In connection with the recently negotiated deal releasing five U.S. citizens wrongfully imprisoned by the government of Iran, on September 18 the U.S. government announced the establishment of a humanitarian channel (“HC”) in Qatar to administer $6 billion in Iranian funds. The funds, comprised of payments made to Iran by South Korea for the purchase of oil, have not been frozen under U.S. law. Until now, they have been held in a restricted account in South Korea. Under the terms of the deal, the funds are being transferred to a restricted account in Qatar, and may only be used for the purchase of food, agricultural goods, medicine, and medical devices for the Iranian people. The funds may not be released to the government of Iran or to Iranian companies. As part of the deal, five Iranian prisoners charged with, or convicted of, crimes in the United States have been freed as well.
The deal does not entail any lifting of U.S. sanctions against Iran, which have long included broad exceptions and authorizations for the supply of humanitarian goods by U.S. and non-U.S. persons. The newly established HC provides an option – not a requirement – for facilitating payments for humanitarian exports to Iran. Financial institutions participating in the HC have received guidance from the U.S. government and have committed to conducting stringent due diligence. The U.S. government intends to monitor the HC closely and to take appropriate action if Iran attempts to use the funds for any purpose other than permitted humanitarian purchases.
As of now, the details of the HC have not been promulgated. Time will tell if the restrictions hold firm. Companies interested in participating in transactions under the HC are advised to communicate with the Qatari International Media Office at [email protected].
In a related development, the U.S. government has designated former Iranian President Mahmoud Ahmadinejad, as well as Iran’s Ministry of Intelligence and Security (“MOIS”) as Specially Designated Nationals based on their involvement in the wrongful detention of U.S. citizens. The legal bases for the designations are (i) the Robert Levinson Hostage Recovery and Hostage-Taking Accountability Act of 2020, which provides criteria for the Secretary of State to determine whether a person has been wrongfully detained abroad, and (ii) Executive Order 14078, issued by President Biden on July 19, 2022 and titled “Bolstering Efforts to Bring Hostages and Wrongfully Detained U.S. Nationals Home,” which empowers the Secretary of State, in consultation with the Secretary of the Treasury and the Attorney General, to place on OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”) any foreign person determined to be responsible for or complicit in, to have directly or indirectly engaged in, or to be responsible for ordering, controlling, or otherwise directing, the hostage-taking of a U.S. national or the wrongful detention of a U.S. national abroad; to have attempted to engage in such activity; or to be or have been a leader or official of an entity that has engaged in, or whose members have engaged in, such activity if it relates to the leader’s or official’s tenure.
Robert Levinson was a former U.S. federal agent who was abducted and detained in Iran by MOIS in 2007, during President Ahmadinejad’s term in office. He is believed to have died in Iranian custody.
The effect of being placed on the SDN List is to exclude the listed party from participating in the U.S. economic system and to block any property or interest in property of the party in the United States or in the possession or custody of a U.S. person. Both the former president of Iran and MOIS have been subjected to these restrictions for years, based on other sources of authority, including executive orders imposing and implementing the comprehensive U.S. embargo on Iran. The new designations, therefore, are not expected to materially impact either the former president or MOIS. The evident purpose of the designations is to warn persons everywhere that they will face severe economic consequences if they participate in the wrongful detention of any U.S. national. This is in keeping with the U.S. government's prioritization of combating the burgeoning practice in certain parts of the globe of seizing U.S. nationals and holding them hostage.