Iran hawks in Congress are in the early stages of planning an all-out campaign to blacklist, sanction, and isolate Iranian banks tied to the funding of terrorism and money laundering, according to sources and legislation obtained by the Washington Free Beacon.
New legislation spearheaded by Sen. Ted Cruz (R., Texas) and allies in both the House and Senate would disconnect from the global financial system every Iranian bank identified as playing a part in the funding of Iran's global terror operations, sources told the Free Beacon.
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The legislation, which was viewed by the Free Beacon, would also treat all Iranian banks as a terrorism and money laundering threat, a massive escalation in the American sanctions regime that goes even further than the Trump administration has, a sign that Iran hawks on Capitol Hill are growing weary with what they view as an effort by the administration to slow roll the sanctions in a bid to appease European allies still working with Tehran.
The new legislation also would address alternate financing methods used by Iran and European allies to skirt new U.S. sanctions, such as the use of cryptocurrency.
The legislation comes on the heels of reports indicating that Iran has been meddling in foreign exchange markets in a bid to save its collapsing currency, the rial.
The legislation, a source said, seeks to combat this move by blacklisting Iran's financial sector.
The congressional bid to isolate Iran's financial system appears to be fueled in part by frustration among some Iran hawks that the Trump administration is not moving quickly enough to shutdown Iran's global financial access. Trump administration allies in Congress were not shy in recent months about criticizing the administration for moving slowly on the reimposition on new sanctions in order to give European countries doing business with Iran time to wind down their operations.
The Trump administration, in a move that rankled Iran hawks in Congress, permitted Iran to remain connected to the international banking system known as SWIFT, which conducts cross-border transactions. It also handed out sanctions waivers to several countries so that they can continue purchasing Iranian crude oil, another source of contention with Iran hardliners.
With some viewing these carve outs as an unacceptable capitulation to Iran that runs counter to the Trump administration's rhetoric of waging a "maximum pressure" campaign on Iran, Cruz and allies are working on legislation that would all but cripple the Iranian banking system.
A parallel version of Cruz's legislation has been introduced in the House by Rep. Mike Gallagher (R., Wis.). It has already gained the support of Republican Reps. Doug Lamborn (Colo.), Jim Bank (Ind.), Elise Stefanik (N.Y.), Jackie Walorski (Ind.), Steve King (Iowa), and Don Bacon (Neb.).
Cruz said the legislation will go further than the Trump administration has and he expects the bill to be passed in the next session of Congress.
"The Obama Iran nuclear deal gifted the Ayatollahs with hundreds of billions of dollars and reconnected them to the global financial system, which they used launder even more money and fund even more terrorism," Cruz said. "Undoing that damage requires imposing maximum pressure against the Iranian regime. President Trump was absolutely right when he began that process by withdrawing from the nuclear deal. Effectively disconnecting Iran from the global financial system, which
this bill does, is a necessary next step."
Gallagher described the Trump administration's decision to abandon the nuclear deal as just a first step in the U.S.'s efforts to cripple Iran's economy.
"Withdrawing from the JCPOA was only the first step in ratcheting up pressure on the Iranian regime. We now have an important window to impose maximum economic pressure and degrade the Iranian regime’s
ability to export violence across the region," Gallagher said. "This legislation does exactly that by effectively cutting Iran off from the international financial community. Its message is clear: Iran must pay a steep price for its aggressive and destabilizing behavior, and the United States will never tolerate its pursuit of nuclear weapons."
Senior congressional sources familiar with the effort tell the Free Beacon the new legislative effort marks a shot across the bow to the Treasury Department, which has come under fire in some foreign policy corners for taking what critics view as a softer approach toward Iran sanctions. It is believed that some senior Treasury Department leaders oppose President Donald Trump's hardline stance on Iran and are seeking to ensure loopholes remain in the U.S. sanctions.
"The Treasury Department caved to Europe and kept Iran connected to the global financial system," said one senior congressional source who was not authorized to speak on record about the behind-the-scenes movement on the legislation.
"Iran responded by launching missiles and threatening to block the Arabian Sea," the source said. "What did they think would happen? Now you've got this bill with the backing of major foreign policy players in both the House and Senate that goes step by step disconnecting Iran's banks, which will only gain momentum in the next Congress as Iran continues escalating."
Cruz's legislation, a fully copy of which can be viewed here, has already garnered the support of Sens. Marco Rubio (Fla.), Tom Cotton (Ark.), Thom Tillis (N.C.), Cory Gardener (Colo.), Cindy Hyde-Smith (Miss.), and Todd Young (Ind.).