US senators press EU on Iran sanctions

A bipartisan group of US senators on Monday pressed the EU to deny Iran access to its euro-denominated foreign exchange reserves, in a new push to tighten sanctions ahead of negotiations over Iran’s nuclear programme.

In a move which could increase the financial pressure on Iran but also risks generating a backlash in Europe, 36 senators signed a letter which called on the EU to close “a significant loophole in US-EU sanctions policy”.

The letter was sent to Herman Van Rompuy, president of the European Council. It focuses on Target2, a cross-border payments system operated by the European Central Bank, which the senators allege is being used to facilitate Iranian trade transactions.

“We strongly urge you to take all the necessary measures to cut off Iran’s ability to use its foreign-held euros,” the letter says.

The US Congress is stepping up the pressure on the EU over sanctions just as US and European negotiators, together with Russia and China, hold talks in Kazakhstan on Tuesday with Iran over its nuclear ambitions.

Although little is expected from this round of talks, US officials say that further sanctions could be imposed if Iran does not demonstrate what they describe as a willingness to negotiate.

“There is still time but there is only time if Iran makes the decision to come to the table and negotiate in good faith,” John Kerry, the new secretary of state, said in London on Monday. “We are prepared to negotiate in good faith, in mutual respect, in an effort to avoid whatever terrible consequences could follow failure.”

The signatories to the letter, which was circulated by Illinois Republican Mark Kirk, include many of the leading senators from both parties, including Republicans Marco Rubio and Susan Collins and Democrats Dianne Feinstein and Charles Schumer – underlining the fact that this is one the few policies that can command strong bipartisan support in the Senate at the moment.

In addition to the letter, the US Congress is preparing legislation that would focus on the Target2 payments system. Previous sanctions have made it extremely hard for Iran to conduct cross-border oil business in US dollars, but have been less successful at closing off business in other currencies.

The ECB said last week that it already complied with EU sanctions against Iran. “The ECB ensures that no illegitimate transactions are cleared in Target2,” the bank said. “But any sanctions are EU sanctions and not an ECB competence.”

Financial Times