by Erich C. Ferrari
With the Persian New Year upon us, it seems the Treasury’s Office of Foreign Assets Control (OFAC), the main US federal agency tasked with the administration of economic sanctions, has gotten into the spirit. Today it issued General License G, a regulatory authorization designed to permit academic [...]]]>
by Erich C. Ferrari
With the Persian New Year upon us, it seems the Treasury’s Office of Foreign Assets Control (OFAC), the main US federal agency tasked with the administration of economic sanctions, has gotten into the spirit. Today it issued General License G, a regulatory authorization designed to permit academic exchanges between Iran and the United States. The license also paves the way for the provision of scholarships to Iranian students, Iranian participation in online courses, and Iranian participation in university entrance and professional certification examinations.
With Iran’s participation in on-going talks regarding its disputed nuclear program, the US appears to have found another concession that it can easily offer to the Iranians as a show of good faith. That said, what appears like an easing of sanctions is in reality merely the broadening of a current policy that benefits the Iranian people while also cutting down on the administrative paperwork OFAC will have to handle as it shifts from a specific licensing policy to a generally authorized one.
It really shouldn’t come as a big surprise that the US has shifted its position on this type of activity. For some time OFAC has maintained a positive licensing policy in favor of academic exchanges, demonstrating that there is a belief within the government that the types of exchanges authorized by this new license do not harm the integrity of the sanctions program, nor impede US foreign policy objectives. But there have been setbacks. Consider the recent controversy surrounding the cessation of services by companies like Coursera to sanctioned jurisdictions such as Iran. Coursera and similarly situated private education service companies offer Massive Open Online Courses (MOOCs), which for some time where offered to parties in Iran but were recently suspended due to concerns over sanctions compliance. Part of the new General License G seeks to address this issue by authorizing the provision of online courses for certain areas of study.
While this all seems great on paper, sanctions critics will likely point to the fact that the majority of these services and/or exchanges will be accompanied by necessary financial transactions that other US sanctions on Iran currently impede. For example, how will an Iranian pay to participate in an online course? How will tuition payments be made? How does a US citizen relocating to Iran to participate in a course of study at an Iranian university transfer their money there? And where will they keep their funds since sanctions prohibit US persons from having a bank account at an Iranian bank?
General License G tries to answer some of these questions by including a note that makes it clear that US depository institutions can process transactions related to the General License pursuant to 31 C.F.R. 560.516. However, section 560.516 prohibits the debiting or crediting of an Iranian account, therefore all transactions must be routed through foreign financial institutions. The problem is that both domestic and foreign financial institutions have been skittish about processing any Iran-related transactions, even when they are clearly authorized by OFAC.
One possible solution is the new financial channel promised by the Joint Plan of Action that was signed by Iran and world powers on November 24, 2013. However, details about how this financial channel operates have been difficult to discern, with some sources reporting that even those banks being asked to participate with encouragement from the US have been hesitant to do so.
Today’s authorization is a great step forward in adjusting the US trade embargo so that it makes sense and minimizes the negative impact on the Iranian people. Yet there are still concerns that this new authorization may not be able to fully achieve its intended effect due to difficulties arising from the ability to transfer funds between the US and Iran. It remains to be seen if the sanctions relief offered thus far by the US following the interim deal reached in Geneva is an adequate solution to allow this authorization to have maximum impact, or if further action will be needed by OFAC in order to achieve such result.
What is likely, however, is that there may be some hesitation by US persons in their willingness to operate under General License G. This may last until they are assured that proper payment channels are in place, and that the financial institutions participating in such channels will not stand in the way of receiving and originating payments under this new license.
Photo: Iranian students celebrating Nowruz, the Iranian New Year, at the LA County Museum of Art on March 14, 2010. Credit: The Farhang Foundation
]]>The Treasury Department’s Office of Foreign Assets Control (OFAC) is primarily known for its role as the agency charged with enforcing Iran sanctions. This summer, however, the agency came out with a series of actions aimed at mitigating the effect of sanctions on the Iranian people. Most recently, OFAC has issued two [...]]]>
The Treasury Department’s Office of Foreign Assets Control (OFAC) is primarily known for its role as the agency charged with enforcing Iran sanctions. This summer, however, the agency came out with a series of actions aimed at mitigating the effect of sanctions on the Iranian people. Most recently, OFAC has issued two new general licenses authorizing certain humanitarian related activities by nongovernmental organizations with Iran, as well athletic exchanges between Iran and the United States. According to the Treasury Department’s press release, the new general licenses, which provide a standing authorization to conduct the activities described therein, are “designed to support longstanding U.S. Government efforts to encourage humanitarian and goodwill activities between the Iranian and American people.”
