Tyler Cullis explains the implications of the latest action against Iran by the Treasury Department:

By designating Iran a jurisdiction of primary money laundering concern, Treasury finalized a rule requiring U.S. banks to conduct “special due diligence” on accounts maintained on behalf of foreign banks if those foreign banks themselves maintain accounts for Iranian financial institutions. The practical consequence is that U.S. banks will urge their foreign correspondents to terminate any accounts maintained on behalf of Iranian banks so as to eliminate sanctions risk and mitigate the need to apply additional resources to monitor their foreign correspondents. This will further sever Iran from the global financial system, as Iran’s few non-designated banks find it increasingly difficult to maintain accounts abroad.

Absent the maintenance of accounts at foreign banks, Iran’s financial institutions will prove increasingly unable to facilitate humanitarian-related transactions, including in food and medicine [bold mine-DL]. This will compound a problem first exacerbated by the Office of Foreign Asset Control’s (OFAC) recent designation of Iran’s central bank. The designation of Iran’s central bank made it sanctionable for foreign banks to facilitate humanitarian trade with Iran if the Central Bank of Iran was involved. Because Iran’s central bank maintains Iran’s stock of foreign currency and because cross-border trade in humanitarian goods requires Iranian importers to pay the foreign exporter in a designated foreign currency, OFAC’s designation of Iran’s central bank created a serious problem as to how Iranian importers would pay for the import of humanitarian goods into the country. OFAC’s failure to exempt humanitarian trade from U.S. sanctions or provide guidance as to this matter in the weeks since the designation provided clear signal that the Trump administration is little concerned about the issue.

Now, Treasury’s designation of Iran as a primary jurisdiction of money laundering will make it increasingly difficult for Iranian banks to maintain what limited overseas accounts remain available to it

Iranians were already facing shortages and skyrocketing prices as a result of U.S. sanctions before the central bank designation, and now they will have a much harder time obtaining imported food and medicine than they did before. Some initial reports claimed that the Trump administration was “easing” regulations on trade in food and medicine, but the effect of the new rules is just the opposite. Esfandyar Batmanghelidj points out that the U.S. government’s requirements are so onerous that few institutions will participate:

But the new framework may introduce more problems than it solves. In order to receive such comfort letters, the financial institutions must undertake an enhanced due diligence process, reporting to Treasury “a great deal of information on a monthly basis.” The due diligence requirements go far beyond what has been considered the industry standard process for companies engaged in trade with Iran [bold mine-DL]. Considering the significant costs and administrative burdens of such reporting, the requirement will likely limit the uptake of the new framework to those financial institutions engaged in the greatest volume of humanitarian trade with Iran.

Most financial institutions will look at the extra work and expense that these new rules require of them and they will very likely decide that the business they are doing is simply not worth the hassle. Between the money laundering designation and the designation of the central bank, the Trump administration is choking off humanitarian trade, and the supposed “humanitarian channel” that they have set up is really nothing of the sort. Laura Rozen reports:

Several former US government sanctions experts said a new, supposed Iran “humanitarian” transparency mechanism announced today by the Treasury Department is likely to be seen as an intelligence-gathering mechanism to inform new US sanctions rather than facilitate Iran’s purchase of food and medicine.

“This does not help, and in fact probably makes the situation worse,” Brian O’Toole, a former official at the Treasury Department’s Office of Foreign Assets Control, wrote on Twitter. “It’s like they’re trying to force Europe to scream and pound the table.”

Switzerland had been working on creating a humanitarian channel, but had been stymied by the Trump administration’s National Security Council for the last year. The new due diligence requirements are now going to drive Swiss banks to shut down their accounts with their Iranian counterparts:

Swiss banks have told Treasury that if it goes forward with the Section 311 finding they will terminate the accounts they maintain with Iranian banks to permit humanitarian trade, Cullis said.

Announcing the humanitarian “transparency” mechanism in the context of the Treasury determination that Iran is a primary money laundering jurisdiction will increase suspicions that it is a sanctions trap, agreed former State Department sanctions expert and Iran nuclear negotiator Richard Nephew.

“In the context of the 311 finding AND general atmosphere, I suspect most will see this mechanism less as a humanitarian channel and more as an intelligence gathering function to enable additional US sanctions,” Nephew, now with Columbia University, tweeted. “For those of us seeking a real channel, this ain’t it.”

So the Trump administration understood in advance what the consequences of these actions would be, and they went ahead with them anyway because they aren’t interested in facilitating humanitarian trade. We have seen several times over the last year that the administration has instead taken every action to curtail and impede trade with Iran in humanitarian goods. The Trump administration is throttling the Iranian people, and that is what they mean to do.

Cullis continues:

Yet, this “mechanism” is no mechanism at all: Treasury is merely requiring that—if foreign banks wish to receive written assurance that they will not be subject to sanctions—they must provide Treasury with far-reaching monthly reports regarding their Iran-related transactions. Instead of providing a financial channel, new licenses or authorizations, or clear interpretive guidance as to how parties may lawfully conduct humanitarian trade with Iran, Treasury has created an information-collection vehicle whose effect—if not purpose—is fundamentally to dissuade foreign banks from partaking in humanitarian transactions with Iranian parties at all.

When the “easing” of regulations actually increases the difficulty of engaging in humanitarian trade with Iran, the administration clearly isn’t worried about shutting down that trade. On the contrary, they have done everything they could to make it virtually impossible for that trade to continue. Cullis concludes:

This action—considered in tandem with the recent designation of Iran’s central bank—provides clear and convincing evidence that the Trump administration is deliberately targeting humanitarian trade with Iran as part and parcel of its so-called “maximum pressure” strategy. The Iranian people are no longer collateral damage to the Trump administration’s economic war against Iran, but are increasingly in this administration’s crosshairs.

This is the result of a policy of punishing the civilian population. An economic war inevitably hurts the people living in the targeted country, and it will hurt the weakest and poorest most of all. Administration rhetoric distinguishes between the government and the people, but in practice U.S. sanctions have been aimed at the latter all along. These latest actions by the Trump administration confirm that beyond any doubt.