Senate’s Iran Sanctions Deal Falls Apart

A deal in the Senate to impose additional sanctions on Iran has fallen apart, as Senate Democrats accede to requests from President Obama to delay new legislation while world powers negotiate a nuclear deal with Iran.

Senate staffers tell The Daily Beast that a bipartisan amendment to the National Defense Authorization Act was ready to go last night, and aimed at closing loopholes in the current sanctions on Iran. The new bill, however, would only kick in after the six-month negotiations period—specified in an interim deal reached last month with Iran—expired and only if Iran had been found in violation of its obligations.

“We don’t know why the Democrats walked away from this,” one senate staff member involved in the negotiations told The Daily Beast on Thursday. “There was a deal last night, but something happened in the last 12 hours.”

The collapse of the Senate’s efforts to reach a sanctions compromise between Senators Mark Kirk (R-Il.) and Robert Menendez (D-NJ) is a victory for President Obama and President Rouhani of Iran. Earlier this week, Iran’s foreign minister, Javad Zarif, told Time magazine that any new sanctions from Congress would collapse the nuclear talks between his country and the United States, China, France, Germany, Russia and the United Kingdom.

Secretary of State John Kerry also warned Congress this week in open and closed testimony that any new sanctions would unravel the international support that has made the pressure on Iran’s banking sector and oil industry so effective.

But Kerry also promised this week that the Obama administration would ask Congress to impose additional sanctions if Iran was found to be in violation of its obligations or if the nuclear negotiations collapsed.

The collapse of the sanctions amendment was hinted at on Thursday at a hearing before the Senate Banking Committee. Sen. Robert Menendez, the Democratic chairman of the Senate Foreign Relations Committee who was leading the sanctions negotiations in the Senate, said he was interested in pursuing new legislation that would define an acceptable outcome of Iranian negotiations as opposed to a new round of sanctions on Iran.

“I know I have been a proponent of pursuing additional sanctions prospectively and in a timeframe beyond the scope of the six-month period of negotiations,” Menendez said. “But I am beginning to think based upon all of this maybe what the Senate needs to do is define the end game, at least what it finds as acceptable.”

Later Menendez declined to directly answer questions from reporters as to whether he still intended to introduce new sanctions in the Senate. When asked, he said, “We’re looking at all the options and what is the best effort that the Senate can lead to assure the eventual outcome is one we can be supportive of and want to accomplish, and that’s our focus.”

Sen. Bob Corker, the ranking Republican on the Senate Foreign Relations Committee, was more blunt on Thursday. At the hearing, he said of new sanctions: “I understand we are going through a rope-a-dope here in Congress and we are not going to do anything.”

However, a silver lining for sanctions proponents this week came from the Treasury Department. On Thursday morning, Treasury officials announced the designation of 10 new individuals and entities for violating sanctions on Iran’s nuclear program. The announcement comes after The Daily Beast reported that the designations from the Treasury on Iran sanctions had slowed to a trickle since June when President Rouhani was elected.

Speaking Thursday before the Senate Banking Committee, the Undersecretary of the Treasury for Terrorism and Financial Intelligence, David S. Cohen, said that senior Treasury officials continue to meet with banks and international businesses to dissuade them from investing in Iran. “We believe our actions have put the international business community on notice: Iran is still off limits, including designated Iranian banks and businesses,” Cohen said.

“David Cohen aims to prevent the unraveling of the sanctions regime as fear shifts to greed in the international marketplace and despair transforms into hope in the Iranian economy,” said Mark Dubowitz, the executive director of the Foundation for the Defense of Democracies, an organization that has worked closely with Congress and the administration on devising the current Iranian sanctions.

Dubowitz added, “These designations are an early indicator that he and his colleagues remain committed to the task. The open question is what they will do when major international companies violate sanctions and, particularly, if they are Chinese, Russian and European sanctions busters.”