by Jasmin Ramsey

Press reports about medical supply shortages in Iran, some of which have described devastating consequences, have been surfacing in the last two years, while debate rages on about who’s responsible — the Iranian government or the sanctions regime. Siamak Namazi, a Dubai-based business consultant and former Public Policy [...]]]> via Lobe Log

by Jasmin Ramsey

Press reports about medical supply shortages in Iran, some of which have described devastating consequences, have been surfacing in the last two years, while debate rages on about who’s responsible — the Iranian government or the sanctions regime. Siamak Namazi, a Dubai-based business consultant and former Public Policy Fellow at the Woodrow Wilson Center for International Scholars, admits the Iranian government shares responsibility but says sanctions are the main culprit. Humanitarian trade may be exempted from the sanctions, says Namazi, but that isn’t enough when the banking valve required to carry out the transactions is being strangled. “[I]f [sanctions advocates] maintain the sanctions regime is fine as it is, then how come they try to promote substitution from China and India?” asks Namazi. The following Q&A with Namazi was conducted in Washington, DC.

Q: You recently authored a policy paper published by the Woodrow Wilson Center where you essentially blame medical shortages in Iran on Western sanctions. How did you reach this conclusion?

Siamak Namazi: We concluded that the Iranian government deserves firm criticism for mismanagement of the crisis, poor allocation of scarce foreign currency resources and failing to crack down on corrupt practices, but the main culprit are the sanctions that regulate financial transactions with Iran. So, while Tehran can and should take further steps to improve the situation, it cannot solve this problem on its own. As sanctions are tightened more and more, things are likely to get worse unless barriers to humanitarian trade are removed through narrow adjustments to the sanctions regime.

My team and I reached these conclusions after interviewing senior officers among pharmaceutical suppliers, namely European and American companies in Dubai, as well as private importers and distributors of medicine in Tehran. We also spoke to a number of international banks. None of us had any financial stake in the pharmaceutical business, whatsoever, and we all worked pro bono.

Q: What is your basis for this claim given the humanitarian exemptions to the sanctions regime that allow for the trade of food and medicine?

Siamak Namazi: The US Congress deserves kudos for passing a law making it abundantly clear that humanitarian trade in food, agricultural products, medicine and medical devices are exempted from the long list of sanctions against Iran. This law is the reason why the Western pharmaceuticals can do business in Iran. I sincerely applaud that gesture.

Unfortunately, what we see is a case of what lawyers refer to as “frustration of purpose.” Iran can in theory purchase Western medicine, but in practice it is extremely difficult to pay for the lifesaving drugs it needs. Despite the Congressional directive, a number of Executive Orders that restrict financial transactions with Iran remain in place, making it all but impossible to implement that exception.

Sanctions also limit Iran’s access to hard currency. The country’s oil sales are seriously curtailed and have effectively been turned into a virtual barter with the purchasing country, mainly China and India.

Q: Not all Iranian banks are blacklisted by the US and there is a long list of small and large international banks that could carry out humanitarian transactions. Why can’t Iran use these channels for importing the medicine it needs?

Siamak Namazi: The non-designated Iranian banks are small and lack the international infrastructure required to wire money from Tehran to most foreign bank accounts. They rely on intermediary banks to process such transactions. Unfortunately, it’s extremely difficult, if not outright impossible, for these Iranian banks to find such counterparts, even when they are trying to facilitate fully legal humanitarian trade.

In the end, Iran needs to go through many loops and plays a constant cat and mouse game, creatively trying to find a channel to pay its Western suppliers of medicine. Not only does this increase the costs of medicine for the Iranians, it also causes major delays. In the meanwhile, pharmacy shelves run empty of vital drugs and the patient suffers.

Q: Isn’t that just a reflection of the international banks being too cautious rather than shortcomings in US sanctions laws? In a recent testimony to the Senate, US Treasury Undersecretary David Cohen was clear that no special permission is required to sell humanitarian goods to Iran and foreign financial institutions can facilitate these permissible humanitarian transactions.

Siamak Namazi: What Mr. Cohen actually said is that all is fine “as long as the transaction does not involve a U.S.-designated entity,” meaning a sanctioned Iranian bank.

