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White House moves to ease way for business deals to cement nuclear pact

By Carol E. Lee and Jay Solomon 

WASHINGTON -- The White House is pushing to ease the way for companies to complete deals with Iran, aiming to cement the landmark nuclear agreement reached last year and make it difficult for future administrations to undo it, senior U.S. officials said.

The effort, which borrows from President Barack Obama's playbook for solidifying U.S. relations with Cuba, got a boost this week when Boeing Co. reached a $17.6-billion deal with Iran to sell commercial jets to the country's main airline.

A Boeing spokesman declined to comment on any specific effort by the administration. In a letter Thursday responding to criticism of the deal from two Republican lawmakers, the company's senior vice president for government operations, Tim Keating, said the administration had made it clear in consultations with Boeing that "the ability to provide Iranian airlines with U.S. and European replacement commercial passenger aircraft for their aging fleets was key and essential to reaching closure on the agreement."

Administration officials are also studying whether to publicly back Iran's bid to join the World Trade Organization, a move opposed by America's Persian Gulf allies, such as Saudi Arabia.

The global agency responsible for combating money laundering, the Financial Action Task Force, this week is weighing whether to remove Iran from a blacklist in a bid to improve its ability to conduct financial transactions through Western banks. A decision is expected as early as Friday, said U.S. and European officials.

Administration officials have said they are seeking in Mr. Obama's final months in office to make his policies toward Cuba and Iran, which have been controversial, difficult for his successors to unravel.

U.S. officials are also exploring what they say are other ways of integrating Iran into the global economy, with more announcements expected in the months before Mr. Obama leaves office in January. Among them is a process for giving Iran limited access to the U.S. dollar, which administration officials said has made some progress.

"We're not going to stand in the way of permissible business activity with Iran," a senior administration official said. "As long as Iran is meeting the terms of the deal, then we're going to uphold our end of the bargain, and that is going to result in some additional business activity with Iran."

The administration's moves to integrate Iran into international business and financial markets, although limited to the terms of the nuclear deal, have drawn criticism from U.S. lawmakers and stoked concerns among America's Middle East's allies.

It is also causing friction between the State and Treasury Departments, U.S. officials say. Secretary of State John Kerry, the administration's point man on Iran, has been the most forward-leaning on ways to aid Iran's economy.

Mr. Kerry and other U.S. officials are hoping an economic windfall in Iran will empower Iranian President Hassan Rouhani, seen as a pragmatist and a relative moderate in Iran's revolutionary government.

Administration officials say a longer-term goal is that business engagement with Iran will facilitate political change there, as Mr. Obama hopes is the case in Cuba.

"Over time that could help strengthen some of the forces inside of Iran that would like to take their country in a different direction," the senior administration official said.

The Boeing deal with Iran Air quickly came under scrutiny from U.S. lawmakers when the company announced it this week. The administration sees the pact as a significant marker for the first anniversary of the nuclear deal reached by the U.S. and world powers with Iran on July 14, 2015.

But critics say the deal could aid Iran's efforts to send arms and supplies to its regional military allies, such as the Assad regime in Syria and the Lebanese militia Hezbollah, which the U.S. designates as a terrorist organization. The U.S. Treasury sanctioned Iran Air in 2011 for its role in ferrying supplies to these groups.

"If Boeing goes through with this deal, the company will forever be associated with Iran's chief export: radical Islamic terrorism," said Rep. Peter Roskam (R., Ill.), who introduced new legislation this week to try to block the deal and was the recipient, along with Rep. Jeb Hensarling (R., Texas), of the Boeing executive's letter on Thursday.

Under the nuclear agreement, U.S. companies are allowed to sell commercial aircraft to Iran. American companies can also request special licenses from the Treasury Department to conduct transactions with Iran in other sectors, such as agriculture and medicine.

White House officials say deals such as the one reached by Boeing, which they expect the Treasury Department to approve, are carefully scrutinized. "We've had to be very careful in assessing how the civil aviation sector does or does not become utilized by the bad actors in Iran who may try to fly material to places like Syria," another senior administration official said.

Iran's blacklisting by the FATF has greatly undercut the country's ability to conduct banking transactions. Currently, Iran and North Korea are ranked as the countries posing the greatest risk to the international financial sector, due to their role in illicit businesses and financing terrorism.

Treasury Secretary Jacob Lew in April specifically discussed with Iran's central bank governor ways that Tehran can improve its standing in FATF, according to senior administration officials. U.S. and European officials said FATF could agree this week to suspend some of the countermeasures countries are asked to employ against Iran because of commitments Iranian officials have made to address FATF's concerns.

"This is a technical process and we are confident that the FATF will treat Iran fairly," said a Treasury official.

The Obama administration is caught in a growing struggle among its allies over another economic integration avenue: Iran's quest to join the World Trade Organization.

Since the nuclear deal last year, countries such as Oman and Switzerland have pressed for forming a special committee of the WTO to address Iran's bid. Iran's regional rivals, particularly Saudi Arabia, have opposed that effort.

The George W. Bush administration once pledged to support Iran's bid if a nuclear agreement was reached. Obama administration officials said they are now trying to find a consensus among allies on the WTO issue.

"We have also noted the uptick in interest in Iran's WTO accession, and we are mindful that this is a major priority for the EU, Oman, and others," said a State Department official. "The WTO accession process is based on consensus, and as of now, there are a number of countries that oppose appointing a chair to Iran's working party on accession."

Business diplomacy has been a core part of Mr. Obama's foreign policy approach in engaging U.S. adversaries. Mr. Obama sees the expansion of business transactions with the West in countries such as Iran and Cuba as the most promising means for solidifying the president's policies there, his aides have said.

White House officials also see the use of businesses transactions as a more effective way of facilitating political changes in countries such as Iran and Cuba than traditional U.S. government efforts.

While business is the overarching tool in cementing Mr. Obama's policies toward Iran and Cuba, the two efforts differ, administration officials said. The White House sees encouraging business with Cuba as a way to advance the president's decision to restore diplomatic ties -- an effort Havana has embraced.

Iran, however, hasn't agreed to a broader thaw in relations, despite Mr. Obama's willingness to pursue one. The administration's use of business as a means to facilitate its Iran policy is more targeted, aimed at doing everything the U.S. can to abide by the sanctions-relief provisions in the nuclear deal to make sure it doesn't unravel, officials said.

One point of tension the White House has faced is that U.S. companies are more interested in doing business with Iran than Cuba because it is a bigger market. White House officials said they increasingly spend time explaining to business groups why the administration can't approve ambitious deals with Iran.

"There was a sense that there would be more opportunity than there has been," the second senior administration official said. "And I think there's a sense that how come the European businesses get this opportunity and we don't."

Write to Carol E. Lee at carol.lee@wsj.com and Jay Solomon at jay.solomon@wsj.com

(END) Dow Jones Newswires

June 24, 2016 02:47 ET (06:47 GMT)

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