The Washington PostDemocracy Dies in Darkness

Trump administration imposes crushing sanctions on Iran in defiance of European humanitarian concerns

Secretary of State Mike Pompeo announces the Trump administration’s restoration of sanctions on Iran last month.
Secretary of State Mike Pompeo announces the Trump administration’s restoration of sanctions on Iran last month. (Patrick Semansky/AP)
Placeholder while article actions load

The Trump administration imposed new sanctions on Iran’s financial sector Thursday in defiance of European allies who warned that the move could have devastating humanitarian consequences on a country reeling from the novel coronavirus and a currency crisis.

The measures target the few remaining banks not currently subject to secondary sanctions in a step European governments say is likely to diminish channels Iran uses to import humanitarian goods, such as food and medicine, officials said.

Treasury Secretary Steven Mnuchin challenged that assertion in a statement, saying that the designation of 18 Iranian banks “reflects our commitment to stop illicit access to U.S. dollars” and that “today’s actions will continue to allow for humanitarian transactions to support the Iranian people.”

The move represents a major pre-election push on a signature Trump administration policy that has succeeded in devastating the Iranian economy while failing to moderate Tehran’s behavior or limit its nuclear program. Since President Trump withdrew from the Iran nuclear deal in 2018, Tehran has exceeded several limitations of the accord and now has more than 10 times the amount of enriched uranium allowed under the agreement, according to the U.N. nuclear watchdog. U.S. officials in Iraq have also experienced an uptick in rocket fire and other attacks by Iranian-backed militias.

Thursday’s action to effectively blacklist the entire Iranian financial industry was pushed by Israeli officials and the Foundation for Defense of Democracies, a hawkish U.S. nonprofit organization that has advocated regime change in Iran. The measures subject all financial institutions to penalties for doing business with the 18 Iranian banks, effectively cutting Tehran off from the international financial system.

“To land a 12th-round economic knockout, it’s time for Mr. Trump to throw one more punch: Blacklist the entire Iranian financial industry,” the foundation’s Mark Dubowitz and Richard Goldberg wrote in an Aug. 25 opinion piece in the Wall Street Journal.

The action relies on an executive order Trump issued in January giving Secretary of State Mike Pompeo and Mnuchin broad authority to impose sanctions on any part of Iran’s economy.

Some Iran hawks say they hope the move will finally collapse an Iranian economy already squeezed by lost oil sales and a vast array of U.S. sanctions imposed on the country after Trump withdrew from the deal.

The Trump administration was initially cool to the idea, but the combined lobbying efforts of Iran hawks and a growing chorus of GOP lawmakers, including Sens. Ted Cruz (Tex.) and Tom Cotton (Ark.), succeeded in advancing the policy, officials said.

The officials, like others, spoke on the condition of anonymity to discuss U.S. policy.

Opposition to the new sanctions inside and outside the Trump administration is related to the delivery of humanitarian goods to the country. Last year, Iran imported $1 billion worth of medical goods and grain worth $3.5 billion.

The governments of Britain, France and Germany, also known as the “E3,” worry that if the remaining Iranian banks are placed under sanction, Iran’s foreign assets would be de facto frozen, “thus further exacerbating the shortage of foreign currency to pay for humanitarian imports,” a senior European official said.

“The concern has always been that sanctions simply criminalize all financial engagement with Iran,” said Suzanne Maloney, an Iran expert at the Brookings Institution. “The biggest concerns have been around medicine and medical devices. There have been shortages of basic drugs such as insulin and specialized chemotherapy and other lifesaving treatments. As the toll of sanctions has widened, this has intensified with concerns about basic poverty in Iran.”

The move is likely to further devaluate Iran’s currency, create a liquidity crunch and be viewed in Tehran as a significant escalation, said Esfandyar Batmanghelidj, founder of Bourse & Bazaar, a think tank focused on Iran’s economy.

In a statement, the Treasury Department said it has issued a general license allowing for humanitarian transactions to continue. “Today’s action targets the Iranian regime and is not directed at the people of Iran,” the department said.

But European officials have doubted the effectiveness of such moves. “Even clear humanitarian exceptions could only counteract this to a limited extent,” the senior European official said.

Batmanghelidj said “the risk profile has changed” with the new measures, meaning that foreign companies and banks involved in trade, humanitarian or otherwise, “will be even more reticent than before.”

In response to the announcement, Iranian Foreign Minister Mohammad Javad Zarif issued a tweet saying that the “U.S. regime wants to blow up our remaining channels to pay for food & medicine. Iranians WILL survive this latest of cruelties. But conspiring to starve a population is a crime against humanity.”