NEW YORK (Reuters) - 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 deployed a new argument in a
feverish battle to prevent lawmakers from killing
it. Congress has until Sept. 17 to act.
Kerry warned of a potential loss of U.S. 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 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."
New York-based Boris Schlossberg, managing
director of FX Strategy, BK Asset Management,
challenged Kerry's reasoning. He said the dollar’s
status could be compromised only if the United
States was unable to compete economically on a
global scale.
“The reality of the situation is that the U.S. dollar
hasn’t been this strong in decades. The thought
that it could be replaced as a reserve currency is
laughable at this point on a geopolitical basis and
nothing in the Iran deal even remotely touches
upon that issue,” he added.
Economists and financial analysts have often
conjectured that a competing currency like the
euro or the Chinese yuan will eventually dethrone
the dollar as global trade and financial patterns
shift. But the U.S. currency’s position has been
largely immune - mostly for lack of any good
alternative.
KERRY, POINT BY POINT
In an hour-long moderated discussion, Kerry
also:
* Acknowledged 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.
* 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.
* Said the Iranians were open to discussing
disputes in the Middle East, where Washington
and its allies accuse Tehran of backing proxies in
Iraq, Lebanon, Syria and Yemen.
"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,'" Kerry said. Iranian
Foreign Minister Mohammad Javad Zarif is
currently in Lebanon and had already visited
Kuwait and Qatar in a bid to reach out, he said.
* Said violations by Iran of an arms embargo or
restrictions on its missile program would not
force an automatic return or "snapback" of United
Nations sanctions under the nuclear deal,
although other options would be available.
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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