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And it requires the president to report every 60 days on Iran’s latest nuclear capabilities, including an estimated timeline for when it could develop a nuclear explosive device and build a nuclear weapon, also known as “breakout capacity.” Further provisions are expected to be added in the markup, including a measure that goes after Iran’s foreign currency reserves.
“The basic idea is that foreign exchange reserves are their principle hedge against a severe balance of payments crisis,” said Mark Dubowitz, executive director of the pro-sanctions Foundation for Defense of Democracies, which has played an active role in coming up with ways to target the Iranian regime. Foreign currencies, said Dubowitz, are Tehran’s “backstop” in preventing their currency, the rial, from dropping further in value, which could create a huge domestic backlash.
Thanks to previous rounds of U.S. sanctions, Tehran has had increasingly limited access to dollars, leading it to shift much of its reserves into euros. Earlier this spring, Congress began pressuring the European Union to cut off Iran’s access to euros, as well. Since then, Dubowitz, said, Iran has begun looking to expand its holdings in a range of other foreign currencies.
That led Sen. Mark S. Kirk, R-Ill., along with four other senators of both parties, to introduce a bill that would require the president to impose sanctions on foreign banks that engage in transactions with blacklisted Iranian companies or sectors in any non-local currency.
The bill, which is expected to be added to the Royce-Engel bill as an amendment during the markup, would be effective retroactively as of May 9, the day after it was introduced.
The senators decided to spin that off from a more comprehensive draft that is still in the works because, according to one aide, it is more “time sensitive.” By summer, Iran may have successfully diversified its foreign currency reserves away from euros and dollars.
In a May 9 statement, Royce and Engel said they “will carefully review” the Kirk currency bill “with an eye toward incorporating this approach into our own legislation.”
Dubowitz called that an important statement because it “signals to banks to stop the activity ASAP because this will become law.”
A congressional aide involved in Iran sanctions policy decisions said other, stronger measures are also likely to come up as amendments in the House markup.
That includes more language on counterproliferation and even, potentially, an outright prohibition of the purchase of Iranian crude oil.
The Senate bill, which sources say Kirk and other key players are still negotiating, is likely go after many of the same elements of the Iranian economy, as well as a broader range of Iranian human rights violators and regime actors.
It remains to be seen what role Senate Foreign Relations Chairman Robert Menendez, D-N.J., will play in the legislative process on sanctions. A staunch supporter of past sanctions bills, Menendez is now in a different position as head of a key committee and with his predecessor, John Kerry, serving as secretary of State. Menendez aides indicated May 10 that he aims to have major input in the next round of sanctions legislation, as well.