by Esfandyar Batmanghelidj
On Aug. 29 the US Treasury added 28 Iranian individuals and entities to its ever-expanding sanctions list. Expectedly, Tehran denounced the decision.
“They are in conflict with the spirit of talks. They are unconstructive in my opinion,” said Iranian President Hassan Rouhani during an Aug. 30 news conference broadcast [...]]]>
by Esfandyar Batmanghelidj
On Aug. 29 the US Treasury added 28 Iranian individuals and entities to its ever-expanding sanctions list. Expectedly, Tehran denounced the decision.
“They are in conflict with the spirit of talks. They are unconstructive in my opinion,” said Iranian President Hassan Rouhani during an Aug. 30 news conference broadcast on State TV.
“We should resist such an aggression with all might and power,” he said. “We consider some of the sanctions crimes against humanity.”
This is not the first time the United States has imposed sanctions on Iran since the historic interim nuclear deal achieved between Iran and the P5+1 (US, UK, France, Russia, China plus Germany) in November 2013, but Rouhani’s words mark a shift in Iran’s reaction. The Iranian president spent considerable time decrying the sanctions in a harsher tone than ever before. Rouhani was sending a message to the United States.
US sanctions on Iran, which have been consistently expanded by Congress and executive orders since 1997, have become so byzantine that they are hindering the activities of countless businesses, Iranian or multinational. The net of financial sanctions has been crafted with such a tight mesh that even harmless, routine trade is constrained and sanctioned.
In concrete terms, the Office of Foreign Assets Control (OFAC), the body responsible for the enforcement of trade and financial sanctions, has extended its regulations to such a degree that many Iranian private businesses are struggling to survive as basic business functions have become nearly impossible. Iranian Banks cannot easily send or receive money abroad, especially if that money needs to be converted into dollars for the transaction, or if the funds must pass through a major bank that conducts significant US business. Airlines cannot readily purchase parts, or refuel in foreign countries. Factories cannot easily secure the inputs of production, or sell their goods overseas. The fact that any private business remains in Iran at all is a testament to the wherewithal of Iranian executives and technocrats.
One could argue that the challenges facing Iran’s business community are offset by the fact that Iran is back at the negotiating table. But Iran expressed a willingness to negotiate before the harshest sanctions were imposed, and the direct consequences of OFAC’s actions have also led to considerable human suffering that could take years to remedy.
When banks, airlines, and factories cannot readily engage in their basic operations, three groups suffer: consumers, employees, and shareholders. In Iran, as in all countries with a private sector, these three groups represent the constituencies of civil society. When sanctions impact banking, it precipitates inflation and currency devaluation that wipes out the real value of savings accounts, leaving families broke or in a state of uncertainty. When sanctions hit airlines, passengers are left boarding ageing and poorly maintained aircraft. Although the US claims it is not targeting average Iranians, financial sanctions constrain factories that process food, manufacture medicines, or refine oil, leaving consumers with ever-increasing prices for basic goods like bread, antibiotics, and gasoline.
Since 2006, when the Iran Sanctions Act was strengthened and extended, Iran’s Consumer Price Index increased from about 40 points to 195 points in 2013, according to data from the Central Bank of Iran. Similarly, the Producer Price Index shot up from its record low of 153 points in 2008 to almost 550 points in June 2014. Most troublingly, monthly food inflation has averaged 38% for the last two years and has only recently begun to stabilize.
As a result, sanctions harm civil society, which we in the West claim to cherish as the foundation of moderate politics. Compounding Iran’s problems, unemployment creeps upward, and business owners cease investing in growth and innovation because they have to search for ways to preserve their wealth, which leads to capital flight. According to the World Bank, Iran’s economy shrank by nearly 6% in 2013. Although last year’s interim nuclear deal, the Joint Plan of Action, offered Iran modest sanctions relief, Iranians, especially the middle class, are still struggling to lead normal lives. Today Iran’s economy remains closer to the brink of collapse than to recovery.
So as OFAC has strengthened its position, sanctioning individuals and business entities while demanding record fines from entities that have long traded with Iran—European banks in particular—the Iranian people have unduly suffered. This has not been unknown to policymakers in Washington. Countless papers from think tanks, academic institutes, and government offices have highlighted the ways in which sanctions have harmed ordinary Iranians. But the collateral damage seemed justified during the overlapping Ahmadinejad and Bush presidencies, when there was no hope for détente.
