The Treasury Department’s sanctions office on Friday said it was prioritizing requests to send food, medicine and medical devices to Iran during the coronavirus pandemic. The move came a day after Treasury published new guidance sought by the private sector about humanitarian exemptions to U.S. sanctions against Iran, Venezuela, North Korea and other countries in light of the COVID-19 emergency.
“It’s one of my primary objections to make sure that sanctions do not impede humanitarian relief efforts related to the COVID-19 crisis,” Andrea Gacki, the director of Treasury’s Office of Foreign Assets Control, said during a virtual panel discussion organized by the Center for a New American Security.
Requests for licenses to provide humanitarian items to Iran are being treated with “the utmost priority and urgency” and expedited to the extent possible, she said.
Iran is experiencing the world’s eighth highest COVID-19 outbreak with 79,494 confirmed cases of the virus and 4,958 deaths as of Friday, according to Johns Hopkins University’s coronavirus dashboard.
The 10-page OFAC fact sheet published Thursday did not announce any new exemptions from Iran sanctions, as liberal lawmakers including Sens. Christopher S. Murphy, D-Conn., and Bernie Sanders, I-Vt., have urged. Rather, it consolidated existing guidance and clarified what the existing exemptions could be used for.
For example, most personal protective equipment such as medical gowns, goggles, surgical gloves, face shields, masks and certain respirators “already qualify for export and re-export to Iran under general licenses, without the need for further authorization from OFAC,” according to the fact sheet.
Practically though, there will not be much export of U.S. supplies of PPE to Iran until August at the earliest. Because of the current severe shortage of PPE in the United States, the Federal Emergency Management Agency last week issued a rule temporarily banning the export of N95 masks, surgical masks and gloves. But if Iran can obtain PPE supplies from other countries, OFAC has made it clear that those foreign businesses, banks and shipping companies that facilitate such transactions will not be subject to U.S. financial sanctions.
“We are not seeing a ton of requests to export PPE, I think, in large part because of the needs of the United States,” Gacki said.
She also spoke positively of a payment channel established earlier this year between the Trump administration and the Swiss government to facilitate third-party countries’ humanitarian exports to Iran. The channel is a voluntary option for foreign banks to enter into that comes with some extra compliance hurdles in return for the peace of mind of knowing that their financial transactions with Iran are fully compliant with U.S. rules.
Gacki, who has led OFAC since fall 2018, said the Treasury and State departments are “evaluating requests” from other countries to establish their own humanitarian trade channels with Iran, similar to the Swiss arrangement. Last week, the South Korean government was reported to be actively pursuing such an arrangement.
But she criticized a recent effort by France, the United Kingdom and Germany to establish a barter-type trade channel, dubbed INSTEX, that aims to evade sanctions by circumventing the U.S. financial system and enabling some limited trade with Iran in hopes of retaining Iranian compliance with the 2015 nuclear agreement. President Donald Trump pulled the United States out of the nuclear accord in 2018, claiming it didn’t do enough to curb Iran’s bad behavior.
“Unlike the Swiss channel, where we have a high degree of comfort on the degree of due diligence, we don’t have the same degree of comfort on the INSTEX mechanism,” Gacki said.
John Smith, who preceded Gacki from 2015 to 2018 as OFAC director, told the center's virtual audience that while Treasury’s new COVID-19 fact sheet was “incredibly helpful,” he did not know if it would go far enough in dispelling the business community’s uncertainty about engaging in humanitarian trade with Iran while it is under so many complicated and overlapping sanctions from the United States.
Because there is a lot of opaqueness in the Iranian economy, foreign companies are reluctant to engage in trade with Iran out of fear they may ultimately be benefiting an Iranian entity that has been blacklisted by the United States. That reality, coupled with continued threats from the State Department of maximum pressure on Iran, has created a murky area for the businesses to operate in, and it is deterring some legitimate trade, Smith said.
“The politics are impacting the actual transmission of the humanitarian equipment because people are scared,” said Smith, a partner with Morrison & Foerster LLP. He called the current situation a “lose-lose” one for banks considering whether to do business with Iran.