Trump’s NSC ‘Blocks’ Swiss Effort to Ease Iran Humanitarian Trade
In November of last year, as the Trump administration reimposed secondary sanctions on Iran and embarked on its “maximum pressure” policy, the Swiss government opened discussions with the Treasury and State Departments to ensure that Switzerland’s significant sales of pharmaceutical products and medical devices—technically exempt from U.S. sanctions—could continue unimpeded.
But the hardline sanctions policy being pushed by the National Security Council has so far prevented a Swiss effort to ease trade in food and medicine in a remarkable subversion of longstanding U.S. protections for humanitarian trade with Iran.
According to Swiss customs data, in 2017 Switzerland exported CHF 236 million in pharmaceutical products to Iran. Last year, the total fell to just CHF 164 million, hampered by both the Trump administration’s withdrawal from the Iran nuclear deal and volatility in Iran’s foreign exchange market. In the first half of this year, exports have totaled CHF 79 million.
European companies engaged in trade with Iran have become adept at finding payment solutions in the absence of normal correspondent banking. Some European and Swiss banks continue to process Iran-related transactions for sanctions-exempt trade, particularly for large clients with longstanding commercial relationships in Iran.
But when trade manages to flow despite the direct and indirect effects of sanctions, it is often with higher transaction costs for all parties, which are then passed onto the consumer. Additionally, many advanced therapies or specific medical devices are produced by smaller Swiss companies, which do not have the same capacity as major Swiss pharmaceutical firms to find alternative payment solutions to sustain their trade with Iran. Hidden in the trade data is the reality that specific medications are not being sold to Iran as reliably, contributing to the shortages that have compromised the treatment of many of the most vulnerable Iranians, particularly those with chronic illnesses.
In light of such challenges, which were first experienced under Obama-era sanctions, the Swiss government entered into discussions with the Trump administration, seeking additional clarity for Swiss banks engaged in humanitarian trade around “two key challenges.” As described by a Swiss official to Bourse & Bazaar, the Swiss government was seeking “some sort of ‘certainty’ for banks involved [in humanitarian trade with Iran] so that they will not be excluded from the US market.” Additionally, the Swiss government was hoping to provide their banks clarity on the permissibility of “the transfer of Iranian-origin funds into the Swiss accounts” when Iranian importers pay Swiss importers for humanitarian goods.
Early discussions proceeded quickly, not least because the Swiss were seeking to reinstate a compliance model that had been used by the Treasury and State Departments before, during the period in which the Obama administration was tightening its secondary sanctions on Iran. In late January, several reports indicated that the payments channel had become operational—that was incorrect. Despite delays, Swiss officials believed they were in the “final stages” of launching the payment channel in February. They too were mistaken.
Six months on, the Swiss government and Swiss banks have yet to receive any meaningful clarity from the Trump administration on their proposed channel for humanitarian trade. As NBC’s Dan de Luce reported in March, administration officials were still debating “a proposal from Switzerland to set up a humanitarian payment channel that would encourage Swiss banks to handle sales of medicine, medical devices and other items to Iran without fear of violating U.S. sanctions.”
Importantly, what the Swiss are proposing is entirely consistent with existing U.S. sanctions laws and does not seek to undermine secondary sanctions powers. The Swiss approach does not entail the creation of a special purpose vehicle in the manner of INSTEX, the company established by the French, German, and U.K. government to support their sanctions-exempt trade with Iran. The INSTEX project was itself launched after the Trump administration rejected a request by the E3 governments for expanded waivers covering humanitarian trade.
European officials with knowledge of the Swiss negotiations tell Bourse & Bazaar that while officials at the State Department and Treasury Department had quickly understood the intention and importance of the Swiss request and moved to provide the requested assurances, the necessary administrative actions were later “blocked” by officials at the National Security Council, which has taken an unusually active role in sanctions policy in this administration.
The debate over the Swiss humanitarian trade mirrors similar disagreements among key administration officials about the reasonable limits of the Trump administration’s maximum pressure campaign. Led by John Bolton, the NSC has taken the same hard stance in debates around the revocation of the oil waivers permitting controlled exports of Iranian oil, around the sanctions designation of Iran’s Islamic Revolutionary Guard Corps (IRGC), and around the partial revocation of waivers that permit civil nuclear projects central to the non-proliferation commitments of the JCPOA.
Earlier this week, the State Department published a video in which Special Envoy for Iran Brian Hook sought to dispel several “myths about sanctions that continue to be promoted by the Iranian regime,” including “myth” that sanctions target humanitarian trade. Back in December of last year, the State Department provided a supportive statement to the Financial Times in response to questions about the Swiss payment channel, declaring: “We understand the importance of this activity since it helps the Iranian people. It has never been, nor is it now, U.S. policy to target this trade.” Officials at the NSC apparently disagree.