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US downplays trade loophole with Iran, other blacklist countries

WASHINGTON – The United States on Friday downplayed a newspaper report about US firms being allowed to do business with Iran and other blacklisted countries, insisting its sanctions were squeezing Tehran.

The New York Times reported that some 10,000 deals had been allowed under a humanitarian aid loophole approved in 2000 that lets US companies — including food giants Kraft and Mars — get around economic blacklists for countries designated as state sponsors of terrorism.

But senior US Treasury official Stuart Levey said such exports were “trivial in the context of our Iran policy” of using sanctions aimed at the government and military to convince Tehran to halt its nuclear drive.

“This effort is having its intended impact. Iran’s leadership is worried about its isolation from the international financial system and the other effects of sanctions,” he said in a statement.

This year the international community, especially the Obama administration, has ramped up pressure on Tehran, blacklisting even more Iranian individuals and firms under an extended economic embargo.

Yet according to the Times report, an office at the US Treasury Department has granted licenses via a 10-year-old law that exempts humanitarian aid, both agricultural and medical.

The broadly-written language of the loophole, opened wider by industry lobby groups in recent years, has seen the term “humanitarian aid” extended to companies exporting items as diverse as cigarettes, chewing gum, Louisiana hot sauce and body-building supplements.

In a three-year investigation involving a Freedom of Information lawsuit filed against the Treasury and its Office of Foreign Assets Control, the Times was given heavily redacted documents outlining the deals.

A Treasury official speaking on condition of anonymity said that providing medical and humanitarian aid to Iran strengthened international support for the sanctions by insuring they did not harm the Iranian people.

“The importation of food items like hot sauce or salad dressing from the US is insubstantial in the context of our Iran policy,” the official said.

“Cutting off food, medicine and medical devices could severely undercut those efforts.”

Since the 2000 humanitarian aid law US exports to Iran have totaled more than 1.7 billion dollars, according to the documents, but they accounted for just 0.02 percent of all American exports in the first quarter of 2010.

On the Wrigley’s chewing gum, owned by food giant Mars, a former sanctions advisor told the Times: “We debated that one for a month. Was it food? Did it have nutritional value? We concluded it did.”

But Hal Eren, who used to work at the Treasury licensing office, admitted to the Times: “We were probably rolled on that issue by outside forces,” apparently referring to industry lobbyists.

The newspaper detailed another incident in which a Hawaii businessman sought to import parts for a medical waste treatment plant from a Chinese firm penalized for providing missile technology to Pakistan and Iran.

Two days after the order was placed in July 2003 the administration of former president George W. Bush barred US citizens from doing business with the company, and the shipment was seized by customs authorities in November.

But the goods were allowed to go through a month later as a “medical and humanitarian” exception after US Senator Dan Inouye of Hawaii intervened on behalf of the businessman, who was a political contributor.

A spokesman for the senator told the Times his donations had “no impact whatsoever” on the senator’s actions, which he said were motivated by public health concerns as medical waste was piling up at the facility.

The Times report found that other licenses were granted to firms operating in blacklisted countries such as Cuba and Sudan.

Jolly Time popcorn, sold through the American Pop Corn Company to both Sudan and Iran, was likewise counted as humanitarian aid.

The firm’s export manager Henry Lapidos described the designation as “pushing the envelope.”

But then he asked: “What?s the harm?” adding that he did not think Iranian soldiers “would be taking microwavable popcorn” to war.

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