US exports to Iran high despite more sanctions

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Iranians count and exchange US dollars and Iranian rial banknotes. The value of the rial has plunged in recent weeks. Photo – Atta Kenare/AFP/Getty Images

Despite Washington’s tightening of financial sanctions against Iran, US exports to Tehran rose by nearly a third this year, chiefly because of grain sales, a report revealed on Monday.

According to Census Bureau data, US exports hit $199.5 million in the first eight months of 2012 from $150.8 million a year earlier, taking many economists and political observers by surprise as Washington, along with its Western allies, is applying measures to strangle Iranian economy in order to disrupt its nuclear programme.

Goods such as milk products and medical equipment – whose sale to Iran is allowed with a Treasury Department export license – continue to flow despite the sanctions.

The largest category of US exports to Iran through August, 2012 was $89.2 million in sales of wheat and other grains. During the same 2011 period, the United States exported no wheat or such grains to Iran, though it sold $21 million of maize.

Without the wheat sales, U.S. exports to Iran would have declined through August overall, sharply in some cases.

Medicinal and pharmaceutical products, including those sold in bulk and those for animals, fell to $14.9 million from $26.7 million. Pulp and waste paper, a category that includes the raw material for diapers, sank to $17.4 million from $40.9 million.

However, exports rose in several other categories. Sales of milk products including cream, butter and other fats and oils derived from dairy more than doubled to $20.3 million from $7.8 million.

Increase in medical, dental, surgical and other “electro-diagnostic apparatus” also helped the bill reach $8 million from $4.7 million in 2011.

US companies have been complaining for months it is getting harder and harder to get paid because Iran’s big banks have been blacklisted by the US Treasury for alleged support of its alleged weapons of mass destruction programs.

While some Iranian banks are not blacklisted, these tend to be smaller institutions with limited access to foreign exchange.

Sanctions experts believe many foreign banks are afraid of obtaining hard currency from a blacklisted Iranian institution for the fear of getting accused of having “indirectly” dealt with a designated Iranian bank.

As a result, groups ranging from religious-affiliated non-profits to liberal members of Congress to the US Dairy Export Council have argued for ensuring that the banking sanctions do not choke off humanitarian trade.

“The Administration’s sanctions against Iran have created a de-facto humanitarian banking blockade,” Kate Gould, legislative associate for Middle East policy at the Friends Committee on National Legislation, said in a statement

“The US Treasury Department’s licenses for life-saving cancer treatment would be of no value to an Iranian patient who cannot access the licensed medication due to US sanctions against financial institutions,” she added.

Shawna Morris, vice president for trade policy at the National Milk Producers Federation & US Dairy Export Council, said her group has long supported a humanitarian exemption.

“For the goals of that humanitarian exemption to be fulfilled, it must be clearly applied to not only the permission to sell the agricultural products covered by that exemption but also the related banking transactions needed to actually carry out the sale,” she said in an emailed response to questions about her group’s policy regarding humanitarian sales to Iran.

Many US policymakers have acknowledged that the Iranian people are becoming the main target of the sanctions, instead of the government.

A Western diplomat, speaking on condition of anonymity, said the West did not want to find itself faced with a situation like that of Iraq under Saddam Hussein, where UN-supported sanctions killed millions of children due to malnutrition and scarcity of milk.

“Iraq is not a good memory,” said the diplomat, who spoke on condition of anonymity. “Since we have these vivid memories of how Saddam Hussein used it, we are being very careful not to give them (the Iranians) this weapon to use against us.”

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