How, exactly, does an international financial institution guarantee that none of Iran’s main banks, all of which are blacklisted, were involved in any part of the long chain involving a foreign currency transfer from Iran? Recall that foreign currency allocation for pharmaceutical imports start with the Central Bank of Iran, which is blacklisted. Maybe the CBI wired these funds to the non-designated Iranian bank from monies it holds in say, Bank Tejarat or Bank Melli, potentially adding further layers of banned banks to the chain.

Given the severity of the risk involved — fines that have reached nearly $2 billion in recent months — international banks seek clear indemnity. They want legal clarification that basically says, “You will not be fined for clearing humanitarian trade with Iran, period.”

So far Treasury has refused to grant such a measure, though recent comments by senior officials suggest that the US government has sent out delegations reassuring the banks, without actually making any changes to the letter of the law. While this is a welcome move, and indeed one of the recommendations in the report published by the Wilson Center, it is far from sufficient.

Q: You say that Iran has a hard time finding a banking channel to pay for Western medicine. At the same time, for the first time in many years, Iran purchased $89 million in wheat from the US in 2012. Why were they able to find a banking channel to pay for wheat, but have difficulty purchasing medicine?

Siamak Namazi: My claim is supported by recent US trade statistics showing that exports of pharmaceuticals to Iran dropped by almost 50 percent, but these numbers are ultimately misleading. My understanding is that US trade data only reflects exports from an American port, directly entering an Iranian port, which is a thin slice of the overall trade. This is while most companies send their goods to Dubai, Europe or Singapore and cover the entire Middle East, including Iran, from these hubs. So, when the statistics refer to a drop of sales of medicine from around $28 million in 2011 to half that figure in 2012, the figure grossly misrepresents the scale of the problem.

Let me stress this point again: the loss of $14 million in American-made drugs does not make for a crisis. The real problem is exponentially bigger than this. We are talking about the loss of hundreds of millions of dollars worth of American and European medicine.

You must also keep in mind supplier power in trade. Wheat is a perfectly substitutable good, so Iran is bound to find one supplier that is willing to sell its wheat with extended credit terms, until it secures the hard currency and banking channel to pay for it. A vital drug is often perfectly un-substitutable; meaning that a single company — most often American or European in the case of the most advanced medicines — enjoys a 20-year patent to manufacture it. So if Iran cannot find a banking channel to reimburse the manufacturer for it, it will have to do without that medicine until it can pay.

Q: Why can’t Iran procure its medicine from China, India or Japan — the countries it’s selling oil to?

Siamak Namazi: Iran has already increased its purchase of medicine and medical equipment from all the countries you listed. However, as I stated earlier, due to the highly regulated and patented nature of the pharmaceutical business, vital drugs are often un-substitutable.

Even when there is an alternative drug made by the Chinese, Indians or Japanese, there is an additional barrier. Medicine has to be registered before its importation is permitted. Just like the US has the Food and Drug Administration, Iran, like most countries, has an equivalent body that must approve the medicine. The specific molecule must be registered after thorough testing. In Iran, this process takes an exceedingly long time and should no doubt be improved, though recently they have taken steps to expedite it by making exceptions. The Ministry of Health sometimes allows a drug that was approved for sale in another country to also be imported and sold in Iran. But this rushed process has had major consequences in terms of side-effects. There are even press reports of deaths when substandard drugs were imported.

To be honest, I don’t understand the logic of the advocates of this solution. They argue that the existing humanitarian waivers are sufficient and claim any shortage of medicine in Iran is the consequence of Tehran’s own mismanagement. I have even heard accusations that Iran is intentionally creating such shortages to create public outrage against the US. But if they maintain the sanctions regime is fine as it is, then how come they try to promote substitution from China and India? Besides denying Iranian patients their right to receive the best treatment there is, aren’t they also rejecting the American pharmaceutical companies’ right to conduct perfectly legitimate business?

Q: To be fair, Iran’s own former health minister, Marzieh Vahid Dasjerdi, also accused the government of failing to allocate the necessary resources and lost her job after doing so.

Siamak Namazi: I actually commend the former health minister for her courageous intervention and have also voiced my concern about the misallocation of hard currency in various forums.

