LobeLog | Tyler Cullis: In July 2019, Brian Hook—the U.S. Special Representative on Iran—released a video addressing the purported “myth” that the U.S. sanctions humanitarian trade with Iran. That wasn’t a “myth” at the time, as the U.S. had historically circumscribed how humanitarian trade with Iran may take place. But now more recent events indicate that sanctioning humanitarian trade is not only a reality but increasingly appears to be a hallmark feature of current U.S. sanctions policy towards Iran.
Last week, the Trump administration designated the Central Bank of Iran as a Specially Designated Global Terrorist for allegedly providing financial support to the Islamic Revolutionary Guard Corps-Quds Force and Hezbollah. This action followed Trump’s promise to “substantially increase” sanctions on Iran in response to Tehran’s purported involvement in the Saudi oil facilities attack.
The consequences could be devastating. Iran’s central bank is critical to facilitating payment for medicine and agricultural commodities being imported into Iran. It allocates the limited foreign reserves at Iran’s disposal—itself a consequence of the U.S.’s imposition of sanctions on almost all of Iran’s productive sectors, including its oil sector—to those Iranian banks involved in the humanitarian trade. Absent this allocation, Iranian importers do not have the required hard currency to make payment for the humanitarian goods.
Successive administrations, as well as the U.S. Congress, have recognized the centrality of the Central Bank of Iran to humanitarian trade. That is why, when Congress imposed correspondent and payable-through account sanctions on foreign banks conducting significant financial transactions with Iran’s central bank, it created a broad exception for transactions involving the sale of agricultural commodities, food, medicine, or medical devices to Iran. That is also why the Obama administration ensured that such humanitarian exceptions remained in place when it promulgated regulations—the Iranian Financial Sanctions Regulations—codifying this humanitarian exception. Even the Trump administration—following its re-imposition of sanctions on Iran and its issuance of Executive Order 13846—published Frequently Asked Questions clarifying that humanitarian-related transactions involving Iran’s central bank were not sanctionable.
That exception has been eviscerated by the new designation. Foreign banks engaged in humanitarian transactions involving Iran’s central bank may now be cut off from the U.S. financial system, as there is no similar humanitarian exception for Iranian banks designated as Specially Designated Global Terrorists. How Iran will navigate this development, and whether foreign banks will remain willing to facilitate humanitarian trade with Iran, remains a looming unknown. That is not something to treat casually when considering Iran has a population of 80 million.
But as U.S. hawks increasingly learn of President Trump’s reluctance to pull the trigger on a war with Iran, they appear ever more tolerant of imposing significant pain on Iran’s people. Their hope appears to be either that sanctioning humanitarian trade with Iran will lead to popular unrest in Iran or to retaliatory action by Iran’s government. In both cases, the imperative grows for Trump to militarily intervene in Iran.
That is why the Trump administration earlier started targeting private Iranian financial institutions that had been intimately involved in facilitating humanitarian trade and why it has now gone after the biggest prize—Iran’s central bank. There are few practical consequences to these sanctions other than eroding trade in humanitarian goods with Iran. And there is no reason to assume that these practical consequences are anything other than intentional. For those paying attention, U.S. hawks have long displayed an obvious ruthlessness in pursuing their hoped-for war with Iran, and that ruthlessness only grows as they see their window with Trump closing.
The Trump administration need not have the final say on this, however. Congress, which has not been allergic to expediting legislation imposing sanctions on Iran, can restore the humanitarian exception that it put in place with respect to the Central Bank of Iran. It can also put into place a humanitarian exception with respect to all Iranian banks, regardless of the authority under which they were sanctioned. Since 2012, Congress has included humanitarian exceptions in each piece of Iran-related sanctions legislation. It is only earlier legislation that has swallowed the exceptions and allowed the Trump administration to aggressively target humanitarian trade with Iran.
Absent Congressional action, though, the designation of Iran’s central bank represents a nadir for U.S. sanctions policy—demonstrating that the United States is not above weaponizing humanitarian trade to achieve its policy objectives.