—but it consciously included a gigantic loophole that will allow President Obama to ignore the legislation.
The legislation still must be approved by the House of Representatives before it can become law.
The legislation was approved on a unanimous 100-0 vote, a rare event that shows the eagerness of senators to show their disgust with the Islamic Republic.
But the bill’s sponsors made a point of openly telling other senators on the floor that the bill contained a waiver that would allow Obama to ignore it.
The bill is aimed at Iran’s Central Bank, which is the flavor of the year for sanctions proponents.
Last year, the panacea for throttling Iran was to cut off gasoline sales to Iran. Proponents said it would bring Iran to its knees. That legislation passed in June 2010, but had little impact in the end.
This year the panacea among sanctions advocates is tackling Iran’s Central Bank. The new legislation says that any foreign financial institution that does any “significant” transactions with Iran’s Central Bank will be totally cut off from the US financial system. Very few banks in the world could afford that sanction. It is often called the “nuclear option” of sanctions.
The Obama Administration publicly opposed the legislation as going too far too fast. There were fears it would drive up the price of oil and cause widespread anti-Americanism among US allies. It seems the sponsors of the legislation feared the same. So they essentially removed the detonator from their “nuclear option.”
They added a presidential waiver authority: “The President may waive the imposition of sanctions … if the President determines that such a waiver is vital to the national security of the United States.” This is an easy waiver for the president to justify. In fact, Administration officials have already justified it by telling Congress in open testimony that the legislation could do the United States more harm than good.
Hours before the Senate vote, Undersecretary of State for Political Affairs Wendy Sherman and Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen warned the legislation risked alienating key allies and lining Iran’s pockets.
In a frequently contentious hearing of the Senate Foreign Relations Committee, Sherman said, “We all agree with the impulse, the sentiment, the objective, which is to really go at the jugular of Iran’s economy. But there is absolutely a risk that, in fact, the price of oil would go up, which would mean that Iran would, in fact, have more money to fuel its nuclear ambitions, not less.”
Cohen warned that allies are unhappy with the legislation. “Now, more than ever, it is imperative that we act in a way that does not threaten to fracture the international coalition of nations” opposed to Iran, Cohen said.