That said, I am not in a position to know or comment on the exact nature or circumstances of her dismissal. I can only reference our direct research and findings. We found and verified ample cases where Iran had allocated hard currency for vital medicine, yet the purchase fell through because they could not find a banking channel. This includes the sale of an anti-rejection drug needed for liver transplants by an American pharmaceutical that ultimately failed. Can you imagine waiting years for a donor and when your operation time arrives, being told that you cannot have it because the drug you need is missing?

You need not take our word for it. It is very easy for the US government to verify our claims by talking to the American pharmaceuticals that do business with Iran, or even by reviewing some of OFACs own files. In fact, the US industry lobby USA*Engage recently wrote a letter refuting Undersecretary Cohen’s claims that American companies have no problems dealing with Iran. In their own words: “Despite … clear Congressional directive and long-standing policy, the U.S. Treasury implements Executive Branch unilateral banking sanctions in a manner that blocks the financial transactions necessary for humanitarian trade.”

Q: So is there a solution to all this?

Siamak Namazi: Absolutely, and I have spelled it out in my op-ed in the International Herald Tribune and also in the Wilson Center report. It simply makes no sense to say humanitarian trade is legal, but the banking channel needed to facilitate the trade is restricted. In the case of medicine, the solution is arguably simpler than other humanitarian goods. With fewer than 100 American and European companies holding patents to the most advanced drugs needed, we can craft narrow, but unambiguous exemptions to the banking restrictions, essentially allowing these companies to sell medicine to Iran without undermining the sanctions regime overall.

To address the shortage of hard currency, Iran should be allowed to convert some of its current holdings in Chinese, Indian and other banks around the world into hard currencies for the exclusive purpose of buying medical supplies. Alternatively, the US could revisit its earlier decision on the matter and allow European companies that owe billions of dollars to Iran to settle this debt by paying a pharmaceutical company on Iran’s behalf.

US policymakers are reminded that medicine is highly subsidized in Iran. Imported drugs receive hard currency allocations at a greatly subsidized rate and are again supported through government-owned insurance companies. That means that the Iranian government ultimately gains far fewer rials for every dollar it allocates to an importer of medicine than it does selling its hard currency to importers of most other goods.

– Siamak Namazi, a Middle East specialist whose career spans the consulting, think tank and non-profit worlds, is currently a consultant based out of Dubai. His former positions include the managing director of Atieh Bahar Consulting, an advisory and strategic consulting firm in Tehran. He has also carried out stints as a fellow in the Wilson Center for International Scholars, the Center for Strategic and International Studies and the National Endowment for Democracy. A frequent contributor to international publications and conferences, he has authored chapters in six books and appeared regularly as a commentator in the international media. He holds an MBA from the London Business School, an MS in Planning & Policy Development from Rutgers University, and a BA in International Relations from Tufts University.

by Jamal Abdi

The notion that U.S. sanctions on Iran are supposed to act as diplomatic leverage to get a nuclear deal may be dispelled once and for all by a new Congressional action now in the works.

The House is poised to move ahead with a new round of [...]]]> via Lobe Log

by Jamal Abdi

The notion that U.S. sanctions on Iran are supposed to act as diplomatic leverage to get a nuclear deal may be dispelled once and for all by a new Congressional action now in the works.

The House is poised to move ahead with a new round of Iran sanctions, and a slew of new sanctions proposals are set to be introduced in the Senate, even as a host of current and former senior U.S. officials — including Secretary of State John Kerry – have warned the body to hold off on new sanctions at the risk of imperiling a diplomatic resolution to the nuclear standoff.

For some in Congress, this seems to be precisely the point.

 Senator Mark Kirk (R-IL) is circulating a draft measure that would make regime change, not a negotiated solution, the official U.S. policy. Kirk promises to introduce that measure shortly, but first will introduce two smaller sanction measures to cut off Iran’s foreign exchange and block its natural gas deals, all building up to the grand finale. The first was introduced this week, S.892, which is designed to cut off Iranian access to euros. It would sanction any foreign entity that converts currency held by Iran’s Central Bank or other sanctioned Iranian entities into non-local currency. Blocking off Iranian access to euros will of course make it more difficult for Iran to purchase Western medicines and exacerbate the reported sanctions-induced medicine shortage now plaguing Iran.

