Feds Say NYC Building Is A Front For Iran

The U.S. government moved this week to seize a Manhattan skyscraper said to be secretly owned by Iran. To discuss how such targeting of Iran's financial assets fits into the broader strategy of ending its nuclear program, Renee Montagne talks to former White House and Treasury Department official Juan Zarate.

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RENEE MONTAGNE, HOST:

In the last few days we've learned that Iran has released political prisoners and that its new president and President Obama have written each other. Also suggesting a thaw in the relationship, both leaders expressed a desire to resolve their countries' dispute over Iran's nuclear program. These seeming overtures come as President Hassan Rouhani prepares to fly to New York to address the U.N.

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Amid all these positive signs, in New York the U.S. government is preparing to seize a skyscraper built by the Shah of Iran, and now, say American officials, secretly owned by the Iranian regime. Going after Iran's financial assets is a key part of the U.S. strategy aimed at getting Iran to abandon its nuclear ambitions.

MONTAGNE: A man who was central in developing the U.S. capability to target the finances of countries it deems rogue states, is Juan Zarate. He recently joined us of that effort, the subject of his book, "Treasury's War: The Unleashing Of A New Era Of Financial Warfare." We invited Zarate back to walk us through this latest salvo.

Welcome back to the program.

JUAN ZARATE: Thank you, Renee.

MONTAGNE: So, this building is said to be secretly owned by Iran. Prosecutors say the owner was operating as a front for the government of Iran. But it has been associated with Iran since the 1970s, so why is the government going after it now? And would that be because it has just worked out - the secret arrangements?

ZARATE: Well, I think what has happened is that over the last 10 years, there was greater scrutiny over Iranian institutions - in particular, banks. And what tied this property to the Iranian bank, most clearly, was the fact that the proceeds and the ownership links back to Bank Melli, one of the immigrating banks subject to U.S. pressure. This is part of the constriction campaign against Iranian financial institutions. And Bank Melli has been associated with and accused of engaging in proliferation finance, terrorist financing.

So this property, in some ways, us a result of that greater scrutiny by prosecutors, as well as the Treasury Department, to go after Iranian financing.

MONTAGNE: A lot of discussion in these past few weeks about Syria, Iran's neighbor, and enforcing a red line against the use of weapons of mass destruction. How powerful do you think a message, say, about a red line and possible military action is compared with economic pressure, like seizing an entire 36 story building in the middle of Manhattan?

ZARATE: Well, I think this has great symbolism and it's symbolic of the financial pressure in the campaign of U.S. has waged against Iran; something the Iranians have called the Hidden War. And I think it is, frankly, more tangible to the Iranians because it has affected their economy; the value of their currency, the rial, and has been a major source of tension and irritation internally for the Iranians. So much so that the new president, Rouhani, has made it a goal to relieve that pressure and to improve the Iranian economy.

So, in many ways, the financial pressure that we've been putting on the Iranians, I think, has been more tangible and perhaps more effective than symbolic red lines or threats.

MONTAGNE: Well, now that new president, Hassan Rouhani, we now know that President Obama and Rouhani have exchanged letters since he took office. Does the seizure of this building - will this affect this potentially warmer relationship between the U.S. and Iran?

ZARATE: Well, financial tools are one tool in the toolkit to try to exert leverage and power. And I think, in this case, they have worked quite effectively to not only get the attention of Iranians, but the slow elements of their nuclear program. And one of the calculations the U.S. government has to make now is whether or not to continue to apply financial pressure against the Iranians.

The Obama administration, when it came in, lightened the pressure and stopped some of the elements of the financial campaign. And I think one of the elements of potential negotiations with Iran is how much do we let up on squeezing the Iranian economy. And if this is any signal, the suggestion is that we are not going to and certainly will be looking to use this financial pressure to gain leverage at the negotiating the table.

MONTAGNE: Thanks very much for joining us.

ZARATE: My pleasure, Renee.

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MONTAGNE: Juan Zarate is a former White House and Treasury Department official. His new book is called "Treasury's War."

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MONTAGNE: You're listening to MORNING EDITION from NPR News.

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