Jan
24
Bye Bye, TSRA?
Posted by Clif Burns at 6:34 pm on January 24, 2012
Category: Iran Sanctions • OFAC
Yesterday, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) added Iran’s Bank Tejerat to the list of Specially Designated Nationals and Blocked Persons List (the “SDN List”). This means that no U.S. person may engage in financial transactions with Bank Tejerat and all assets of Bank Tejerat that come into the possession or control of U.S. persons must be blocked.
The real impact of this is that this may well signal the end of legal exports of agricultural products, medicine and medical devices to Iran under the authority of the Trade Sanctions Reform and Export Enhancement Act of 2000, or TSRA (tis’-ruh) in Exporteranto, the lingua franca of export professionals. Exports to Iran licensed by OFAC require that the exporter must deal directly with a non-Iranian bank and that the non-Iranian banking intermediary may not use an Iranian bank on the SDN List to complete the financial aspects of the transaction.
Here is a link to a comprehensive list of Iranian financial institutions on the SDN List. As you can see, the U.S. has now designated what I believe to be all Iranian banks that are involved in international financial transactions. Here is a list on Wikipedia purporting to be all the private banks in Iran, but I am unaware of whether any of these other banks are able to engage in international transactions, although the website of EN Bank suggests that it may be able to handle international financial transactions.
That may mean, I’m afraid, that as a practical matter, TSRA exports to Iran will be cut off because there is no way for the U.S. exporter to be paid. If anyone is aware of any other banks that can be used for TSRA exports to Iran and that are not on the SDN List, please share that in the comments section.
Couple this with OFAC’s recent action putting most (and perhaps all) shipping ports in Iran on the SDN List when it designated Tidewater Marine, the executive branch has now effectively nullified the intent of Congress when it passed TSRA. This nullification could easily have been avoided if OFAC issued (or issues) general licenses that permit licensed TSRA transactions to use Iranian banks even if they are on the SDN List and to use ports on the SDN List for licensed TSRA transactions. But there is no indication that this is going to happen.
Of course, in the present environment, it is unlikely that Congress will protest this de facto executive repeal of the act.
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7 Comments:
Interesting. Would it be actually possible to mail cash?
Dear Clifton,
You are spot on about TSRA. The National Foreign Trade Council (NFTC) and USA*Engage has been raising the issue of the humanitarianly-imprecise use of SDN designations targeting Iranian financial institutions for years. OFAC must allow for both direct and indirect involvement of SDN’s in TSRA Licensed transactions. OFAC could do so in 2 ways. USA*ENGAGE/NFTC recommended 1 way, in written form, to the National Security Council as follows: “the U.S. government should unequivocally remove any perception of [financial institution] risk for entities engaged in OFAC-licensed transactions. To remove the risk from OFAC licensed transactions, OFAC licenses should also be issued ““under the authority of … 31 C.F.R. Parts 501, 544, 560, 561 and 594†… and … ” With the equal seriousness of intent with which the U.S. unequivocally states our national security interests and foreign policy goals regarding transactions it seeks to prohibit, the U.S. should unequivocally endorse transactions it has deemed within its national security and foreign policy interests.” Another way TSRA can co-exist with Parts 544 and Parts 594 is for OFAC to issue separate license pursuant to 544 and 594 which are layered over TSRA licenses; it is more work but it adheres to the dual foreign policy goals and captures the essence of wratcheted up sanctions. I am submitting applications pursuant to 544 requesting direct involvement of Tejarat in TSRA licensed transactions today.
FYI, USA ENgage/NFTC is also submitting its comments to FinCEN today focuing on TSRA transactions and the 311 designation.
EN Bank is really BANK EGHTESAD NOVIN, which has 15 connected SWIFT BICs, so they certainly have the capability.
Thanks for the info, Scott. That will be useful for the folks who had been using Tejerat for TSRA approved transactions.
Clif,
Great article and great points by Tim above. Also, I was going to point out what Scott has already pointed out. My understanding was that there was also some other banks, Bank Pasargad and Karafarin Bank, that may be able to facilitate the transfers, but I can’t completely confirm whether that is true.
Also, what I have seen is a lot of trade finance companies springing up internationally which have been handling these types of licensed transactions, as well as the Iranian importers maintaining accounts outside of Iran and all funds being exchanged through those banks with all of the funds remaining outside of Iran.
I am also hearing a lot of rumors about 3rd country companies and wealthy individuals who are paying for the TSRA licensed shipments, and then are receiving credit for goods, property, etc. inside of Iran.
I’m not sure too many of the big U.S. exporters operating under TSRA would be comfortable with these methods of transfers, however, I have heard of a lot of smaller exporters finding creative ways to deal with the funds transfer issues while still complying with U.S. law.
Anyway, that’s my two cents. Should be interesting to see how this plays out.
Erich is correct, Pasargad and Karafarin also have connected SWIFT BICs.
http://www.reuters.com/article/2012/01/30/iran-grains-shipments-idUSL5E8CU2YB20120130