Sen. Kirk hopes to attach these smaller bills to another sanctions package in the House before formally introducing his regime change bill. That bill will mandate that sanctions be kept in place until Iran transitions to a democratic government — a preposterous notion given the disastrous effect sanctions are having on Iran’s civil society and democracy movement. The bill would echo the Iraq Liberation Act, which was passed and signed by President Clinton in 1998 and cemented regime change as the official policy toward Saddam Hussein. That measure all but guaranteed Saddam would not comply with sanctions — what was the point if they would never be lifted? — and was cited by Congress as the basis for authorizing war with Iraq four years later.

In the meantime, the House is considering H.R.850, a measure that would sanction U.S. allies that conduct commercial transactions with Iran. Despite existing humanitarian waivers, this could affect transactions that include food and medicine as commercial entities and banks are becoming increasingly fearful of conducting any business transaction with Iran for fear of being penalized by the United States. Congress attempted to pass a similar measure last year as part of a previous sanctions package, but removed it at the last minute after intervention by the Obama Administration. A Congressional aide told Congressional Quarterly at the time that the measure “would be impossible to enforce and only make our allies really angry. They would have endangered their cooperation with the sanctions we have now.”

Nevertheless, the House Foreign Affairs Committee is looking to move H.R.850 in a matter of weeks. Next Wednesday, the committee will hold a hearing with Under Secretary of State for Political Affairs Wendy Sherman, the top U.S. negotiator conducting multilateral talks with Iran, and Treasury Under Secretary for Financial Intelligence and Terrorism David Cohen, who is in charge of implementing the Iran sanctions. Committee Chairman Ed Royce  ominously said the hearing was “a chance to press the Administration on critical questions surrounding U.S. participation in the P5+1 negotiations and its implications for the enforcement of sanctions.” The implication being that the U.S. could be implementing more sanctions if pesky diplomacy wasn’t getting in the way. The next step would be to move the sanctions bill.

Regardless of what Sherman and Cohen tell the chamber, it may make no difference. Secretary of State John Kerry implored the Senate Foreign Relations Committee in April to hold off on further sanctions and to not interfere with diplomatic efforts to little effect. Congress has become increasingly bold in dismissing the White House’s requests when it comes to Iran. Congress has also thus far ignored reports from senior former officials like Tom Pickering, Dick Lugar, Ann Marie Slaughter warning that sanctions were outpacing negotiations and threatening to upend the diplomatic process.

The Kirk measure on foreign exchange introduced this week, in fact, circumvents the White House and doesn’t even require the President’s signature. It pronounces that, regardless of when the bill would actually be passed, the sanctions on foreign exchange would go into effect starting May 9. This means the U.S. will retroactively issue sanctions against any bank conducting a transaction after this date, so long as the bill passes at some point. It is essentially sanctions by Congressional decree. The threat of sanctions from the Hill is now so great that they do not even need to be passed to have a chilling effect. It is a stunning display of impunity by Iran hawks in Congress and groups like AIPAC and the Foundation for Defense of Democracies that are supporting these measures.

It’s little wonder, then, that the narrative in Tehran is that even if Iran complies with U.S. demands on its nuclear program, the sanctions will continue and the President can’t do a thing about it. While Kirk’s Iraq Liberation Act for Iran may not yet be introduced, he may not have to get his final bill passed in order to lock in the sanctions as regime change policy.

The dominant narrative in Tehran is already that, much like with Saddam’s Iraq, the sanctions on Iran will never be lifted. The President has no mechanism to formally lift many of the hardest hitting sanctions — he is dependent on Congress. And Congressional hawks have indicated that if Iran compromises, it will be proof the sanctions are working and instead of easing them in a quid pro quo, more sanctions should be passed. Tehran’s narrative is being reinforced by Congress, and unless the U.S. can convey that there is an offramp from sanctions, Iran’s nuclear program will likely continue apace.

– Jamal Abdi is the Policy Director of the National Iranian American Council, the largest grassroots organization representing the Iranian-American community in the US. He previously worked in Congress as a Policy Advisor on foreign affairs issues. Follow Jamal on Twitter: @jabdi

Photo: The Central Bank building in Tehran, Iran.

