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U.S. Pushes to Expedite Some Humanitarian Shipments to Iran

Deal is Part of Temporary Sanctions Easing Program

Iranian women shop at Tehran's Grand Bazaar. Sanctions had a negative impact as European companies stopped selling goods in the country. ENLARGE
Iranian women shop at Tehran's Grand Bazaar. Sanctions had a negative impact as European companies stopped selling goods in the country. AFP/Getty Images

Amid a diplomatic thaw earlier this year between Tehran and the West, U.S. officials had a message for European companies eager to get back into Iran: Take it slow.

Today, Washington is pushing some of them to speed things up.

In recent weeks, U.S. officials have been reaching out to a handful of European companies and asking them to expedite the sale of medical goods to Iran, a market they were struggling to gain access to just a few months ago.

European drug makers Bayer AG BAYN -0.42 % and GlaxoSmithKline GSK -0.84 % PLC, as well as Siemens AG SIE -0.49 % —which has a large medical-equipment business—have all been approached by Washington officials eager to expedite the sale of humanitarian goods into Iran, according to executives and one of the U.S. officials. After Iran identified specific pharmaceutical companies it wanted to trade with, "we have notified those companies that this [payment channel] is available to them," one of the U.S. officials said.

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The encouragement comes just after the U.S. extended an experimental six-month period of lighter sanctions, through November. The loosening was intended to smooth the way for a deal with Iran over its nuclear program, but a Wall Street Journal review of applications for licenses by businesses seeking to do business in Iran shows that few were willing or able to take advantage of the modest relaxation. (Explore a list of companies doing legal business with Iran, despite sanctions.)

While many companies have shown interest in wading into Iran, few are jumping at the opportunity. In fact, fewer companies appear to have sought permission to do business in Iran during the relief window than when sanctions were in full force. The records, obtained through a Freedom of Information Act request, show that 230 licenses were granted in the first three months of 2014, when the easing began, compared with 390 a year earlier. Most of the applications were made by medical-related companies that have long received humanitarian waivers to supply Iran.

The limited nature of the sanctions relief, and the complexity of doing any business with a country that has become toxic for international banks, made the six-month window moot for most companies, trade experts say. "Let's say you get a license--what bank is going to process that transaction?" said Erich Ferrari, an export control attorney.

Now, the U.S. is taking further steps to address such impediments. The U.S. is clearing banks in Switzerland and Japan, for instance, to help handle payments for the humanitarian shipments, according to a U.S. official familiar with the effort. And it is allowing them to access Iranian oil revenue—above and beyond what's already been unfrozen by the sanctions relief—as payment for the shipments, this official said.

The aim is to show good will amid the current détente between the West and Tehran. The move to help finance humanitarian shipments is intended "to send a reminder [that the West is] not targeting the average Iranian," another U.S. official involved in the effort said.

A spokesman for Bayer said it was "contacted by the U.S. State Department in June about the new payment mechanism" at Iran's request. A Siemens spokesman said the State Department had reached out to international companies to discuss concerns "humanitarian sales to Iran were being stymied by…uncertainties about the [U.S. Treasury] licensing process, and the reluctance of banks to serve as financial intermediaries."

A GlaxoSmithKline spokesman said it supplies "essential medicines in sanctioned countries, in compliance with applicable sanctions and export controls." Bayer, Siemens and GlaxoSmithKline declined to elaborate further.

To expedite the humanitarian trade, U.S. officials have clarified legitimate payment channels for the shipments.

Japan's Mizuho Financial Group Inc. 8411 2.13 % said in a filing last week that it has been providing non-U.S. dollars settlement services in connection with humanitarian trade with Iran after getting a specific clearance from the U.S. government as part of the interim nuclear agreement.

The bank, which couldn't be reached for comment, said it had opened accounts for Iranian state financial institutions, specifically for food and medical trade between U.S.-approved food and medical exporters and Iran.

One Swiss bank, Banque Heritage SA, has been given approval by the U.S. to facilitate humanitarian-trade financing, according to Parviz Aghili, chief executive of the recently-created Middle East Bank in Tehran. Banque Heritage officials declined to comment.

Middle East Bank, a privately-owned bank, has also been approved by the U.S. because it only trades in humanitarian goods. That enables Middle East Bank to work with other banks to facilitate payment for humanitarian goods. He said those banks include ABN Amro Bank NV of the Netherlands, and KBC Group KBC -0.38 % NV of Belgium, and German savings bank Sparkasse Leverkusen, which is assisting in Bayer's Iranian exports.

ABN and KBC confirmed they are helping their clients secure payments for humanitarian exports to Iran. Sparkasse Leverkusen didn't respond to a request for comment.

