Trump Targets Iran Banks, Seeking Crippling Blow Before US Vote

By Shaun Tandon

President Donald Trump's administration imposed sweeping sanctions Thursday on Iran's banking sector, taking a major new step to cripple Iran's already struggling economy weeks ahead of US elections.

The Treasury Department said it was designating 18 major Iranian banks, a move that could largely cut off the nation of 80 million people from the world's financial system just as it tries to cope with the Middle East's worst Covid-19 outbreak.

The United States defied concerns from European allies that the sanctions could cause needless suffering and insisted it was making exemptions for humanitarian trade.

The Trump administration did not list specific accusations against most of the banks, instead declaring broadly that the entire Iranian financial sector may be used to support the government's contested nuclear program and its "malign regional influence."

Treasury Secretary Steven Mnuchin said the action would "stop illicit access to US dollars."

"Our sanctions programs will continue until Iran stops its support of terrorist activities and ends its nuclear programs," he said in a statement.

Iranian Foreign Minister Mohammad Javad Zarif accused the United States of trying to "blow up our remaining channels to pay for food and medicine" during the pandemic.

"Iranians WILL survive this latest of cruelties. But conspiring to starve a population is a crime against humanity," Zarif wrote on Twitter.

"Culprits & enablers—who block our money—WILL face justice."

Ahead of Election

The Treasury Department said it was exempting transactions in humanitarian goods such as food and medicine.

But European diplomats and some experts say US sanctions nonetheless have dire consequences, with few institutions willing to take the risks of legal action in the world's largest economy.

Barbara Slavin, director of the Future of Iran Initiative at the Atlantic Council, described the move as "sadism masquerading as foreign policy," saying it would only hurt ordinary people and encourage smuggling, working against sanctions that are already in place.

The Treasury Department said the sanctions will be effective in 45 days, giving companies time to wind down transactions in Iran.

The timeframe will also give anyone working with Iran a chance to see the November 3 election, with polls showing Trump trailing Democrat Joe Biden, who supports a return to diplomacy.

Trump has pursued a policy of "maximum pressure" aimed at reining in Iran, the arch-rival of US allies Saudi Arabia and Israel.

The Trump administration has already moved to stop all Iranian oil exports and bolted from a deal negotiated under former president Barack Obama through which Iran curtailed its nuclear program.

Since Trump's imposition of unilateral sanctions, Iran has taken small but steady moves away from the nuclear accord.

Biden's running mate pick Kamala Harris, in a debate Wednesday with Vice President Mike Pence, said the pullout from the accord has led to Iran building "what might end up being a significant nuclear arsenal."

The US had been part of the Iran nuclear deal along with world allies but "because of Donald Trump's unilateral approach to foreign policy, coupled with his isolationism, he pulled us out and has made America less safe," she said.

The Trump administration has repeatedly butted heads on Iran with European allies, who most recently rejected a US legal argument that Washington can revive UN sanctions against Tehran.

Photo: Wikicommons

Swiss Humanitarian Channel to Iran Takes Effect

A new Swiss payment mechanism allowing food, medicine and other humanitarian aid to be sent to Iran without stumbling over US sanctions has officially taken effect, Bern said Thursday.

The system was created to allow Swiss companies in the food, pharmaceutical and medical sectors to make aid shipments to Iran without drawing the wrath of Washington for breaching a vast range of sanctions against the Islamic country.

"The Swiss Humanitarian Trade Arrangement (SHTA), a payment mechanism to enable humanitarian goods to be delivered to Iran, came into effect on 27 February," the Swiss economic affairs ministry (SECO) said in a statement.

Iran has been facing severe medical shortages since the US pulled out of a landmark nuclear deal and reimposed crippling sanctions on the country in 2018.

Washington had exempted humanitarian goods, especially medicines and medical equipment from its punitive measures.

But international purchases of such supplies are forestalled by banks being wary of conducting any business with Iran, for fear of falling foul of sanctions themselves.

This has sent medicine prices in Iran soaring and has had severe consequences, especially for people suffering from rare or special diseases that require imported medication.

