Moves to unwind the international sanctions regime against Iran are growing increasingly risky as long as Tehran continues to engage in a range of illicit activities – from its support for global terrorism to its pursuit of illegal weapons materials – according to a report published Tuesday by Mark Dubowitz and Jonathan Schanzer, respectively the executive director and vice president for research at the Foundation for Defense of Democracies (FDD).

U.S. diplomats whose priority was securing a nuclear deal with North Korea at all costs undercut that action. Facing a North Korean negotiating team that refused to make concessions before sanctions relief, Foggy Bottom advocated for the release of funds on good faith. They ultimately prevailed, and Chinese banks renewed their financial relationships with Pyongyang. Washington lost its leverage, and an undeterred North Korea went on to conduct its first nuclear test in 2006. U.S. negotiators currently haggling with Iran should take heed. Compromising the integrity of the U.S. and global financial system in order to get a nuclear deal done neither sealed the deal nor protected the system. Yet, Washington currently appears intent on a deal that could allow bad banks back into the system.

The Daily Beast emphasized last November that “isolating [Iran’s] banks from the global financial sector” had emerged as a critical tool by which the Obama administration exerted pressure on Iran.

Expectations have been growing, according to Dubowitz and Schanzer, that the P5+1 global powers will strike a deal with the Islamic republic under which Iran will “retain essential elements of its military-nuclear infrastructure… [but] the White House will unravel the complex sanctions architecture that has kept Iran’s economy on its heels.” The scenario would allow Iran to continue pursuing illicit activities even as the West encouraged financial institutions to release funds on the basis of good faith, risking a dynamic that would have Western banks interacting with the toxic Iranian banks used by the regime to fund those activities.

Iran has already sought to build on the erosion of sanctions provided by the interim Joint Plan of Action (JPA) to expand into segments of the global banking world. Arabic and Turkish outlets reported in April that multiple Iranian banks were seeking to establish footholds in Turkey, and FDD Research Fellow Benjamin Weinthal reported in January that German corporations were seeking to finance projects in Iran.

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