David Cohen, The Treasury Undersecretary for Terrorism and Financial Intelligence, is typically a busy man. After all, it can’t be easy to oversee several federal agencies which not only police the U.S. economy, but also much of the global economy. Well a few weeks ago, Mr. Cohen’s schedule became a little more hectic when the Department of Justice charged an individual with an attempt to carry out a bomb plot against the Saudi Ambassador at Cafe Milano in Washington, DC. As has been widely reported, the U.S. believes that this plot was organized by and carried out at the behest of Iran; a country which also seems to be the U.S. government’s number one target when it comes to the imposition and enforcement of U.S. economic sanctions. Thus, as one can imagine, Mr. Cohen became one of the main officials that the administration would have to include in any discussion of how to respond to the alleged bomb plot.

As readers may already be aware, one of the options that the U.S. government has offered in response to the bomb plot is to sanction the Central Bank of Iran (CBI). Cohen has already indicated to Congress that although U.S. persons are generally prohibited from engaging in transactions with CBI, that a designation of CBI as a Specially Designated National (SDN) would further increase pressure on Iran.

This week Mr. Cohen has hit the road in an effort to round up international support for increasing financial pressure on Iran through the use of sanctions. There are a number of concerns surrounding a designation of CBI. First, the designation would effectively shut Iran out of the global economic system. Some officials have called the designation of CBI the nuclear option, presumably because it would freeze or block all transactions in Rials. Second, there are concerns that such an action would force Iran’s energy exports to be withdrawn from the global market. This would increase energy costs all over the world.

Regardless of the veracity of the Department of Justice’s allegations, designating CBI in response to the alleged bomb plot would be a drastic move that could do as much harm as good. It seems that the administration probably knows this and that’s why they have not pursued such a designation previously. On the other hand, members of Congress has been pushing for stronger and stronger measures against Iran including a designation of CBI with no discernible understanding of what such a designation will mean. As such, Mr. Cohen and the administration look to be in between a rock and hard place. On one hand, they feel obligated to respond through action for the alleged bomb plot. On the other, they need to ensure they aren’t pushed into a rash decision by Congress. As such, Mr. Cohen’s trip to Europe may not be to search for allies in the designation of CBI, but rather to search for alternatives to such a designation. The answer to which it is should reveal itself in the coming months.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.