An Iranian representative, Farhad Memelohi, for instance told the UN Human Rights Council in Geneva Thursday that "at least 15 Iranian children with epidermolysis bullosa (EB) had died due to the lack of medication and equipment, resulting from US sanctions."

He said the Swedish pharmaceutical company supplying protective bandages for patients who suffer from the genetic condition that results in easy and dangerous blistering of the skin, "halted their supplies due to the restrictions."

The new coronavirus epidemic, which has hit Iran particularly hard, has put further pressure on the health system and there is a shortage of face masks.

SECO said Swiss authorities had been working "intensively" since late 2018 to implement a humanitarian payment mechanism, hailing that the SHTA agreement had finally taken effect.

"In this way, Switzerland is helping to supply the Iranian population with agricultural commodities, food, medicines and medical equipment ... in keeping with Switzerland's humanitarian tradition," it said.

Under the agreement, the US Treasury Department will provide involved Swiss banks and companies "with the necessary assurances that financial transactions can be processed in accordance with US legislation."

In return, the exporters and banks will provide SECO with "detailed information about their business activities and business partners in Iran and the transactions they carry out," the statement said.

Swiss authorities will then make that information available to their US counterparts, and they will work together to ensure "increased due diligence" regarding the transactions, it added.

A pilot transaction was conducted last month after the Swiss government approved the agreement in principle, allowing for an initial payment for the shipment of cancer drugs and medicines required for organ transplants to Iran.

Photo: Fars

U.S. Sanctions Strand Iran Ships Ferrying Corn From Brazil

By Tatiana Freitas, Fabiana Batista, Sabrina Valle and Kevin Varley

U.S. sanctions on Iran are not only reverberating through the oil world, but also the agricultural market in Latin America.

At least two Iranian vessels set to carry Brazilian corn are stranded off the Latin American nation’s coast because they can’t get fuel, according to the port authority at Paranagua, about 450 kilometers (280 miles) south of Sao Paulo. State-controlled oil company Petroleo Brasileiro SA said it won’t supply the ships—which have been floating for over a month—due to the risk of U.S. sanctions.

Brazil’s Supreme Court may decide if the ships can be fueled. In a statement sent to the Supreme Court on Friday night, the attorney general’s office said Petrobras is not obligated to fuel the ships as the company responsible for them is able to buy fuel from others suppliers. In addition, the attorney generalsaid the diplomatic issue involving the matter should prevail over private interests.

Iran was the main destination of the country’s corn in the past year, with imports totaling 6 million metric tons, according to government data.

The uncertainty surrounding the fate of the vessels is the latest evidence of how the Trump administration’s policies are rattling commodities markets across the globe. The U.S. trade war with China has already led to a shift in trade flows of everything from soybeans to sorghum. Meanwhile, American sanctions aimed at squeezing Iran’s revenue have left some of the biggest oil buyers searching for supplies from elsewhere.

MV Bavand, carrying 48,000 metric tons of corn, should have set off from Paranagua to Iran on June 8, the port authority said in an email. The ship had left Imbituba port, in Brazil’s Santa Catarina state, on May 15 after loading, according to vessel data compiled by Bloomberg.

MV Termeh has been waiting for fuel supply since June 9 to head to Imbituba Port, where it will be loaded with corn and then head to Iran, according to the port authority. It unloaded a cargo in Sao Francisco do Sul Port in Santa Catarina on June 1, data compiled by Bloomberg show.

“If Petrobras loads these ships, it would be subject to the risk of being included” in the U.S. sanctions list, which could result in significant losses for the company, the Brazilian state company said in a statement. “In addition, there’s information that these ships came from Iran loaded with urea, which is subject to U.S. sanctions.”

Reuters reported on the stranded ships on Thursday.

Iran and the U.S. have been at loggerheads since last year, when Donald Trump withdrew the U.S. from a 2015 nuclear agreement with the Islamic Republic he called the “worst deal ever.” In May, the administration refused to extend waivers to eight governments for Iranian oil purchases, ratcheting up the pressure on the country’s already battered economy.

