Kerry: Euro Banks Free to Deal with Iran

On May 10, Secretary of State John Kerry said that European businesses “should not use the United States as an excuse” for not dealing with Iran. He arrived in London to meet representatives of European banks and discuss implementation of the nuclear deal and implications for financial transactions. “I think it’s important to have clarity, and the clarity is that European banks, as long as it’s not a designated entity, are absolutely free to open accounts for Iran, trade, exchange money, facilitate a legitimate business agreement, bankroll it, lend money,” he told reporters.
On May 12, Kerry met with nine executives from leading European banks. British Foreign Secretary Philip Hammond, secretary of state for business Sajid Javid and trade envoy to Iran, Norman Lamont, also attended the meeting, a British official told Reuters. Deutsche Bank, HSBC, Credit Suisse, Santander, Royal Bank of Scotland, Societe Generale, and Barclays were represented, as well as Standard Chartered and BNP Paribas, which have both been fined billions of dollars for sanctions violations in previous years. After the meeting, Standard Charted and Societe Generale said they had no plans to resume commercial activities with Iran. 
Iranian officials have argued that the United States has fallen short of its obligations under the nuclear deal. “The United States needs to do way more. They have to send a message that doing business with Iran will not cost them [European banks],” Foreign Minister Mohammad Javad Zarif told The New Yorker in April. Zarif and Kerry met in New York on April 22 to discuss disagreements related to implementation of the deal. The following is an excerpted transcript of Kerry’s remarks to the press in London. 
Roundtable Discussion
May 10, 2016
QUESTION: Why is it our job as America to be trying to sell people on doing business in Iran given the fact that their financial system is still not up to par and that they’re still doing a whole lot of other concerning activities?
SECRETARY KERRY: Well, it’s not our job to sell them on doing business. It’s our job to make clear to them what the rules are, that’s all. I mean, we’re not telling people what to go do, but we are telling people what they’re allowed to do, and there seems to be some confusion about that. So it’s very simple.
And it’s clarifying that an agreement was reached in which the sanctions affecting European banks, particularly, and businesses were lifted. And some people don’t – aren’t clear about what is lifted, what is not, and that clarity has to be drawn. And the reason you do that is because if you make an agreement, you live up to an agreement. It’s very simple. It’s – Iran has a right to the benefits of the agreement they signed up to, and if people by confusion or misinterpretation or, in some cases, disinformation are being misled, it’s appropriate for us to try to clarify that.
With respect to the banks overall, et cetera, we’re simply responding to inquiries that people have about what the limits are of their – of the permissiveness within which they’re operating. And since we were the principal designer, implementer, enforcer of the sanctions themselves, and obviously a key player in the negotiations, I think it’s important for us to answer those inquiries. Any legitimate business that has a question, we have an obligation to answer.
QUESTION: And in terms of the possibility that this could change dramatically in a different direction?
SECRETARY KERRY: Well, I don’t believe that. I just don’t believe that a new president regardless – is going to suddenly say, “Let’s go have a war in the Middle East,” and give up the restraint on a nuclear weapon. And I just don’t think the advisors to that president or anybody are going to suggest that that makes sense.
QUESTION: When you talk to bankers, do they raise those kinds of concerns with you?
SECRETARY KERRY: No. They have concerns about our secondary sanctions and the alternative – we do maintain sanctions on certain designated entities as a result of arms activities or missile activities, but there really shouldn’t be any confusion – and in some ways, there is. But it’s not a – it’s just not as complicated as some people make it. There are a clear list of designees who have been lifted and there’s no game being played here. There’s a – Iran gave up its nuclear weapon chase, so to speak.
QUESTION: In the oil and gas sectors, for example, like the IRGC, it can be hard to – in some instances to see where the ties sort of end and begin –
SECRETARY KERRY: I don’t think it’s that hard.
QUESTION: -- based on what’s spelled out in the U.S. sanctions.
SECRETARY KERRY: I really don’t think it’s that hard, and that’s what – it’s OFAC’s job, obviously, to clarify to people. And OFAC has said if you have a question, come to us and they’ll clarify it. So it really shouldn’t be complicated. It’s not a – it’s not incomprehensible or undefinable. It’s clearly defined and when people have a question, we are available to answer those questions. And we’ve encouraged people, if you have a question, come to us.
QUESTION: It’s just since almost every transaction, especially in banking, it touches the U.S. financial system at least briefly, and you’ve maintained this restriction on the U.S. dollar. What are you telling these banks about how they can do those kinds of transactions and not –
SECRETARY KERRY: Banks in Europe are allowed to open accounts for Iran, banks in Europe are allowed to do business, banks in Europe can fund programs, lend money. That’s absolutely open for business as long as it’s not a designated entity, period, very simple. And they shouldn’t use us as an excuse. Businesses should not use the United States as an excuse if they don’t want to do business or if they don’t see a good business deal. They shouldn’t say, “Oh, we can’t do it because the United States.” That’s just not fair. That’s not accurate. And we sometimes get used as an excuse in this process. So I think it’s important to have clarity, and the clarity is that European banks, as long as it’s not a designated entity, are absolutely free to open accounts for Iran, trade, exchange money, facilitate a legitimate business agreement, bankroll it, lend money – all of those things are absolutely open, permissible.
Remarks by Secretary of State John Kerry and Foreign Secretary Hammond
May 12, 2016
SECRETARY KERRY:  I want to thank Secretary Hammond for hosting key bankers from around Europe in order to answer questions that the banking community has had regarding the impact of lifting of sanctions and questions that they have about what this really means and how does it really work.  And in some cases there have been – there has been a reluctance in some places to take risk or to – what they think is a risk.
So what we’ve been trying to do here today with the representation of the Treasury Department and our officials who are dealing with this is clarify and put to rest misinterpretations or mere rumors about how this is applied.  We want to make it clear that legitimate business, which is clear under the definition of the agreement, is available to banks.  As long as they do their normal due diligence and know who they’re dealing with, they’re not going to be held to some undefined and inappropriate standard here.
We also will be continuing to hold Iran accountable to live to up to the agreements and the standards that Iran needs to meet.  So this was really an effort to listen to the bankers, to hear from them what their perceptions are, the hurdles that they see to moving, and to be able to address those as directly as we can and define for them our interpretation of the law and of the standards so that there’s a clarity going forward and, hopefully, an ability to be able to do those things that are meant to be done under the agreement.
Both sides have an obligation to live up to this agreement and both sides need to get the benefit of the agreement.  Our benefit is that we see a nuclear program that is now visible, open to inspection, understandable, restrained, and living up to the standards of the IAEA.  And they have an expectation that the sanctions that were supposed to be lifted are in fact lifted and that the implementation is appropriate.  That’s the agreement and that’s what we’re trying to do.
FOREIGN SECRETARY HAMMOND:  What we’re trying to address is a gap between the undoubted political commitment of the United States to make this agreement work in practice, to allow Iran to access the world’s trade system and the world’s financial system, and the reality of what the European banks are finding in practice.  We’re trying to bridge that gap; we’re trying to understand where those disconnects are between the political intention and the banking world reality and work out together how we can bridge them to allow these European and global banks to support European businesses in resuming normal trade and investment patterns with Iran.  That’s what all of us want in order to deliver the dividend from the JCPOA that Iran expects and deserves. 
And if we’re going to achieve our strategic objective, which is drawing Iran back into the international community – normalizing relations, including trade and investment relations with Iran – we have to succeed in this.  It’s – essentially it’s the first hurdle in the race, and if we fall at this one, then we’ll never get the chance to demonstrate all the other benefits that can flow from this agreement that we spent so much time and energy delivering last year.