U.S. Boosts Trade to Iran, Despite Sanctions

The Standard Chartered affair has laid bare a transatlantic rift between the U.S. and Europe over Iran sanctions.

U.K.-listed bank Standard Chartered agreed Tuesday to pay a $340 million sum to a New York regulator to settle allegations it broke U.S. money-laundering laws in handling Iranian customers’ transactions.

The allegations, which were made public by the New York state Department of Financial Services last week, led some U.K. political figures to accuse the regulator of seeking to undermine London as a financial center.

Now there are more grumblings this side of the pond as European companies realize they suffer more from recent Iran restrictions than their U.S. counterparts–and that such advantage may stem in part from better corporate access to decision-makers in Washington than in Brussels.

The Wall Street Journal reported Thursday morning that U.S. exports to Iran were increasing despite mounting enmity between both sides, while European Union exports to Tehran were falling.

Oral-B mouth wash, made by Procter & Gamble Co. of Cincinnati, Ohio, is still on display at local corner shops in Iran—the company confirms it still sells to Iran legally. Coca-Cola Co.’s Coke soft drink is sold in cafes and supermarkets. The Atlanta-based multinational says its syrup is still being legally exported to Iran and bottled by Khoshgovar Co., whose commercial manager Valid Nejati confirmed the information. “There have been no issues” with receiving payments, a Coca-Cola spokesman said.

To be sure, the penalties enforced against European banks for breaching sanctions on Iran were not focused on trade in foodstuffs, as a U.S Treasury official points out.

But European companies say their banks are increasingly refusing to handle letters of credit because they fear they could run into trouble in the U.S. because financial sanctions there have become so complex.

By contrast, the growth of U.S. sales to Iran largely stems from a decision in October to replace the previous cumbersome approval process with a blanket license for non-sanctioned food items, says Michael Burton, a Washington-based sanctions lawyer at Arent Fox.

While some European cereal traders say they can’t find banks to issue letters of credit for Iran, the U.S. this year restarted wheat exports to the Islamic Republic after a two-year gap.

As of last year, the vast majority of U.S. goods were medical preparations or equipment—31%– , pulpwood and woodpulp—25% and agricultural goods and food–17%

But U.S. permits even extend to goods such as cigarettes, though they are not covered by the blanket license and are subject to more stringent control than foodstuffs.

In April, Philip Morris International Inc. obtained a specific licence from the U.S. Treasury, “to sell cigarettes to customers for import into Iran,” a spokesman for the company said, although it has yet to make use of the authorization.

But expect no miracle to explain why Iranians may be allowed to buy Marlboros but not drive the new Peugeot in the future. To put it simply: when it comes to pleading its case with decision-makers, Corporate America does it better.

Mr. Burton also said U.S. companies benefit from well established channels in Washington to plead for sanctions exemptions, while their European peers, “don’t have the same mechanism to lobby the EU bureaucracy.”

For instance, Washington-based lobby group USA*Engage has successfully campaigned for the extension of a humanitarian exemption for food, agricultural products and medical goods from Iran sanctions.

Richard Sawaya, the director of USA* Engage, said “we have been in perpetual conversation with lawmakers and the Treasury,” on keeping the exemption. The primary aim of USA*Engage is humanitarian, but it can also benefit U.S. companies, Mr. Sawaya said, adding its focusis not limited to Iran.

USA*Engage is an offshoot of the Washington-based National Foreign Trade Council, whose board includes Procter & Gamble.

Both commodities trader Cargill Inc., of Minneapolis, Minn., which confirmed it was still trading with Iran, and Procter & Gamble have approached members of the U.S. Senate and the House of Representatives over Iran sanctions, according to disclosures made as recently as July 19, and the companies themselves.

For instance, Cargill queried lawmakers over food and agricultural sales over the latest sanctions legislation, the Iran Sanctions, Accountability and Human Rights Act of 2012, which increases the pressure on Iran by targeting national oil and tanker companies, among others.

A Cargill spokesman said that it and other companies, “were seeking clarity on the language used in the various sanctions laws and regulations, and proposed laws,” on food exports to Iran.

USA*ENGAGE’s Mr. Sawaya said he also pleaded with lawmakers to keep the food exemption in the text.

It’s unclear how much convincing Capitol Hill needed. But one thing’s for sure, when president Barack Obama signed up the bill into law Friday, he kept the humanitarian exception word for word, so food remains exempt from the sanctions.


Source: wsj.com

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