US Sanctions on Iran Inadvertently Blocking Humanitarian Exports, Panelists, Congress Members Say

About a year into the Trump administration's maximum pressure sanctions campaign on Iran, the effort has done nothing to bring Iran to the negotiating table, panelists said during a Dec. 12 Atlantic Council event. U.S. sanctions have instead emboldened a more aggressive Iran, panelists said, which is growing increasingly frustrated with its unwilling European trade partners and will likely continue breaching the terms of the Joint Comprehensive Plan of Action.

In addition, aspects of U.S. sanctions policy toward Iran are backfiring and preventing humanitarian exports to Iran that should be allowed, said Barbara Slavin, a panelist and director of the Atlantic Council’s Future of Iran Initiative. Although license exceptions are supposed to be granted for exports of certain aid -- such as medicine and medical supplies -- the threat and risk of violating U.S. sanctions are warding off international exporters.

“Because of the U.S. dominance of the financial sector, the sanctions on Iranian banks have effectively prevented many companies in Europe and elsewhere from providing desperately needed” humanitarian goods, Slavin said. “I think it’s hypocritical, at the least, when you hear administration officials talk about how these things are not sanctioned. Effectively, they are.”

Reps. Raul Grijalva, D-Ariz., Ilhan Omar, D-Minn., and Barbara Lee, D-Calif., are requesting signatures for a letter to Treasury Secretary Steven Mnuchin asking him to fix this issue. “While the Administration has stated that humanitarian supplies, like medicine, are exempt from sanctions, we are concerned by reports that indicate otherwise,” the letter says. “Sanctions are having devastating ramifications for these patients whose medications and treatment rely heavily on imports.”

The sanctions are also hurting Iran’s ability to import “raw materials that drugs for cancer treatment depend on,” the letter said, and hospitals do not have access to imports of medical equipment. The Congress members referenced an October announcement by Treasury that created a mechanism for humanitarian exports to Iran (see 1910250057), saying the mechanism was crippled by Treasury’s designation of Iran as a primary money-laundering concern. That action created “rigorous conditions” for foreign banks to export humanitarian goods to Iran, including extensive due diligence checks and an “unprecedented” amount of information that is required to be reported to Treasury before exports can take place.

“It is highly unlikely that banks will voluntarily subject themselves to the new conditions necessary to participate in humanitarian trade with Iran,” the letter said. “The likely outcome of this ‘channel’ is only to further limit Iranians from accessing crucial medical supplies.”

Slavin also said the U.S. is “running out of things” to sanction, as evidenced by the State Department’s Dec. 11 decision to designate three Iranian entities that have previously been sanctioned by the Treasury’s Office of Foreign Assets Control (see 1912120024). “I’m not quite sure what announcing it again means, but to my mind, that’s not exactly going to produce any new results,” Slavin said.

Other panelists said U.S. sanctions are clearly not achieving their intended purpose. David Jalilvand, a research associate with the Oxford Institute of Energy Studies, said that despite U.S. sanctions, the “broader trajectory” of Iran’s economy “remains unchanged” as it continues to find ways to diversify and “extend the value chain” for its oil and gas reserves. “A year of maximum pressure has not brought Iran anywhere closer toward meeting any of the demands that were put forward by Secretary of State Mike Pompeo,” he said.

Jalilvand also said the sanctions have caused Iran to grow increasingly dissatisfied with Europe, which has been “unable or unwilling” to mitigate the damage of U.S. sanctions. “Increasingly, frustrations grow in Iran with the Europeans' inability to sustain at least a significant, minimal level of trade between both sides,” he said, “which has rendered the European position largely irrelevant to the Iranians.”

Kenneth Katzman, a senior Middle East analyst for the Congressional Research Service, said that if the U.S. is judging the effectiveness of its sanctions policy by examining to what extent Iran is bowing to Pompeo’s demands, then it is clear U.S. sanctions are not working. Katzman pointed to Iran’s stockpiling and production of drones, ballistic missiles and torpedoes, and its functional military capabilities, including its recent bombing of Saudi oil fields (see 1909180029). “If the policy is working,” he said, “one would expect Iran to be doing less of these things.”