In an interview with BBC Persian, Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen says that his department’s assessment is that reports published regarding serious and extensive shortages of medicine in Iran are exaggerated. He thinks the government of Iran is trying to portray a manageable problem as [...]]]> via Lobe Log

In an interview with BBC Persian, Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen says that his department’s assessment is that reports published regarding serious and extensive shortages of medicine in Iran are exaggerated. He thinks the government of Iran is trying to portray a manageable problem as bigger than it really is (I am not using direct quotes because I suspect that the original interview was conducted in English and I only have access to the Persian version).

Journalist Mohammad Manzarpour should be given kudos for not allowing Cohen to get away with this rather careless comment. Stepping away from the question of exactly how an official of the US Treasury Department — or anyone else for that matter — is able to make an accurate assessment of conditions on the ground in Iran without sufficient data, Manzarpour shifts the conversation to reports from family members in Western Europe and the US who have been asked to send medicine to Iran for serious illnesses such as cancer, and the fact that due to financial sanctions, even Iran’s private sector has had a difficult time getting letters of credit for importing medicine or ingredients for the production of medicine inside Iran. According to another report by BBC Persian, Iran’s purchase of medicine from Europe has dropped by 30 percent in the past 5 months. Furthermore, despite the issuance of licenses by the Office of Foreign Assets Control (OFAC) for exporting medicine to Iran, banks continue to refuse transactions. (Eric Ferrari, a Washington-based sanctions attorney, describes the Treasury department’s licenses regarding food and medicine as essentially useless).

Manzarpour’s questioning forces Cohen to acknowledge that Iranian imports of medicine may have been reduced. Channels may have narrowed in comparison to 5 years ago, Cohen states, but there are still reliable channels for the import of food, medicine, and medical equipment.

So sanctions have not stopped the export of medicine to Iran; they have just made it more difficult. And according to Cohen, this situation can be resolved when the Iranian leadership responds to demands to stop its nuclear program, which would result in the removal of sanctions. He wants the BBC Persian’s audience to understand that the objective of sanctions is not the sanctions themselves; sanctions exist because of the Iranian government’s decisions.

How is this not collective punishment? Isn’t Cohen saying that so long as the nuclear issue is not resolved, at least some Iranian patients may not get their medicine and that this is okay for him?

By this time, an irritated Cohen realizes that he has been caught. No, he’s not saying that the US is indifferent to the negative side-effects of sanctions on people who had no role in the making of Iran’s nuclear program; sanctions have not been designed to harm people; the Treasury Department is in contact with financial institutions everyday so that they understand the boundaries of sanctions and know what is allowed and what is not; and we will continue our talks with suppliers of food, medicine, and medical equipment as well as with financial institutions…

Cohen is not responsible for the US’ sanctions policy even if as a political appointee he does have some control over the zeal with which his office implements the sanctions regime. But his statement of care for the plight of the Iranian people shows quite a bit of cluelessness — real or feigned — about how sanctions, irrespective of where and on whom they are imposed, work. There is no way that sanctions which are imposed on a country’s financial system and Central bank can be described as not designed to harm people. The Treasury Department’s efforts to get around the blunt and ferocious effects of the sanctions regime may be laudable, but none of these efforts address the costs imposed on the Iranian economy as a whole, even if these so-called manageable problems had a more competent government in charge to deal with them. Consider, for example, that although the export of food and medicine to Iran is not banned, at minimum, financial sanctions still increase the cost of importing goods to Iran, which results in higher prices for consumers.

And what of the charge that it’s the government of Iran that’s either not managing problems resulting from sanctions properly or is intentionally not distributing goods in ways that take care of the needs of the Iranian population? Of course these charges are correct. The Iranian government is responsible both for its refusal to back down on its nuclear program as well as its incompetent and/or horrid distribution of resources. Indeed, many of us who have opposed sanctions do so precisely because we look at the sanctions regime as a US policy that is mediated by the Iranian government and other powerful networks that have a vested interest and the means to transfer the costs of sanctions to the less powerful.

Powerful economic and political networks anywhere in the world reshape policy — even those that are directly intended to harm or constrict them — all the time by transferring the costs to others. This is especially the case when authorities issuing the policy have no way of assuring that the costs are not transferred (through the use of direct punishment, for instance). So, David Cohen’s pronouncements that sanctions are not intended to harm the Iranian people or prevent their access to medicine or other necessary goods, as well as his office’s earnest efforts to get around the side effects of the same sanctions that they rather zealously work to implement, are a bit disingenuous, to say the least.