Iran’s willing to meet with U.S. senators to discuss possible ways out of the dispute, the New York Times reported on Thursday. But also said the nation’s escalation of its nuclear enrichment program could be reversed if the U.S. drops sanctions that Trump imposed after withdrawing from the nuclear agreement.

“This is an isolated episode that won’t impact the rest of Brazil exports to Iran,” Jose Augusto de Castro, president of Brazilian Foreign Trade Association said in a phone interview.

Brazil’s exports to Iran total about $2 billion a year, with shipments mostly comprised of commodities like corn, meat and sugar, according to the association known as AEB. The Latin American country frequently receives ships from Iran, and Petrobras provides fuel for the vessels on a regular basis, Castro said.

The restriction only applies to these specific ships hired by a Santa Catarina-based trader as the Iranian company responsible for the vessels is named in the U.S. sanctions list, he said.

“Brazil has no interest in restricting exports to Iran, which has a strong import potential,” Castro said.

The risk involved in hiring sanctioned ships is solely for the Brazilian exporter company, Petrobras said by email.

Photo: FleetMon

Transcript: Special Representative for Iran Brian Hook Briefs Reporters on Iran Sanctions

This transcript was published by the Office of the Spokesperson at the U.S. Department of State. The briefing took place on November 2, 2018.

MR HOOK:  I’m happy to take questions.  And you’ve heard the Secretary talk.  I just (inaudible).

QUESTION:  What are the eight countries?

MR HOOK:  Huh?

QUESTION:  What are the eight countries? 

QUESTION:  What are the eight countries? 

MR HOOK:  Monday.  Monday.

QUESTION:  Can you at least say what are the two that said that they will cut to zero since it seems the negotiations with them are over?

MR HOOK:  It’ll – it’s all going to be announced on Monday.

QUESTION:  But why do all of this today if there’s so little detail available today?

MR HOOK:  There was a lot of detail today.  There was a full briefing by both secretaries.  So --

QUESTION:  There was not a lot of detail.

MR HOOK:  The sanctions go back into effect on Monday.  This was a preview today.

QUESTION:  Can I ask, though, similar to the question Arshad asked on the – using the word jurisdiction instead of country, can we assume that a certain island that begins with “T” is the reason that you’re using jurisdiction instead of country?  Or is that --  

MR HOOK:  I think --  

QUESTION:  Taiwan.  I’ll --

QUESTION:  Could jurisdiction mean more than one government, or does it mean one government?

MR HOOK:  Is this what Secretary Mnuchin said?

QUESTION:  He said – no, Pompeo.

QUESTION:  Both, both.  Pompeo – both of them said --

QUESTION:  They used the word jurisdictions.

QUESTION:  -- jurisdiction not country, which is why – I mean, it’s a technical point, but I’m just – and I get – I can understand that you don’t want to give the names.

MR HOOK:  I don’t know all of them.  I don’t know.  

QUESTION:  But are all of the eight countries?

QUESTION:  Single governments?

QUESTION:  Countries?

MR HOOK:  Yes.

QUESTION:  Yes countries or yes governments?

MR HOOK:  They are – they are -- 

QUESTION:  If Taiwan is among them, that would be a reason to -- 

MR HOOK:  I get it.  They’re nations.  They’re nations.

QUESTION:  Okay.  So Taiwan is not.

MR HOOK:  I’m not going to say what it’s not.  I’m saying that eight nations.

QUESTION:  Can I get a clarification on the SREs?

MR HOOK:  Yeah.

QUESTION:  Yesterday you said the waiver is granted for a six-month period and then re-evaluated. 

MR HOOK:  That’s by statute.

QUESTION:  Right.  And then the Secretary said it will take them weeks longer to wind down.  Is that all-encompassing for the eight that are being granted or just --  

MR HOOK:   No, he was – there he was talking about two of the countries that will receive an SRE are going to be given a little extra time, weeks of time, to get to zero.

QUESTION:  But they – if they can still – the waiver is for six months still by statute?

