If the United States walks away from the nuclear deal with Iran and demands that its allies comply with US sanctions, a loss of confidence in US leadership could threaten the dollar's position as the world's reserve currency, the top US diplomat said on Tuesday.
"If we turn around and nix the deal and then tell them, 'You're going to have to obey our rules and sanctions anyway,' that is a recipe, very quickly ... for the American dollar to cease to be the reserve currency of the world," US Secretary of State John Kerry said at a Reuters Newsmaker event.
Defending the July 14 Vienna agreement between Iran and world powers that he helped to negotiate, Kerry deployed a new argument in a feverish battle to prevent US lawmakers from killing it. Congress has until Sept. 17 to vote whether to reject the deal.
Kerry warned of a potential loss of US financial and political clout. He said this was not something that would happen overnight but many countries were "chafing" under the present international financial arrangements.
He said US Treasury experts "are doing a full dive on how this works and what the implications are. But the notion that we can just sort of diss the deal and unilaterally walk away as Congress wants to do will have a profound negative impact on people's sense of American leadership and reliability."
In an hour-long moderated discussion, Kerry also acknowledged that the tone of the Iran debate had taken on a political edge.
US President Barack Obama said last week some critics of the deal had beaten the drum for the Iraq war.
"You can squabble maybe with the choice of words," Kerry said when asked about Obama's comments. He stressed his view that the Iran deal should be argued on its merits. "I think the merits are very, very strong and I think the president does too."
On any possible cooperation between Tehran and Washington to address regional challenges, he said the Iranians were open to discussing disputes in the Middle East.
"They said to me, 'If we can get this deal done, then we're ready to sit down and talk about the regional issues and we may be able to work things in different places."
Tehran says the nuclear settlement will not lead to any shift in its policy on the region.
***Arms Embargo Not Tied to Snapback
In addition, Kerry said violations by Iran of an arms embargo or restrictions on its missile program, set out in an annex to the July 20 United Nations Security Council resolution endorsing the nuclear pact, would not force an automatic return or "snapback" of UN sanctions under the deal.
"The arms embargo is not tied to snapback," he said. "It is tied to a separate set of obligations. So they are not in material breach of the nuclear agreement for violating the arms piece of it."
The agreement gives Tehran relief from economic sanctions in return for temporary limits on a nuclear program that the West claims may be aimed at developing a nuclear weapons capability, but Tehran, denying the charge, says is only meant for peaceful applications such as generating electricity.
Deputy Foreign Minister Abbas Araqchi made clear last month that Tehran had no intention of complying with the arms embargo and missile sanctions.
"Whenever it's needed to send arms to our allies in the region, we will do so," he said. "We are not ashamed of it."
***Schumer Disputes Kerry's View
Meanwhile, the lone Democratic senator to publicly oppose Obama's agreement with Iran claimed Tuesday even if the US backs away and other countries lift their sanctions, Iran still will feel significant pressure from the US measures, the AP reported.
New York Sen. Chuck Schumer's view sharply contrasts with European leaders who have told US lawmakers that if Congress were to reject the deal, the international sanctions would unravel.
Schumer said sanctions aimed at companies that do business with Iran could force US allies and trade partners back to the negotiating table.
"Let's not forget, those secondary sanctions are very powerful," Schumer told reporters in New York as he detailed a decision he first announced last week.
He said these sanctions alert corporations, such as the French oil company Total, that if it deals with Iran, it cannot deal with the United States.