Yet the presidential election of Rouhani last year paved the way for a new era in US-Iran relations. The cautious optimism was boosted by the interim nuclear agreement. Now the role of OFAC must come under greater scrutiny. President Barack Obama has clearly expended immense effort and political capital to push forward the negotiations since Rouhani became president. Yet OFAC and its agents take extraordinary measures to sanction companies, many of whom claim they have done nothing more than try and survive in an impossible economic and regulatory environment. Should OFAC tow the line of anti-engagement proponents in Congress and hawkish advocacy groups, we may be condemned to a further decade of antagonism with Iran, the resilient and capable partner sorely needed in a region descending into chaos.
– Esfandyar Batmanghelidj is a founding partner of the 1st Europe-Iran Forum, a conference to be held in London in October focused on commercial opportunities in Iran. He has conducted extensive research on Iranian political economy and social history.
Photo Credit: Behroz Khosravi/Fars
]]>via Sanctions Law
This was a big year for sanctions. Although 2012 isn’t over yet and there is some pending legislation threatening to impose more sanctions against Iran and a forthcoming set of regulations from OFAC on some of the additional Iran sanctions we saw in the late summer/early fall, [...]]]>
via Sanctions Law
This was a big year for sanctions. Although 2012 isn’t over yet and there is some pending legislation threatening to impose more sanctions against Iran and a forthcoming set of regulations from OFAC on some of the additional Iran sanctions we saw in the late summer/early fall, I thought I would recap some of the big sanction developments of 2012. I may update this list if additional events do come to pass.
December 31, 2011: President Obama signs into law the National Defense Authorization Act (NDAA) of 2012 (NDAA), which includes Section 1245, calling on the President to block all Iranian banks and the Central Bank of Iran.
January 23, 2012: Bank Tejarat is designated under Executive Order 13382 for its involvement in Iran’s weapons of mass destruction proliferation efforts. Tejarat was frequently used to initiate payments for U.S. exports of agricultural commodities, medicine, and medical devices. That same day the European Union (EU) institutes an oil embargo against Iran and targets the Central Bank of Iran for sanctions.
February 6, 2012: President Obama issues Executive Order 13599, effectively blocking all Iranian financial institutions.
February 23, 2012: Designations under the Transnational Criminal Organizations sanctions program applied to a number of individuals believed to be members of Brother’s Circle and Yakuza.
February 27, 2012: The EU applies sanctions to the Central Bank of Syria.
February 28, 2012: The first NDAA deadline passes.
March 15, 2012: EU prohibits SWIFT from providing financial messaging services to EU designated banks.
March 20, 2012: First NDAA exemptions are announced. Eleven (11) countries receive sanctions waivers.
April 23, 2012: The Grave Human Rights Abuses by the Governments of Iran and Syria Via Information Technology (GHRAVITY) executive order is issued.
May 1, 2012: Foreign Sanctions Evaders Executive Order is issued.
May 16, 2012: Yemeni Sanctions Executive Order is issued. EU suspends sanctions targeting Burma.
May 22, 2012: Belarus based JSC CredexBank is targeted as a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act.
June 6, 2012: The United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) announces $619 million sanctions settlement against ING Bank. The announcement marks the largest settlement in the history of OFAC.
June 11, 2012: 2nd NDAA exemptions are announced.
June 28, 2012: 2nd NDAA deadline concerning oil activity and public/private banks.
July 1, 2012: EU Oil Embargo against Iran goes into effect.
July 11, 2012: OFAC issues two general licenses which significantly ease U.S. sanctions targeting Burma.
July 17, 2012: U.S. Senate releases report and holds hearing on the activities of HSBC which includes evidence of money laundering and sanctions violations.
July 31, 2012: First designations under the Comprehensive Iran Sanctions Accountability, Divestment Act of 2010 (CISADA). Kunlun Bank and Elaf Islamic Bank added to the new Part 561 List. President Obama also issues Executive Order 13622 implementing further sanctions against Iran, specifically targeting the National Iranian Oil Company, and Naftiran Intertrade Company.
August 6, 2012: New York Department of Financial Services announces violations of banking laws and sanctions by Standard Chartered Bank.
August 10, 2012: The Iran Threat Reduction and Syria Human Rights Act of 2012 (“TRA”) is signed into law.
October 9, 2012: Executive Order 13628 issued. U.S. parent companies become liable for their foreign subsidiaries dealings with Iran.
October 11, 2012: MS-13 is designated under the Transnational Criminal Organizations sanctions program.
October 15, 2012: EU bans dealings between EU financial institutions and Iranian banks.
– Erich Ferrari an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.