The department has always been wary of exploiting leverage over the global banking system for the advancement of U.S. political goals. Before 9/11, in Zarate's telling, Treasury's fear of undermining that system "hamstrung" the U.S. intelligence community, impeding its ability to "follow the money." This certainly changed after September 2001, when Treasury prioritized terrorism finance alongside money laundering and, after some success, modified new counterterrorism capabilities to confront state actors like North Korea and Iran in a way distinct from traditional trade sanctions. As explained in the book, Treasury went after the financiers who underpin illicit exchanges without having to worry about national jurisdiction or approval from foreign governments.
But, according to the author, each of the banks designated in the push against Iran and North Korea happened to be engaged in illicit activities like money laundering or funding terrorism. This meant that Treasury's actions could be justified to bankers not on the basis of American interests but rather on the basis of protecting the international financial system:
What made this approach effective was that it focused on illicit activity that could infect the international financial system... enemies of the United States used many of the same systems and networks to evade detection and move money around the world... We could serve national security objectives while protecting the integrity of the international financial system from tainted capital.
For instance, after a lull in pressure on Iran after Obama took office, Zarate worried that "suspension of financial pressure appeared to be an admission by the U.S. government that the financial measures against Iran were really just driven by geopolitics. This made the financial pressure campaign seem much less urgent to bankers and CEOs around the world. They would be less willing to listen and more able to throw up barriers to action, because they would believe the actions were just political machinations from Washington." Similarly, at one point in negotiations with North Korea, Zarate observed, "many around the world began to perceive that our efforts to 'protect the financial system' with our 'conduct-based' financial pressure were just a Trojan horse for political and diplomatic interests. When convenient, we would abandon our concerns about the integrity of the financial system and the illicit financial activity by rogues. Tactics that had previously been effective because they were perceived not to be politically driven now fell prey to precisely that calculation."
But, though Zarate maintains that the "key" for deploying Treasury's new tools is a focus on illicit behavior, the department has now designated at least one Russian bank without reference to terrorism funding, money laundering, or sanctions busting. Treasury's press release on the Tempbank designation does mention, as an afterthought, its role in evading sanctions on Syria. But the department's statement about the Bank Rossiya designation, on the other hand, provides no justification for action other than the fact that Rossiya is a "personal bank for senior officials of the Russian Federation." This means the designation looks to be solely driven by U.S. political interests, an important error according to one of the architects and closest observers of "Treasury's war."
How can we explain this? Here are the possibilities:
- Bank Rossiya is actually involved in activity that threatens to destabilize the global financial system, but Treasury is not saying so openly. (Doubtful if Treasury is really trying to avoid the perception of promoting narrow U.S. interests---why wouldn't they say so?)
- "Activity that threatens the global financial system" is being defined so broadly as to encompass the provision of banking services to members of a foreign government engaged in belligerent foreign policy. (But Treasury's public statements have not drawn any link between Crimea and the financial system.)
- Treasury has decided that nobody believes that bank designations related to Iran or DPRK were really motivated by a desire to protect the health of global finance, so they have dropped the pretense.
- Treasury, together with a White House searching for coercive levers abroad, has decided to expand the department's scope of activity beyond protecting global finance, estimating that benefits to the U.S. of increased short-term political power outweigh the possibility of blowback.
This last possibility, if accurate, would mean that Treasury has undergone another permissive shift in its approach to foreign policy.