No Need for Additional Humanitarian-Related General Licenses, OFAC Director Says

Despite calls from industry and lawmakers, the Treasury Department does not plan to introduce new authorizations for humanitarian exports to Iran, said Andrea Gacki, director of the Office of Foreign Assets Control. Gacki said OFAC’s current general licenses are sufficient, adding that the agency has not received many license applications to export medical goods that are not already covered by an existing exemption.

“We’re just not seeing a ton of requests to export [personal protective equipment],” Gacki said during an April 17 webinar hosted by the Center for a New American Security. She said that is partly due to the recent export restrictions on medical equipment announced by the Federal Emergency Management Agency earlier this month (see 2004080018 and 2004160050). And while she said OFAC has “considered” issuing a “special authorization” that specifically applies to the COVID-19 pandemic response measures, Gacki said OFAC’s existing exemptions -- which allow for exports of a broad range of disease-fighting equipment, such as ventilators, face masks and medical robes -- should cover industry's needs (see 2004100044).

“OFAC has greatly expanded the types of humanitarian authorizations that are standing, so that when something like this happens, it does not mean that the U.S. government has to start from scratch and build something new in order for aid to flow,” Gacki said.

Industry, however, thinks differently, said John Smith, a sanctions lawyer and former OFAC director. While companies have been “complimentary” of OFAC’s efforts to speed up license applications related to the pandemic, the business community “had hoped OFAC would go further to issue additional general licenses and additional statements of assurance” (see 2004140027).

Smith applauded the April 16 guidance issued by OFAC (see 2004160039) that clarified its humanitarian exemptions, calling it “incredibly helpful.” But he said more can be done. “Critics have said OFAC should go much further. The administration has said it’s gone far enough. In some ways, it’s probably somewhere in the middle,” Smith said during the webinar. “I'm still hearing that there are some difficulties in the private sector.”

Industry has “always” been confused by the sanctions exemptions even before the pandemic, said Juan Zarate, a senior adviser at the Center for Strategic and International Studies and the former deputy national security adviser in the George W. Bush administration. Zarate commended OFAC for issuing the guidance and said some blame for the confusion should be placed on sanctioned countries -- such as Iran and Venezuela -- who often “overstate” restrictions. “Iran can take steps that would make it a lot easier for pharmaceutical companies, for suppliers and for banks to operate,” Zarate said.

He also said companies and risk-averse banks sometimes hide behind the perceived confusion of the sanctions as an excuse to not proceed with the transaction. Even so, “more general licenses that are specific to the current crisis may be helpful,” Zarate said.

Even though exemptions are available, companies and banks are straying away from humanitarian transactions with Iran because of the strong rhetoric from the State Department, Smith said, which has repeatedly warned industry and partner countries about trusting Iran. “You have general licenses, but you also have these threats of maximum pressure,“ Smith said. “People are scared.” Even if industry decides to use a general license for a humanitarian export, they still worry about using it incorrectly, Smith said. “You're afraid of getting it wrong, especially in this era where the State Department, the administration could say, 'we told you so. We told you that you shouldn’t trust Iran,'” Smith said. “That, I think, is what is chilling a lot of the aid delivery.”

The U.S.-Swiss joint mechanism, a government-approved channel introduced earlier this year to export humanitarian goods to Iran (see 2002270017), can alleviate much of the sanctions risk felt by industry and banks, Smith said. When using the channel, “you’re working under assumptions that the government in some sense has blessed your” transaction, he said. “It takes away a lot of the fear that may exist.”

Gacki said OFAC is “evaluating requests” from countries that are considering establishing similar humanitarian trade mechanisms for exports to Iran. But she said OFAC has not yet considered establishing similar channels for other sanctioned countries, such as Venezuela and Syria. She added that the U.S. is monitoring the use of INSTEX -- the European payment system designed to allow countries to trade with Iran despite U.S. sanctions (see 2004010016) -- but declined to endorse it. “The Swiss channel is where we have a high degree of comfort on the level of due diligence,” Gacki said. “We don't have that same level of insight into the INSTEX mechanism.”