MR HOOK:  But operationally it’s only relevant for the first few weeks of the – but by law, when we give an SRE, it’s for 180 days.

QUESTION:  Right.

MR HOOK:  And that’s under the National Defense Authorization Act of 2012, NDAA.  And so it’s a 180-day SRE.  It doesn’t matter whether they go to – I mean, it’s – each country is different.  In two of the countries, they will be getting to zero before the expiration of the SRE.

QUESTION:  Can you talk about kind of the broader efforts on trying to get Iran to behave like a normal regime?  I mean, does that include kind of the Twitter messaging or social media messaging, or is it something more than that, more concrete about supporting opposition groups or protestors?

QUESTION:  Is it more than just Twitter messages?  Is there something – is the U.S. doing something to kind of promote protestors?

MR HOOK:  The Iranian regime has historically not come to the negotiating table absent significant economic and diplomatic pressure.  The reimposition of our sanctions are designed to do two things:  deny the regime the revenue it needs to fund violent wars abroad, and also to change the cost-benefit analysis in our favor so that Iran decides to come back to the negotiating table. 

The Ayatollah Khamenei has said that require hostility with the United States, which is the kind of thing that you expect to hear from a revolutionary regime.  We have been very clear.  Secretary Pompeo has been very clear that we have an ear open to what is possible.  We very much want to begin work on a new and better deal to replace the insufficient Iran nuclear deal that the President left in May, and our campaign of maximum economic pressure is a critical tactic to achieve that goal.

QUESTION:  But he’s also talking about restoring democracy. 

MR HOOK:  The President, the Secretary of State, the Vice President, at all levels of the administration, have stood with the Iranian people and their aspirations for a better way of life.  The Iranian people want a more representative government, a government that does not rob them blind, that supports their human rights, their economic rights, their freedom of expression, freedom of assembly.  These are all rights that the United States wants for the Iranian people.  We think they deserve a much better way of life, and Secretary Pompeo has repeatedly made remarks addressed to the Iranian people in support of their demands for reforms from this regime.

QUESTION:  How – I want to ask the question that Gardiner asked yesterday about the Khashoggi murder and the war in Yemen and how any of that is playing into this.  I mean, how can you, on the one hand, focus so much on Iran’s human rights record while not doing enough to pressure the Saudis on some of the same very issues?

MR HOOK:  We do not share interests or values with the Iranian regime.  We have asked Saudi Arabia to increase the production of oil while we take off Iranian oil from the market, and Saudi Arabia has been very helpful to ensure an adequately supplied oil market during this period where we have seen dramatic reductions in the import of Iranian crude as part of our maximum economic pressure campaign.  The Saudi Government has successfully insulated oil from broader political issues, and that has been helpful in the broader context of our pressure campaign.

QUESTION:  Well, just to be devil’s advocate here, I understand the shared interests that you have with the Saudis on Iran.  But what shared interests, what shared values does the U.S. have with the Saudis – respect for human rights?

MR HOOK:  I can only speak to how the Saudis have helped our Iran strategy.  The President gave a speech in Riyadh on his first trip overseas as president, where he called upon our Sunni Arab partners to increase their capabilities to reverse Iranian hegemony so that our Arab partners can shoulder more of the burden in the Middle East.  And we have enjoyed a great deal of cooperation from Gulf countries and beyond to isolate Iran and to apply as much economic pressure as possible so that they don’t have the money they need to destabilize the Middle East.

QUESTION:  How is this escrow account that he talked about going to work, and how do you make sure that the Iranians are going to get basic needs fulfilled – medicine, food?

MR HOOK:  The escrow accounts that are being created for those nations that need to continue importing Iranian oil deny Iran hard currency, and it denies Iran any revenue from oil sales.  Any time Iran sells oil, that money goes into an escrow account in the importing nation’s bank, and Iran has to spend down that credit.  We strongly encourage those nations to ensure that Iran spends that money on humanitarian purchases to benefit the Iranian people.  The longest-suffering victims of the Iranian regime are the Iranian people.  This regime uses fake companies disguised as humanitarian organizations to divert purchases that should go to food, medicine, and medical devices, and they use that to enrich the regime and support revolutionary activities overseas.

