Bloomberg | Saleha Mohsin: The U.S. announced it has opened a banking channel via Switzerland to provide humanitarian aid to Iran, nearly two years after President Donald Trump withdrew from an international nuclear agreement with the Islamic Republic and reinstated severe economic sanctions.
Cancer and organ transplant patients in Iran were the first to benefit from the new channel, the Treasury Department said Thursday. The financial transactions are “subject to strict due diligence measures to avoid misuse by the Iranian regime,” the agency said in a statement on its website.
It wasn’t immediately clear how significant the humanitarian channel will be but the move is unlikely to assuage critics, including European allies, who have criticized the Trump administration from quitting the 2015 nuclear accord and ramping up sanctions on on Iran over its nuclear program.
Opponents of the U.S. approach have long said the administration’s restrictions make it hard to trade even basic items such as food and medicine. The White House has disputed that, but had also struggled to highlight any successful humanitarian efforts.
Treasury Secretary Steven Mnuchin, in a statement Thursday, said that “humanitarian transactions are currently allowed under our sanctions programs, and we encourage companies to use this humanitarian mechanism.” However Mnuchin and Secretary of State Michael Pompeo have spent nearly two years telegraphing the dangers of any transaction with Iran, boasting about more than 100 companies withdrawing from the Iranian market and warning of aggressive sanctions enforcement.
rust any financial transaction with Iran, so it’s hard to see anyone using this banking channel,” said Brian O’Toole, a senior fellow at the Atlantic Council who previously worked in the Treasury Department’s sanctions unit.
U.S. sanctions have had a heavy impact on Iran’s economy and put President Hassan Rouhani’s government under increasing political pressure at home. Roughly 1,000 Iranian entities are now sanctioned and inflation has soared to an annual rate as high as 40%.
In a four-page document released in October, the Treasury Department laid out the expectations of any financial entity wanting to use the Swiss banking channel. The “enhanced” due diligence includes restrictions on dealing with the Iranian central bank, which holds the nation’s forex reserves but is sanctioned. Requirements also include the identities of Iranian customers, balance sheets of any Iranian customers’ accounts at the bank and a list of business relationships of the Iranian entity receiving the humanitarian aid.
“I don’t know many institutions that would be willing to subject themselves to such additional oversight by Treasury,” said Daniel Tannebaum, head of sanctions at Oliver Wyman in New York.
Treasury has said that the heightened due diligence is due to the Iranian regime’s “abuse of the goodwill of the international community, including by using so-called humanitarian trade to evade sanctions and fund its malign activity.”
“It’s positive that they have opened the channel, but it’s hard to see any significant impact, like prices of food and medicine coming down in Iran,” O’Toole said. “The mechanism is so onerous, it may instead have the effect of chilling humanitarian trade to Iran.”