General License F authorizes “the importation of Iranian origin services into the United States or other dealings in such services, and the exportation or reexportation of services, directly or indirectly, from the United States or by a United States person related to professional and amateur sporting activities and exchanges involving the United States and Iran.” It covers activities such as the sponsorship of players, coaching, refereeing, and training. One caveat is that any payments related to these activities must comply with 31 CFR § 560.516 of the Iranian Transactions and Sanctions Regulations (ITSR), meaning that payments must either be deposited into a third-country bank account or passed through a third-country financial institution before being deposited in an account at certain authorized Iranian financial institutions.
This authorization also reflects the sensitivity of OFAC to allegations that its action have had an adverse effect on matters unrelated to the Iranian government’s illicit activities. Those pushing for the new general license likely received a boost following the recent case where an Iranian tennis referee was initially prevented from participating in the U.S. Open. While some were quick to blame sanctions, the larger problem was that the referee received a visa not covered by § 560.505, which authorizes activities related to certain visa categories. The fact that OFAC felt compelled to respond to an issue that was somewhat inaccurately blamed on U.S. sanctions policies is indicative of the role the agency plays in the public relations war between Iran and the United States.
While General License F is fairly limited in scope, General License E could have a far broader impact. Contained within the license are standing authorizations for a range of humanitarian and human rights-related activities designed to help the Iranian people. These include activities related to humanitarian projects in Iran such as the operation of orphanages, the provision of relief services and non-commercial reconstruction projects related to natural disasters, donations of items intended to relieve human suffering, and activities related to environmental and wildlife conservation projects. Prior to General License E, U.S. persons were required to seek specific licenses on a case-by-case basis from OFAC to conduct the above activities, or in the case of natural disasters such as the August 2012 earthquake in northwest Iran, wait until the release of a time-limited general license.
Most important, however, are the provisions in § (a)(4) of General License E that focus on the activities of NGOs in Iran. These include authorization for activities related to human rights and democracy building projects in Iran such as the sponsorship of and attendance and training at conferences in Iran related to human rights projects, democracy building, efforts to increase access to information and freedom of expression, and public advocacy, public policy advice, polling, or surveys relating to human rights and democracy building. U.S. NGOs that wish to take advantage of this general license are required to file quarterly reports with OFAC, and the transfers of funds by a single U.S. NGO may not exceed $500,000 in aggregate over a 12-month period.
The new license could make it far easier for U.S. NGOs to conduct activities directly benefiting the Iranian people. In particular, the inclusion of “efforts to increase access to information and freedom of expression” builds upon General License D, which authorized the sale of certain goods and services related to personal communications. By opening the doors for NGOs working in Iran to expand awareness of and access to software designed to defeat restrictions on internet access, the new general license has the potential to be a boon to those seeking to defeat government filters and internet censorship. Realizing the full impact of these provisions, however, depends upon U.S. NGOs actively taking advantage of the general license, as well as on Iranian NGOs’ ability to operate without provoking a crackdown by the government.
As noted by Collin Anderson, an independent researcher who works on Iran’s internet censorship, the Treasury’s recent action caps a summer in which OFAC has made a conspicuous effort to dispel perceptions that its coercive actions are targeted at the Iranian people, as well as to lower tensions with Iran. On May 30, OFAC released the above mentioned General License D, while July 25 saw the release of guidance designated to clarify OFAC’s policy regarding payments for humanitarian goods, amid allegations that sanctions have resulted in shortages of these goods, particularly medicine. Furthermore, OFAC has considerably slowed the pace of its Iran-related designations following the June 14 election of Iranian president Hassan Rouhani. A full 94 days have passed between the designations of June 4 and the recent action targeting oil sanctions evaders, making this one of, if not the longest quiet periods in the last 5 years.