The US and EU are touting Iran’s currency woes as proof that sanctions are working, though it’s not clear to what end. The Wall Street Journal reports that the Western powers “are working on new coordinated measures intended to accelerate the recent plunge of Iran’s currency and drain its foreign-exchange reserves”:

The first [...]]]> via Lobe Log

The US and EU are touting Iran’s currency woes as proof that sanctions are working, though it’s not clear to what end. The Wall Street Journal reports that the Western powers “are working on new coordinated measures intended to accelerate the recent plunge of Iran’s currency and drain its foreign-exchange reserves”:

The first salvos in this stepped-up sanctions campaign are expected at a meeting of EU foreign ministers on Oct. 15, including a ban on Iranian natural-gas exports and tighter restrictions on transactions with Tehran’s central bank, European officials said.

The U.S. and EU are also considering imposing a de facto trade embargo early next year by moving to block all export and import transactions through Iran’s banking system ….

To that end, U.S. lawmakers are drafting legislation that would require the White House to block all international dealings with Iran’s central bank, while also seeking to enforce a ban on all outside insuring of Iranian companies.

David Cohen, who coordinates the US’s Iran sanctions policy from within the Treasury, outlined the US’s stance in a speech before a British think tank. Reuters reports:

[David] Cohen, undersecretary for terrorism and financial intelligence, added in remarks on a visit to Britain’s Chatham House think-tank that Iran had the ability to “relieve the pressure its people are feeling” by resolving concerns over its nuclear work.

“What in particular has sparked the most recent precipitous decline in the rial, I’m not in a position to say on a granular basis,” he said, adding however that over the past year it had fallen substantially.

The Washington Post also reported that EU officials are “even more blunt” over the intentions behind the sanctions:

One senior European official said the goal of the tightened sanctions was to “bring the Iranian economy to its knees,” and to “make it in a way that really hurts the regime more than the population. That is very difficult.”

But US officials are also attempting to downplay the negative effects of the sanctions by blaming the regime. State Department spokeswoman Victoria Nuland said yesterday that “[t]he Iranian state has horribly mismanaged all aspects of their internal situation.” Cohen told the Chatham House audience that the unrest in Iran “is undoubtedly in significant part due to the Iranian government’s own mismanagement of its economy and it is in part due to the effect of sanctions. The Iranian leadership has within its capacity the ability to relieve the pressure its people are feeling.” Secretary of State Hillary Clinton offered the following qualifier:

“They have made their own government decisions– having nothing to do with the sanctions– that have had an impact on the economic conditions inside of the country,”" Mrs. Clinton said. “Of course, the sanctions have had an impact as well, but those could be remedied in short order if the Iranian government were willing to work with. . .the international community in a sincere manner.”

Benoit Faucon reports for Dow Jones News Service on measures that the Iranian Revolutionary Guard Corps — which is subject to US sanctions under the Treasury Department’s “Designated IRGC Affiliates and Designated Iran-Linked Financial Institutions” list — has taken to tighten its economic control in Iran:

The withdrawal of Western [...]]]> via Lobe Log

Benoit Faucon reports for Dow Jones News Service on measures that the Iranian Revolutionary Guard Corps — which is subject to US sanctions under the Treasury Department’s “Designated IRGC Affiliates and Designated Iran-Linked Financial Institutions” list — has taken to tighten its economic control in Iran:

The withdrawal of Western companies from the country is also opening up new opportunities for the business interests of the politically powerful Guards in areas as diverse and oil tanker construction and road building. This raises questions over whether economic sanctions will apply enough pressure on the Iranian regime to force concessions on the country’s nuclear program. One Iranian businessman told Dow Jones Newswires of how Western sanctions have forced him into the arms of the Revolutionary Guard, enriching the organization in the process.

After Swiss companies stopped selling the businessman fuel because of the sanctions, the trader found alternate supplies in neighboring Iraq. The new trade route required new permits, so to get a customs clearance only valid for month, the businessman said he had to drop by the office of an intelligence operative in the force with $70,000 in cash.

