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Could humanitarian bank project advance US, Iranian interests?

The complex network of sanctions on Iran means that even exempted humanitarian transactions remain difficult, and a humanitarian bank could provide the Iranian-American community with a legitimate, closely monitored channel to conduct business as well as prevent black market activities.
Iranians check a display board at a currency exchange shop in the capital Tehran, on September 29, 2020. - For Iran, struggling from sanctions imposed under Washington's policy of "maximum pressure", the US presidential race raises hope of change -- but also fears that life could get even worse. (Photo by ATTA KENARE / AFP) (Photo by ATTA KENARE/AFP via Getty Images)

As the new administration in Washington outlines and develops its Iran policy — including whether, how and at what pace to lift sanctions on Tehran — the Iranian people still face challenges making any transfers in and out of the country at a time when many are facing economic hardships and humanitarian crises. While these policies are being worked out, a closely monitored "humanitarian bank" could offer an opportunity for Iranians abroad to send money to relatives and improve their daily lives.

The slew of sanctions on Iran has made it nearly impossible to transfer money into the country, causing frustration for many Iranian-Americans living in the United States and Iranians with family abroad. 

Reza, a 45-year-old academic, is no exception. He moved to the United States 23 years ago to continue his studies, eventually becoming a college professor. Recently, his mother had a medical operation in Tehran and he wanted to help. But there was no legitimate way to send money back to Iran. “All [possible] transactions involved shady individuals,” he told Al-Monitor. He was told to send money to a contact who would send it to a currency exchange office in the United Arab Emirates. “Life should not be this difficult,” he said. All he wanted to send was $2,000. 

Thousands of Iranian-Americans like Reza have sought ways to keep their economic ties with their homeland and failed to find a bank offering services to ordinary people of Iranian origin. It is time to consider establishing a community bank focusing on humanitarian trade with Iranians and not the Iranian government and operating within international laws and regulations.

Fortunately, the American banking community and regulators have gained ample experience in conducting financial transactions between Cuban American communities in the United States and Cuba. Western Union already offers services to Cuba, where measures were adopted to prevent these remittances from enriching Cuban officials (Western Union is currently not operating in Iran). The United States placed limitations on the amount of money each individual could send to his or her family in Cuba. The Office of Foreign Asset Control (OFAC) can issue such a license for family transactions, permitting Iranians to wire money to the United States for academic tuition and medical expenses as well.

As President Joe Biden’s administration takes over, Iran continues to represent a challenge for US foreign policy. There is an undeniable need for a banking channel for Iran to conduct daily economic activities. While the Iranian government expects a swift return to former agreements — particularly to the Joint Comprehensive Plan of Action (JCPOA) — there is a lack of infrastructure to conduct meaningful trade with Iran. 

During the 2010s, US-Iran trade remained very modest. American exports to Iran peaked in 2018, reaching $425.8 million, while Iranian imports to the United States reached $70 million. Following President Donald Trump’s decision to leave JCPOA, American exports to Iran have dropped significantly — to $36.1 million from December 2019 through November 2020. Iran's exports to the United States, meanwhile, stood at a meager $3.9 million during the same period. There are fast food restaurants with higher annual sales in the United States.

Following the adoption of the JCPOA in October 2015 and its implementation in January 2016, Iranian airlines expressed interest in acquiring commercial jetliners from Boeing and began negotiating to acquire 120 of them. However, the efforts did not bear fruit. No Iranian airline could conduct the necessary financial transactions as the Iranian bank system remained isolated. Iranian authorities refused to join the Financial Action Task Force (FATF) to promote transparency in Iran’s international financial transactions. No Iranian bank received a license to work with American banks, and the Iranian government continued to conduct its affairs without becoming part of the global banking network.

While many observers hope that the new US administration ends the "maximum pressure" policy of the previous administration regarding Iran, a long list of sanctions remain in place. In October 2020, the US Treasury Department identified 18 Iranian banks as funding vehicles for the Iranian government’s malign activities and placed additional sanctions on Iran’s financial sector. The new sanctions freeze all of the property and interests in the designated banks in the United States or the possession or control of US persons. It is hardly possible to conduct any business with Iran when its entire financial sector is under sanctions.

Lifting sanctions on Iran’s financial sector cannot happen overnight. The anti-American groups in Iran will likely remain intense and paranoid, blocking any effort to join FATF or to open banking channels to international transactions. However, Iranians, particularly young people and women, need a venue for economic activity on the global scene to combat spreading poverty and other harsh economic realities. They need relief today.

No observer expects any significant change until Iran’s presidential elections in 2021. President Hassan Rouhani’s administration is approaching its endpoint and its opponents are preparing to take over. Any negotiation with the Rouhani administration will be with a lame duck administration and subject to fierce objection from Iran’s legislature, whose speaker, IRGC general and former mayor of Tehran Mohammad Bagher Ghalibaf, has presidential ambitions of his own.

In the meantime, what can be done? The challenge is not to work out a solution with the Iranian government, whose governance sphere is shrinking by the day. The challenge is rather how to conduct business with Iranian people, small and medium enterprises and the private sector without the government. Speaking to Al-Monitor, Fariba, a physician living in Maryland, said, “When a relative is sick or your parents are in financial difficulty, you cannot wait for the governments to reach an agreement.” She believes many Iranian-Americans are forced to turned to other channels simply because life cannot wait for Washington and Tehran to resolve their differences.

There is no doubt that in the absence of transparency from Iranian banks, it will be complicated to engage in any significant projects in the energy or aviation sectors. Iran's banking network has problems beyond US sanctions in meeting international standards.  Moving billions of dollars through international channels for the sake of political convenience is unlikely to create the intended economic results. There can be no sustainable macro-level change without shifts at the micro level. Establishing a community bank focusing on humanitarian trade with a defined mandate outlining legitimate activities will open the path to conducting legitimate business with Iran, focusing on providing relief to the Iranian people. Such a bank can be closely monitored by the Office of Foreign Assets Control and have a license to conduct financial transactions below a certain level to prevent money laundering or other abuse of the international monetary system for malign activities. 

Such a bank also would provide the Iranian-American community with a legitimate, closely monitored channel to conduct business with Iran, thus lowering the demand for black market activities. One must remember that this community continues to have cultural and family ties with Iran. Creating a community bank for humanitarian trade with Iran will recognize the need to facilitate such transactions with Tehran, thus reducing the demand for illegal activities out of official regulations and oversight. This bank can find sponsors and investors in the business community without becoming a new public entity, and it could expand its role if the conditions permit. Most importantly, such an endeavor will assure the Iranian people that their welfare is a priority and not a target. 

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