QUESTION:  So you’re counting on countries like China to make sure that they don’t use money for those things?

MR HOOK:  The United States will be monitoring these escrow accounts very closely.  Unlike in prior administrations, we will ensure that the money is not spent on illicit activities, that there isn’t any leakage in these escrow accounts, and we will work closely with countries to encourage the purchase and – the sale and purchase of humanitarian goods to benefit the Iranian people.  Our sanctions regime has very clear exceptions for the sale of food, medicine, and medical devices.

QUESTION:  So how does the travel ban fit into the U.S. support for Iranian people?

MR HOOK:  Because the Iranian regime is the largest sponsor of terrorism in the world, we have a restrictive visa policy.  And that policy is driven by the terrorism of the regime.  It is not driven by a desire to restrict the average Iranian people.  The problem we have is --

QUESTION:  But it does.

MR HOOK:  But that is the problem of the regime.  If the regime would stop funding terrorism and open up its economy so that we can see where the money goes, it would create a much better environment for us to be granting visas.

QUESTION:  So for the countries that you say need to keep importing oil, do you foresee issuing these exemptions over and over again?  Are you going to put an upper limit on how many times they’ll be renewed?

MR HOOK:  Our goal remains getting countries to zero imports of Iranian oil.  In 2019, our projections are that oil supply will exceed demand, and that creates a much better atmosphere for us to bring remaining nations to zero as quickly as possible.

QUESTION:  So you’re not putting an upper limit on how – for how – how many times these exemptions will be renewed at this point?

MR HOOK:  We are not looking to grant additional SREs at the end of the 180-day period.  We are being very careful to advance our maximum economic pressure campaign without increasing the price of oil.  Next year we anticipate a stronger oil supply coming online, and that will allow us to accelerate the path to zero.

QUESTION:  And are you – how many Iranian banks will be cut off from SWIFT?  I mean, the administration is saying more than prior, but can you give a number?

MR HOOK:  That will be announced by Secretary Mnuchin on Monday.

QUESTION:  He did say, though, on this subject – he was very precise in his language.  He said “certain designated Iranian financial institutions.”  That does not categorically mean all.  So is it possible that either, one, don’t redesignate all of the banks that had previously been designated; and two, is it possible that some designated bank, because he used the word “certain designated,” would not be required to disconnect?

MR HOOK:  I’m not going to interpret what “certain” means beyond saying that he will announce all the banks on Monday.

QUESTION:  The 20 – 20 countries import 80 percent of Iran’s oil, as I understood – stand.  Are those eight countries, any of them, among those 20 – the eight countries receiving the SREs?

MR HOOK:  That there’s a small group of – that there’s a – there is a relatively small number of countries that make up the lion’s share of the import of Iranian crude.

QUESTION:  And are any of them getting exemptions?

MR HOOK:  I’m not going to get ahead of the Secretary’s announcement on Monday.

QUESTION:  Can you offer a little clarity on the response about non-U.S. civil nuclear cooperation?  Will waivers be granted in that --

MR HOOK:  The Secretary addressed that this morning, and it’ll be announced on Monday.

QUESTION:  On the humanitarian transaction, Europeans have expressed concern in the past weeks that even though there were exemptions to humanitarian goods and services, the financials mechanism were not safe enough, that you have to clarify what are the means by which the countries and entities can do those kind of transactions.  Do you think that what you announced today clarifies this and that it’s safe to do humanitarian transactions with Iran?

MR HOOK:  The Iranian regime has a history of creating front companies to divert the distribution of humanitarian goods.  Financial institutions around the world know of Iran’s history of deceiving banks on the sale of humanitarian goods.  The burden is on Iran to open up its dark economy so that banks around the world have more confidence that when they facilitate humanitarian transactions that the humanitarian goods will reach the Iranian people. 

