
appeared
before the Senate Banking Committee for a confirmation hearing the day
after his speech to the Washington Institute. At the hearing, Sen. Tom
Cotton (R-Arkansas) asked the nominee where the Obama administration
finds the “legal underpinnings” for using the JCPOA to re-open the
“foreign sub” loophole.
Szubin said the foreign subsidiaries licensed to do business with
Iran will have to meet “some very difficult conditions,” and he
specifically cited ITRA, saying the 2012 law “contains the licensing
authority that Treasury would anticipate using…to allow for certain
categories of activity for those foreign subsidiaries.”
Elsewhere, in documents obtained by Fox News, Szubin has maintained
that a different passage of ITRA, Section 601, contains explicit
reference to an earlier law –
the International Emergency Economic Powers Act,
or IEEPA, on the books since 1977 – and states that the president “may
exercise all authorities” embedded in IEEPA, which includes licensing
authority for the president.
However, Section 601 is also explicit on the point that the president
must use his authorities from IEEPA to “carry out” the terms and
provisions of ITRA itself, including Section 218 – which mandated that,
before this form of sanctions relief can be granted, Iran must be
removed from the State Department’s terror list. Nothing in the
Congressional Record indicates that, during debate and passage of ITRA,
members of Congress intended for the chief executive to use Section 601
to overturn, rather than “carry out,” the key provisions of his own law.
One administration lawyer contacted by Fox News said the re-opening
of the loophole reflects circular logic with no valid legal foundation.
“It would be Alice-in-Wonderland bootstrapping to say that [Section] 601
gives the president the authority to restore the foreign subsidiary
loophole – the exact opposite of what the statute ordered,” said the
attorney, who requested anonymity to discuss sensitive internal
deliberations over implementation of the Iran deal.
At the State Department on Thursday, spokesman John Kirby told
reporters Secretary Kerry is “confident” that the administration “has
the authority to follow through on” the commitment to re-open the
foreign subsidiary loophole.
“Under the International Emergency Economic Powers Act, the president
has broad authorities, which have been delegated to the secretary of
the Treasury, to license activities under our various sanctions regimes,
and the Iran sanctions program is no different,” Kirby said.
Sen. Ted Cruz (R-Texas), the G.O.P. presidential candidate who is a
Harvard-trained lawyer and ardent critic of the Iran deal, said the
re-opening of the loophole fits a pattern of the Obama administration
enforcing federal laws selectively.
“It’s a problem that the president doesn’t have the ability wave a
magic wand and make go away,” Cruz told Fox News in an interview. “Any
U.S. company that follows through on this, that allows their
foreign-owned subsidiaries to do business with Iran, will very likely
face substantial civil liability, litigation and potentially even
criminal prosecution. The obligation to follow federal law doesn’t go
away simply because we have a lawless president who refuses to
acknowledge or follow federal law.”
A spokesman for the
Senate Banking Committee could not offer any time frame as to when the committee will vote on Szubin’s nomination.
