The U.S. v. the ICJ: The Increasing Humanitarian Costs of Sanctioning Iran
By Charlie Lyons
On October 3, 2018 the International Court of Justice (ICJ) ordered the United States to remove any impediments to Iran’s ability to obtain goods for humanitarian purposes, including food, medicine, and aviation safety equipment. Iran argued that the U.S.-imposed sanctions upon it violated the 1955 Treaty of Amity, Economic Relations, and Consular Rights between Iran and the United States. In its order, the ICJ stated that, although the United States’ measures do not explicitly prohibit the exportation of humanitarian goods to Iran, in practice it is “difficult if not impossible for Iran, Iranian nationals and companies to engage in international financial transactions” necessary to obtain products such as food, medicine, and medical equipment. The ICJ observed a reality in which financial institutions are unwilling to participate in transactions for the humanitarian benefit of the Iranian people for fear of subjecting themselves to sanctions violations. If that fear was minimal before, the United States’ recent action on the private Iranian bank, Parsian Bank, surely compounded it.
Almost two weeks after the ICJ ordered the United States to remove any obstacles preventing Iran from its ability to obtain humanitarian goods, the Department of Treasury’s Office of Foreign Assets Control (OFAC) designated Parsian Bank under Executive Order 13224 for assisting, sponsoring, or providing financial, material, or technological support for, or financial or other services to or in support of, Andisheh Mehvaran Investment Company. OFAC’s action generally prohibits U.S. persons from dealing with Parsian Bank and also may expose non-U.S. persons and foreign financial institutions to sanctions violations. Although the United States assured Iran that sanctions imposed would not affect humanitarian needs, Parsian Bank’s designation runs contrary to this assertion and the ICJ’s order.
Despite the ICJ’s order, Parsian Bank’s designation will further impede the flow of humanitarian goods, such as food and medicine, to Iran. For example, one Iranian, Maryam Peyman, who has multiple sclerosis, explained that for three months she was unable to find a replacement drug for a German-made medication she typically uses. She eventually found a domestic alternative, but that medication caused side effects like headaches and vision impairment. Iranian Foreign Minister Mohammad Javad Zarif noted that “U.S. addiction to sanctions is out of control” and that the Parsian Bank is vital to importing food and medicine into Iran.
Due to the sanctions campaign, financial institutions are wary of transacting at all because at any moment OFAC could sanction additional persons or entities. Parsian Bank’s designation illustrates this fear because it is one of Iran’s most reputable banks and was trusted by many European financial institutions. Furthermore, Parsian Bank “was among the few Iranian financial institutions with standards reflective of the [Financial Action Task Force (FATF)] requirements for anti-money laundering and combatting terrorist financing procedures.”
Perhaps more signaling in Parsian Bank’s designation is that Parsian Bank was designated for dealings with an entity that was seven degrees removed from the main target, the Basij Resistance Force (Basij), a paramilitary force subordinate to Iran’s Islamic Revolutionary Guard Corps (IRGC). It would have been nearly impossible for Parsian Bank to have recognized this risk and avoided it. Zarif further highlighted the practical difficulty of this, noting “Iranian private bank key to food/medicine import is designated because of alleged EIGHT degrees of separation [with] another arbitrary target. In comparison, all humans on planet are connected by SIX degrees of separation.” Prior to Parsian Bank’s designation, financial institutions were already skeptical about processing payments for the exportation of humanitarian goods to Iran. Following OFAC’s action, and contrary to the ICJ’s order, the U.S. is making it more difficult for Iran to import humanitarian goods. The U.S. does not explicitly sanction the exportation of food and medicine to Iran, but the U.S. is signaling financial institutions to adopt a policy of “better safe than sorry.”