Despite Easing of Sanctions, Companies May Still Stay Out of Iran

Despite Easing of Sanctions, Companies May Still Stay Out of Iran

After reaching an interim deal this weekend to halt the development of Iran’s nuclear program, U.S. officials have gone to great pains to emphasize that the United States will continue to take a hard line on enforcing sanctions, most of which remain in place. But in at least in one area — getting medicine to Iranians — sanctions might have been too successful, discouraging companies and banks from engaging even in approved trade.

Though humanitarian products like food and medicine are already exempted from the sanctions, banks and companies that facilitate the transactions have been hesitant to get involved, for fear of ending up being sanctioned themselves. Companies also avoid doing even permitted business with Iran because it often requires a special license from the Treasury Department office that handles financial sanctions.

"Really this is tied to the medicine shortage in Iran and the fact that there were very few banking channels through which to sell medicine to Iran," said Jamal Abdi, the policy director for National Iranian American Council.

The United States agreed over the weekend to "establish a financial channel to facilitate humanitarian trade," but it isn’t yet clear how it will work. Lawyers who work on trade deals for humanitarian products say it isn’t yet clear whether the agreement will change the status quo.

"It’s way too early to determine how successful this new financial channel will be in practice," said Doug Jacobson, a sanctions attorney in Washington, D.C. Jacobson said he expected the overall agreement’s effect on sales for U.S. companies to be "extremely limited."

Humanitarian and trade groups have criticized the Obama administration over how the sanctions have affected the Iranians’ access to medicine.

"Their handling of the humanitarian trade issue has been a disaster," said Bill Reinsch, the president of the National Foreign Trade Council. "They grant licenses, but no one can use them because they can’t get financing, because they’ve gone around and intimidated the banks into not doing business."

In addition to fear of sanctions, companies could also avoid facilitating humanitarian trade because it’s not worth risking the stigma attached to working with Iran. Public companies that do business with Iran have to file a public notice with their financial documents, sometimes even for approved humanitarian transactions.