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 The sanctions regime, imposed by the United States and European
Union over Tehran's nuclear program, permits trade in humanitarian
goods such as food and pharmaceuticals.
Yet many banks are steering clear of financing any deals with Iran
due to a series of fines handed out by U.S. authorities for dealing
with sanctioned countries, including a recent $8.97 billion penalty
for BNP Paribas of France.
So from January to March this year the Greek-run tanker lay at
anchor before it was forced to head to Fujairah in the United Arab
Emirates to refuel - this also being difficult in Iran due to the
sanctions. Eventually, a sale of goods bill for the transaction came
through and the tanker discharged its cargo in Iran, but only after
months of wasted time and mounting costs.
"This was meant to have been entirely uneventful business," the
ship's manager told Reuters, requesting that the name of the vessel
and his company be withheld - for fear of attracting negative
publicity for a shipment that was entirely legal.
Iranians blame such disruption of trade for soaring food prices at
home and shortages of medicines for the sick such as cancer
patients.
Western shipping sources, Iranian officials, and suppliers of foods
and medicines told Reuters that increasing numbers of shipments
destined for Iran are being held up or stopped.
"The banking side is the core problem. We are seeing banks dropping
out of providing this type of transaction or ceasing to process
them. It is complicated and the costs are high for such trades. It
looks like it will get harder to do this business," one U.S.
exporter of humanitarian goods to Iran said.
U.S. officials said Washington was aware of the problems and taking
steps to make humanitarian trade easier.
FINES FEAR
In May, trade sources and Iranian officials said hundreds of
thousands of metric tons of grain and sugar were stuck in transit
due to payment problems. The following month, Reuters reported that
Iran was lobbying to get HSBC to process humanitarian trade
transactions after Europe's biggest bank froze some financing
because of concerns about potential breaches of international
sanctions.
"International and even regional banks are hesitant to interact with
Iran. We have been trying to find replacements for those banks but
have not been very lucky," an official with Iran's central bank
said.
Trade sources say at least 500,000 metric tons of wheat is currently
held up due to payment problems. Iranian government officials
separately confirmed there was a large backlog.
Despite diplomatic talks with world powers over Tehran's disputed
nuclear program, banking problems continue, the official and other
sources said.
The fines on banks in the past two years have made many fear U.S.
regulators. Apart from the BNP Paribas penalty for breaches
including trade with Iran, Germany's Commerzbank AG is expected to
pay $600 million to $800 million to resolve investigations into its
dealings with Iran and other countries under U.S. sanctions.
U.S. authorities are also investigating others including Italy's
UniCredit and Germany's Deutsche Bank . In 2012, HSBC was fined
$1.92 billion by U.S. regulators for various violations including
doing business with Iran and money laundering in Mexico. Separately
in 2012, New York regulators threatened to revoke Standard
Chartered’s banking license after it broke sanctions on Iran.
POTENTIAL PENALTIES
Sanctions were first imposed in 2006 over the nuclear program which
Tehran says is peaceful but the West fears could be used to make
weapons.
"Humanitarian aid is not targeted, but the different aspects of
sanctions have made it very difficult for Iran to import food and
medicine," a senior Iranian government official said. "It allows
smuggling networks to get rich."
A former U.S. official said: "Financial institutions are seeing the
business, even though it is permissible, as too risky from an
anti-money laundering perspective and not profitable enough to
outweigh the potential penalties and the additional compliance
costs."
 A U.S. Treasury official, who declined to be named, said Washington
had expanded general licenses issued for food, agricultural goods,
medicine and medical devices to Iran.
"I acknowledge there are banks out there that are reluctant to
facilitate these transfers for a variety of reasons - they are risk
averse when it comes to dealing with Iran," the official said.
"Iranians in the past have tried to evade sanctions, exploit or
misuse what looks on the surface to be benign trade."
The official said Washington had set up two "humanitarian channels"
in Europe and in Asia in recent months to facilitate legitimate
trade with Iran. This followed an interim agreement in November
known as the Joint Plan of Action (JPOA) which provided some
sanctions relief.
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Several commercial banks and international companies were involved
in the scheme, he said but declined to name them. "We see that both
channels are being used quite a lot. The process has been going
smoothly," the official said.
A separate U.S. official said Washington was able to get "a critical
mass" of banks willing to do the trade.
"The idea here wasn't to create normalcy for Iranian banking, even
in this area. The idea was (that) we need to be able to do a good
faith effort to enable the movement of humanitarian goods to Iran,"
the second official said. A spokeswoman for Archer Daniels Midland
said the U.S. agribusiness giant was on approved lists for both the
U.S. State Department and the government of Iran for this program.
"The JPOA funding may resolve some of the problems that existed
previously at the international banks on sales of food," the
spokeswoman said.
Nevertheless, she added that many international banks simply "will
not participate in the transactions for fear of being sanctioned or
fined".
"This has been a problem even when suppliers have demonstrated to
the banks that the transaction is validly licensed. The compliance
departments of many international banks simply do not want to run
the risk of involvement in Iranian transactions," she said.
Belgian financial group KBC said it had placed restrictions on its
humanitarian trade including offering services just to
well-established clients as well as working in currencies excluding
U.S. dollars and only with buyers not blacklisted by the EU or
United States.
Similarly, Dutch state-owned bank ABN Amro said it was involved in
transactions only for existing clients and restricted to foodstuffs,
healthcare, medical equipment or humanitarian purposes.
Some of the main Iranian banks still involved in transactions,
including Bank Pasargad and Saman Bank declined to comment.
HARD TIMES
Ordinary Iranians say life is growing harder.
Babak Saremi, 43, a teacher who has leukemia, needs chemotherapy
sessions once a month which cost 4.5 million rials($170) each. "My
salary is $300 a month. I have sold my car, a few pieces of gold
that my wife had to pay for the sessions but the price of medicine
for the treatment goes higher and also it is becoming very difficult
to find it," Saremi said.
"I wish we were not isolated and sanctioned. Then the price of such
medicine would be cheaper. The price of my medicine has doubled in
the past four months and it is becoming more difficult to find it
even at the black market."
Hairdresser Faranak Mirzaie, 27, said that in the past seven months
she had had to find black market dealers in Tehran to buy medicine
for her mother who suffers from cancer. "Since (January) it has
become almost impossible to find cancer-treatment medicine at
state-run hospitals and pharmacies. And at the black market, you
have to know a good dealer to find it for you."
"Even that takes days after ordering it until I can have it. Why
should a cancer patient suffer because of not being able to find
medicine due to sanctions? Sanctions make us suffer."
 A manufacturer of cancer drugs in the city of Karaj said he was
thinking about closing his factory due to the problems. "Each time I have to fight to open letters of credit and so on.
Restrictions on our banking system make it almost impossible to
import raw materials for medicine," he said.
A U.S.-based supplier of medical devices to Iran said getting a deal
done takes several months as very few banks were accepting Iranian
letters of credit (L/Cs).
"Even if they do approve it, ... it takes two to three months of leg
work before you can do anything," the supplier said. "Companies have
received L/Cs from Iranian banks that were not sanctioned, yet the
receiving bank of those L/Cs did not pass on that money to the
owners. That is a huge fiasco especially when the product has been
shipped."
(Additional reporting by Anna Yukhananov in Washington, editing by
Simon Robinson and David Stamp)
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