Taken together, these actions may signal a change both in how OFAC views its role in administering Iran sanctions and how the U.S. government addresses the tension between preventing certain economic activities while promoting others. During a February symposium at the Georgetown University Law Center, an OFAC attorney-adviser stated that “Generally OFAC’s job is preventing economic activity and even when there is a strong policy favoring certain types of activity, it’s not part of their nature to go out and sort of drum up business for pharmaceutical companies to send medicine to Iran. Maybe it should be.” Setting aside the highly contested issue of pharmaceutical exports, the point holds that OFAC has traditionally viewed enforcement as a far more important priority than promoting activities that support U.S. policy goals. While OFAC is not the only, or even the primary driver of Iran sanctions policy within the U.S. government, these actions are a positive indication that the United States is doing a better job of recognizing the importance of balancing pressure with outreach to the Iranian people.
– Samuel Cutler is a policy adviser at Ferrari & Associates, a Washington, DC boutique law firm specializing in US economic sanctions matters.
- Photo Credit: Reza Saiedipour
]]>by Erich C. Ferrari and Samuel Cutler
In a move alluded to earlier this week by Undersecretary of State for Political Affairs Wendy Sherman, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) has released General License D, authorizing the exportation and re-exportation by US persons [...]]]>
by Erich C. Ferrari and Samuel Cutler
In a move alluded to earlier this week by Undersecretary of State for Political Affairs Wendy Sherman, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) has released General License D, authorizing the exportation and re-exportation by US persons to Iran of services, software and hardware incident to the exchange of personal communications.
According to the Treasury’s press release, the new general license “aims to empower the Iranian people as their government intensifies its efforts to stifle their access to information.” Prior to today’s action, only those items covered by 31 CFR § 560.540 could be exported to Iran and were limited almost exclusively to free-of-charge online communication services such as Gmail, LinkedIn and Facebook. The relatively limited nature of the exemption generated a great deal of criticism from certain groups that the Obama administration was aiding the Iranian government’s crackdown on dissent by preventing Iranians from accessing technology that could be used to access the internet, circumvent government filters and communicate freely with each other and the rest of the world. Such criticisms were at a fever pitch during the weeks and months following Iran’s June 2009 Presidential Election, where widespread protests gripped the country.
With Iran’s next Presidential Election only two weeks away, the Administration has sought to evade such criticisms this time around through an expansion of authorized exports, the likes of which have not been seen since the passage of the Trade Sanctions Reform and Export Enhancement Act of 2000. Under the new general license, US persons can legally export electronic and communications equipment including cell phones, modems, laptops, tablets, antivirus software, anti-censorship tools, and Virtual Private Networks. Helpfully, OFAC also included Bureau of Industry and Security ECCN classification codes for these products, in order to limit any confusion over what exports are allowed.
Unfortunately, exporters will continue to face numerous hurdles in selling goods to Iran and the effects of the general license will likely not materialize for some time. While payment for newly authorized goods is covered, conducting any financial transactions with Iran remains extremely difficult. If third country banks are reluctant to facilitate payments for the export of medicine and medical devices to Iran, it is unclear whether they will be any more likely to do so for laptops and smartphones. In addition, transactions with individuals and entities who are designated under 31 CFR Chapter V, which can implicate a significant percentage of Iranian companies, are also forbidden and are likely to scare off exporters who may deem such transactions as too risky despite the authorizations contained in General License D. As such, even in a best-case scenario, it doubtful that much will change before Iran’s June 14 election.
That said, there is one aspect of the license that could have an immediate impact. The inclusion of Virtual Private Networks and other software designed to combat censorship may come into play if the same type of unrest occurs after this election as occurred in June 2009. VPNs help evade local internet restrictions by replacing user IP addresses with that of the VPN. Because these tools are usually available for download online, Iranians, especially those with foreign bank accounts, will be able to pay for and access this software almost immediately.
Ultimately the General License D is a positive development and the Obama administration should be applauded for it. There are still concerns that despite the authorizations, the hardware necessary for the conducting of personal communications may still have a difficult time reaching Iran. However, given the way Iranians have been able to get their hands on iPhones, iPads, and iPods over the last few years, maybe it won’t be as difficult as some think.
- Samuel Cutler is a policy adviser at Ferrari & Associates, P.C. and Erich Ferrari is the principal of Ferrari & Associates, P.C., a Washington, DC boutique law firm specializing in US economic sanctions matters.
Photo Credit: Farzad Hamidimanesh
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