The United States is the largest donor of humanitarian assistance in the world.  Every sanctions regime we have makes exceptions for food, medicine, and medical devices.  That is, we have done our part; the Iranian regime needs to do its part by making those transactions possible in an open and transparent financial system.

QUESTION:  Sounds like there’s not very many safe ways of trade – like, for pharmaceutical companies and medical companies.

MR HOOK:  The Iranian regime makes it very difficult to facilitate the sale of humanitarian goods and services.

QUESTION:  The Europeans says that the fear is that even if you sell humanitarian goods to Iran, you will be target by U.S. sanctions, so they addressing this to you and not to Iran.

MR HOOK:  Say that again?

QUESTION:  The European countries say that companies fear that if they sell those goods to Iran, they will be targeted by U.S. sanctions.  So they ask you to say what are the safe channels to do that.

MR HOOK:  The burden is not on the United States to identify the safe channels.  The burden is on the Iranian regime to create a financial system that complies with international banking standards to facilitate the sale and provision of humanitarian goods and assistance.

QUESTION:  Right, but I think that the point is that they are looking for some kind of, like, assurance --

QUESTION:  Guidance from OFAC.

QUESTION:  Guidance.

MR HOOK:  We have been – OFAC has given very clear guidance over many years --

QUESTION:  That’s not what the Europeans say.

MR HOOK:  We have done our part to permit the sale of humanitarian goods to Iran.  That is our part.  That is our role.  Iran has a role to make these transactions possible.  Banks do not have confidence in Iran’s banking system – often don’t have confidence in Iran’s banking system to facilitate those transactions.  That’s Iran’s problem; it is not our problem.

QUESTION:  But banks do not have confidence, the companies do not have confidence in Iran banks because they are subject to American sanctions from now on.

MR HOOK:  That’s not true.

QUESTION:  That’s what the Europeans say.  I’m just --

MR HOOK:  I’m giving you the answer. 

QUESTION:  We were expecting the list.  (Laughter.)

MR HOOK:  But he told you it was coming Monday.

QUESTION:  Why is it that – and when you say Monday, this isn’t going to be at literally 12:01 Monday morning, is it?  Or I mean --

MR HOOK:  No.  The Secretary will announce it on Monday, and then it will be published in the Federal Register.

QUESTION:  Okay, but he’ll announce it – what, do you have any – like, I just want it for personal planning purposes.

MODERATOR:  About 8:30 in the morning.

QUESTION:  8:30 Monday morning and not beforehand.  So in other words, I – at 12:01 Monday morning, they go into effect --

MR HOOK:  Yes.

QUESTION:  -- but there won’t be a – like, is something going to go up on the Treasury website at 12:01?  I mean, I’m just trying to figure out --

MR HOOK:  I don’t know about that.  For our part, on the SREs and anything else will be announced on Monday.  I don’t – Treasury may have a different way where at 12:01 they have to --

QUESTION:  So you guys aren’t planning on saying who the eight are at 12:01.

MR HOOK:  No.  No.  No.

QUESTION:  But presumably these eight are aware that – right, they’ve been told that they’re okay to – because they’re all coming out of the woodwork now, the Turks, the Italians, the South Koreans, the Indians, the – they are.

MR HOOK:  I think you’ve answered your own question.

QUESTION:  Well, I just want to make sure no one’s lying.

MR HOOK:  Oh.  We’ll announce it on Monday.

QUESTION:  And so will we see sanctions on the countries that aren’t getting these things on Monday?

MR HOOK:  We expect – well, we have already seen enormous pre-compliance with the reimposition of our sanctions because corporations around the world are rightly choosing to sell goods and services in the United States over the Iranian market if given the choice.

QUESTION:  But I mean, weren’t we going to see sanctions on big countries that aren’t – that don’t get these waivers?  Are you going to – sanctions announced on Monday?

MR HOOK:  We expect nations around the world to comply with sanctions because it’s in their interest, and it promotes our broader national security objectives to address a significant and expanding threat to peace and security.

Okay.

QUESTION:  Thank you.

MR HOOK:  All right, thank you.

Photo Credit: State Department