It is unclear if the guard kept the money for himself or paid it to the force.

In addition to profiting from the reshaping of established trade routes, the Revolution Guard has also seen sanctions give a competitive advantage to some parts of its diverse of business interests.

Another consequence of the sanctions for the fuel importer was that banks were unwilling to handle his foreign currency transactions. To get around this restriction, he said he had to fork over 3% of the value of a $1.4 million deal to black market foreign-exchange traders.

The Revolutionary Guards have no such problem. The force has access to foreign currency rates and free customs clearance, according to a former revolutionary guard and businessmen who works with them.

“For them, the currency exchange rate is the official one,” which is much cheaper than the black market rate private businessmen must rely on, the former guard says.

And as the country’s main security agency, “they are advantaged for clearance” on imports which normally cost 10% to 50% of the goods value, he said.

When the fuel importer paid the Guards $70,000 for customs clearance, it went directly to a member of the corps’ intelligence division, which was created specifically to monitor the risk of mass dissent after post-elections protests in 2009.

The US denies that sanctions are strengthening the IRGC:

David Cohen, undersecretary of the U.S. Treasury for terrorism and financial intelligence, said the Guards’ expanded economic power is the result only of government support, not of the sanctions.

“Our sanctions are clearly focused on trying to impede the [Guards'] effort to take over important parts of the Iranian economy,” he said.

The Obama administration, while wanting to apply additional pressure on Iran, came out today in a letter to a key Member of Congress and in a Congressional hearing with “strong opposition” to a Senate amendment to the Defense Department budget that would level hard-hitting sanctions against Iran’s [...]]]> Republished by arrangement with Think Progress

The Obama administration, while wanting to apply additional pressure on Iran, came out today in a letter to a key Member of Congress and in a Congressional hearing with “strong opposition” to a Senate amendment to the Defense Department budget that would level hard-hitting sanctions against Iran’s Central Bank (CBI). The Kirk-Menendez amendment, named for the sponsoring Senators Mark Kirk (R-IL) and Bob Menendez (D-NJ), would bar any companies or central banks abroad that do business through Iran’s central bank from doing any business in the U.S. Kirk has said the legislation was designed to collapse Iran’s currency and expressed indifference to the suffering of ordinary Iranians as a result of doing so.

At a Senate Foreign Relations Committee hearing today, two administration officials pushed back against the Kirk-Menendez amendment, offering a critique that while they shared the goals that underly the bill — pressuring Iran — they feared consequences of the legislation might be counterproductive.

Under Secretary of the Treasury for Terrorism and Financial Intelligence David Cohen, who recently returned from a trip to Israel and the United Arab Emirates to work with U.S. allies in pressuring Iran, told the committee that the Kirk-Menendez amendment could shatter the international coalition that has been successful in slowing Iran’s nuclear progress:

COHEN: [It] risks fracturing the international coalition that has been built up over the last several years to bring pressure to bear on Iran, especially today in the aftermath of what has occurred in Tehran over the last several days, in the aftermath of the IAEA report, and in the growing sense of urgency internationally with respect to Iran’s nuclear program.

I think we have an opportunity to work cooperatively and collaboratively with our international partners to bring additional pressure to bear on Iran. The amendment, however, would focus the most powerful sanction that we have, the termination of access to the United States on the largest financial institutions and the central banks and some of our closest partners.

Watch the video:

Cohen said the “threat of coercion that is contained in the amendment” could alienate even close and cooperative allies like Japan and European countries. The administration believes, Cohen added, that cooperation and coordination can be better achieved “if we approach this issue through an effort to coordinate action voluntarily.”

Under Secretary of State for Political Affairs Wendy Sherman, who also appeared at the hearing, said the administration’s analysis concludes that “there is absolutely a risk that in fact the price of oil would go up, which would mean that Iran would in fact have more money to fuel its nuclear ambitions, not less.”

Also today, as committee chair Sen. John Kerry (D-MA) acknowledged, Treasury Secretary Timothy Geithner wrote a letter to Armed Services chair Sen. Carl Levin (D-MI) stating the administration’s “strong opposition to this amendment because, it its current form, it threatens to undermine the effective, carefully phased, and sustainable approach we have undertaken to build strong international pressure against Iran.”