In a Friday statement, the U.S. departments of Treasury and State announced the launch of what they called a “new humanitarian mechanism to ensure unprecedented transparency into humanitarian trade with Iran.” The statement said the mechanism “will help the international community perform enhanced due diligence on humanitarian trade to ensure that funds … are not diverted by the Iranian regime to develop ballistic missiles, support terrorism, or finance other malign activities.”
In an email sent to VOA Persian, the British Embassy in Washington said: “We have noted the announcement of this new humanitarian channel and look forward to hearing details of how it will work. It is vital that humanitarian goods are able to get to Iran.”
Preserve Iran nuclear deal
Britain is one of three European Union nations, along with France and Germany, that launched their own mechanism for humanitarian and other trade with Iran, known as the Instrument in Support of Trade Exchanges, or INSTEX, in January. INSTEX was intended to facilitate what the three nations called “legitimate” trade to help preserve the 2015 Iran nuclear deal in which world powers promised Tehran sanctions relief in return for restrictions on its nuclear program.
The Trump administration has put the nuclear deal’s survival in doubt by withdrawing from it last year, saying it was not tough enough on Iran and unilaterally tightening U.S. sanctions. It also has warned EU nations not to use INSTEX to circumvent the U.S. sanctions and said European businesses have refrained from participating in it for fear of being further penalized by Washington.
“This new humanitarian mechanism will help international companies that seek to engage in permissible humanitarian trade with Iran to ensure that they do not run afoul of sanctions,” Treasury Secretary Steven Mnuchin said in Friday’s statement.
Iran a ‘money laundering concern’
In a concurrent action, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a final ruling that Iran is a “jurisdiction of primary money laundering concern.” The ruling prohibits international banks from helping an Iranian financial institution open or maintain a correspondent account in the U.S.
“FinCEN’s action further exposes the characteristics of Iran’s deceptive financial conduct to the international community as part of our maximum pressure campaign to shut off the Iranian regime’s illicit sources of revenue,” Mnuchin said.
Brian O’Toole, a former senior U.S. sanctions adviser who served at Treasury from 2009 to 2017 and currently serves as a senior fellow at the Atlantic Council, told VOA Persian the FinCEN ruling sends a problematic message about conducting humanitarian trade with Iran.
Onerous paperwork
“People have known about the U.S. concern with money laundering in Iran for quite some time, so as a practical matter, finalizing an interim ruling on the issue doesn’t do anything,” O’Toole said. However, what he described as Treasury’s “aggressive” messaging against Iran is going to “further chill the market” for food and medicine exports to the Iranian people, as he put it.
O’Toole said another problem is the “enhanced due diligence” that international businesses must perform on their Iranian partners to secure U.S. approval for selling humanitarian goods to Iran under the new trade mechanism.
“The amount of detail that you would have to provide (to Treasury) about your Iranian partners and the kind of comfort that you would have to develop with those partners is such that foreign companies, with maybe very limited exceptions, are not going to want to formally approach the U.S. government to turn over all of this information,” he said.
“Requiring disclosures of sensitive financial information may be unacceptable to Iranian banks and companies wary of U.S. intentions,” wrote Esfandyar Batmanghelidj, founder of London-based Bourse & Bazaar, an Iran-focused business media company.
“The Trump administration’s latest gesture to ease humanitarian trade may end up doing just the opposite.”
In another VOA Persian interview, Peter Harrell, who served as U.S. deputy assistant secretary of state for counter threat finance and sanctions from 2012 to 2014, said it is “certainly plausible” that large international pharmaceutical companies will be willing to share the required information with Treasury in order to export products to Iran.
“It’s premature to say this would be a failure, and I hope it succeeds because I’d like to see humanitarian trade with Iran enabled,” said Harrell, now an economics analyst at the bipartisan Center for a New American Security.
Annie Fixler, a sanctions and illicit finance analyst at the Foundation for Defense of Democracies, told VOA Persian that she sees a silver lining for international companies that accept the “onerous” paperwork involved in the U.S. humanitarian mechanism.
“The kind of due diligence necessary to ensure that no sanctioned persons are benefiting from the trade is the kind of due diligence that companies have to be doing anyway,” Fixler said.
“If banks are hesitant to do business with Iran because they are concerned they might become exposed to secondary U.S. sanctions, this provides them a mechanism to ensure that they can conduct permitted trade and not worry about getting hit for sanctions violations. So it may actually ease some of the risk and allow more trade to happen,” she said.
This article originated in VOA’s Persian Service.