Collateral damage: How Iran sanctions fears hurt humanitarian trade

Published August 2, 2014
The sanctions regime, imposed by the United States and European Union over Tehran’s nuclear programme, permits trade in humanitarian goods such as food and pharmaceuticals. — Photo by Reuters
The sanctions regime, imposed by the United States and European Union over Tehran’s nuclear programme, permits trade in humanitarian goods such as food and pharmaceuticals. — Photo by Reuters

LONDON: It should have been a routine delivery of vegetable oil to Iran for making margarine; instead the tanker spent months in the Gulf as banks held up payment for the cargo, fearing they would run foul of international sanctions.

The sanctions regime, imposed by the United States and European Union over Tehran’s nuclear programme, permits trade in humanitarian goods such as food and pharmaceuticals.

Yet many banks are steering clear of financing any deals with Iran due to a series of fines handed out by US authorities for dealing with sanctioned countries, including a recent $8.97 billion penalty for BNP Paribas of France.

So from January to March this year the Greek-run tanker lay at anchor before it was forced to head to Fujairah in the United Arab Emirates to refuel - this also being difficult in Iran due to the sanctions. Eventually, a sale of goods bill for the transaction came through and the tanker discharged its cargo in Iran, but only after months of wasted time and mounting costs.

“This was meant to have been entirely uneventful business,” the ship’s manager told Reuters, requesting that the name of the vessel and his company be withheld - for fear of attracting negative publicity for a shipment that was entirely legal.

Iranians blame such disruption of trade for soaring food prices at home and shortages of medicines for the sick such as cancer patients.

Western shipping sources, Iranian officials, and suppliers of foods and medicines told Reuters that increasing numbers of shipments destined for Iran are being held up or stopped.


Fines fear


The fines on banks in the past two years have made many fear US regulators. Apart from the BNP Paribas penalty for breaches including trade with Iran, Germany’s Commerzbank AG is expected to pay $600 million to $800m to resolve investigations into its dealings with Iran and other countries under US sanctions.

US authorities are also investigating others including Italy’s UniCredit and Germany’s Deutsche Bank. In 2012, HSBC was fined $1.92bn by US regulators for various violations including doing business with Iran and money laundering in Mexico. Separately in 2012, New York regulators threatened to revoke Standard Chartered’s banking licence after it broke sanctions on Iran.


Potential penalties


Sanctions were first imposed in 2006 over the nuclear programme which Tehran says is peaceful but the West fears could be used to make weapons.

“Humanitarian aid is not targeted, but the different aspects of sanctions have made it very difficult for Iran to import food and medicine,” a senior Iranian government official said. “It allows smuggling networks to get rich.”

A former US official said: “Financial institutions are seeing the business, even though it is permissible, as too risky from an anti-money laundering perspective and not profitable enough to outweigh the potential penalties and the additional compliance costs.”

A US Treasury official, who declined to be named, said Washington had expanded general licences issued for food, agricultural goods, medicine and medical devices to Iran.

The official said Washington had set up two “humanitarian channels” in Europe and in Asia in recent months to facilitate legitimate trade with Iran. This followed an interim agreement in November known as the Joint Plan of Action (JPOA) which provided some sanctions relief.


Hard times


Ordinary Iranians say life is growing harder.

Babak Saremi, 43, a teacher who has leukemia, needs chemotherapy sessions once a month which cost 4.5m rials($170) each.

“My salary is $300 a month. I have sold my car, a few pieces of gold that my wife had to pay for the sessions but the price of medicine for the treatment goes higher and also it is becoming very difficult to find it,” Saremi said.

“I wish we were not isolated and sanctioned. Then the price of such medicine would be cheaper. The price of my medicine has doubled in the past four months and it is becoming more difficult to find it even at the black market.”

Hairdresser Faranak Mirzaie, 27, said that in the past seven months she had had to find black market dealers in Tehran to buy medicine for her mother who suffers from cancer.

A manufacturer of cancer drugs in the city of Karaj said he was thinking about closing his factory due to the problems. “Each time I have to fight to open letters of credit and so on. Restrictions on our banking system make it almost impossible to import raw materials for medicine,” he said.

A US-based supplier of medical devices to Iran said getting a deal done takes several months as very few banks were accepting Iranian letters of credit (L/Cs).

“Even if they do approve it, ... it takes two to three months of leg work before you can do anything,” the supplier said.

“Companies have received L/Cs from Iranian banks that were not sanctioned, yet the receiving bank of those L/Cs did not pass on that money to the owners. That is a huge fiasco especially when the product has been shipped.”

Published in Dawn, August 2nd , 2014

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