The U.S. outreach comes as some American companies make early steps to restart business with Iran. Last week, Boeing Co. BA -0.73 % disclosed it was in talks to sell airplane parts and other safety equipment to Iran Air. As part of its sanctions relief, the U.S. has lifted prohibitions on doing business with companies related to several industries, including commercial aviation, automobiles and petrochemicals. In January, Lufthansa Technik AG also made a maintenance deal with Iran Air, a spokesman said.

Still, other types of businesses have been ensnared by sanctions. In February, the U.S. allowed satellite provider Intelsat S.A. I -1.34 % to return to Iran, but it had already lost its business to Russian competitors after being barred in 2012 from beaming the state-run Islamic Republic of Iran Broadcasting. "Now instead of being the incumbent we are trying to win the business back," an Intelsat spokeswoman said.

Just the whiff of an Iranian partner in a project can be enough to freeze a transaction. This occurred earlier this year when a Barclays BARC -0.17 % PLC customer was trying to wire money to the Jordanian government, a Barclays spokesman said. The Arabic name of the country's central bank has a similar spelling to Iran's Bank Markazi. Citigroup Inc., C -0.66 % which acted as a middleman for the transfer, flagged the transaction and froze the funds, according to the spokesman. A Citigroup spokesman declined to comment.

To unfreeze the funds, Barclays needed a license from the U.S. Treasury's Office of Foreign Assets Control, which took two months to get, according to government records.

For big banks, some of which have paid heavy penalties over sanctions violations, these kinds of headaches can far outweigh the profits, said Serena Moe, a former deputy chief counsel at OFAC, now an attorney at Wiley Rein LLP. "All they get from the transaction is a small processing fee. And then they have to explain these transfers to their bank regulator," Ms. Moe said. "There are many banks that just say 'not worth it.'"

Write to Benoit Faucon at benoit.faucon@wsj.com and Joel Schectman at joel.schectman@dowjones.com

11 comments
James Richard
James Richard subscriber

Any country who had a hand in these Economic Sanctions must be isolated. Do not deal in its currency.

Formally jr.

James Richard
James Richard subscriber

To Iran, I would deal LESS with those Western Govts who helped subjugate your people over the years and more with those who have not.

Suggest reverse engineer those products you lack. Concentrate on computer services and health related products.

Formally jr.

Gerard Muller
Gerard Muller subscriber

Suddenly the US is the advocate for Iran and Hamas!

What strange times we live in.

Alex Cook
Alex Cook subscriber

I won't do business with any company that does business with Iran.

RICHARD COLLINS
RICHARD COLLINS subscriber

The "state sponsors of terrorism" list is promulgated by the USG.  That same USG is helping expedite goods (albeit humanitarian) to the regime that the USG has placed on the terrorism list.  The current negotiations are about the Iranian regime's nuclear program.  Even if the talks are successful, they will not address the regime's support of terrorist groups.  And there are questions as to why the public holds the federal government in low regard?

ENID HINKES
ENID HINKES subscriber

Does Obama think for a moment that the Iranians will stop working on a nuclear weapon because they get some medicines?  Does he think that the Iranians only want a nuclear weapon because we weren't playing "nice?"

The world is the most dangerous when weak people or fools are running countries. Terrorists and dictators know that now is the time to act, for there are no consequences.

John Gower
John Gower subscriber

"The move to help finance humanitarian shipments is intended "to send a reminder (that the West is) not targeting the average Iranian," another U.S. official involved in the effort said."


But how can we be sure that's how the average Iranian is perceiving this?  Their government controls all media.  How do we know they're not twisting the message to make it appear that they negotiated this for their people?  And since Iran is hand-picking which companies they work for, how do we know how this aid is being prioritized?  Heck, it could be forwarded to Iranian fighters in Iraq and Syria.

Russell Friedson
Russell Friedson user

"And it is allowing them to access Iranian oil revenue—above and beyond what has already been unfrozen by the sanctions relief.."  So once again the Obama administration is unilaterally bypassing the law.  Appeasing dictatorships and terrorists never works.  Just one more rolling Obama foreign policy failure.  Unfortunately Obama has made is clear he is willing to accept "containment" of Iran's nuclear weapons program rather than take the steps necessary to dismantle it.  

Ira Garoon
Ira Garoon subscriber

Just, wondering, how is Boeing selling airplane parts a humanitarian effort?

Edward Joback
Edward Joback subscriber

@James Richard You'll be thrilled as Obama, desperate to kick the can down the road and accept any deal, allows the mullahs to keep those centrifuges spinning.  It is the kind of moral relativism that people like you display that eventually gets nukes into the hands of fanatics.  After that, its just a matter of time until the next 9/11 results in the disintegration of an entire city.

James Richard
James Richard subscriber

Consider where Israel has taken us...no where.

Formally jr.

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