If the United States walks away from the nuclear deal with Iran and demands that its allies comply with U.S. sanctions, a loss of confidence in U.S. leadership could threaten the dollar's position as the world's reserve currency, the top U.S. 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,” U.S. 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 also said it would be impossible for Iran to create a secret program for developing atomic fuel without the United States being able to detect it under the deal.
In warning of a potential loss of U.S. financial and political clout, Kerry deployed a new argument in a feverish battle to win Congress's approval of the Iran deal – or at least to prevent lawmakers from killing it.
Congress has until Sept. 17 to approve or disapprove the nuclear deal.
Kerry, asked about his comment on the dollar losing its status as world currency, said this was not something that would happen overnight but there are many countries “chafing” under the present international financial arrangements.
He said U.S. 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.”
Kerry appeared to acknowledge that the tone of the Iran debate had taken on a political edge.
President Barack Obama last week accused critics of the deal of making common cause with Iranian hardliners who chant “Death to America” and said some 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,” he said.
The agreement gives Tehran some relief from economic sanctions in return for strict limits on a nuclear program that the West has suspected was aimed at creating a nuclear bomb.
Tehran has long denied seeking a nuclear weapon and has insisted on the right to nuclear technology for peaceful means. Obama has never ruled out military force if negotiations failed, and has said that he and future presidents would still have that option if Iran quit the agreement.
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