This article in Bloomberg Business Week details efforts by the U.K. Export Control Organization (“ECO”) to prevent U.K. companies that trade with Iran from becoming subject to U.S sanctions on Iran. Bloomberg filed a lawsuit in the United Kingdom seeking to force the ECO to reveal the names of companies that had applied for licenses to export controlled items to Iran. The United Kingdom observes UN sanctions, which prohibit exports of arms and materiel to Iran, but does not prohibit exports of controlled dual use items as long as licenses are obtained. In a court filing in that case, the ECO argued against releasing the information, saying that U.S. sanctions had caused banks to withdraw banking facilities from companies doing business with Iran.

Early versions of the Bloomberg story contained an interesting statement from a source at OFAC who wished to remain anonymous.

U.S. trade-secrets laws prevent the Treasury from disclosing the names of companies seeking licenses to export goods that would otherwise be prohibited by sanctions, according to a U.S. Treasury spokeswoman, who declined to be identified and said she couldn’t comment on the U.K. case.

That, of course, is simply not even close to being true, which may be why the spokeswoman wanted her name withheld. The spokeswoman seems to have forgotten somehow the release by OFAC to the New York Times of hundreds of names of corporations that received licenses to export items to Iran and other sanctioned countries. This blog reported on that release here. When I brought this to the attention of Erik Larsen, the reporter who wrote the story, the OFAC quotation was removed and a statement from me on the New York Times disclosures was substituted in its place.

The moral of the story: don’t believe everything that OFAC tells you during a phone conversation.

[Thanks to reader Russ VanDegrift, compliance director at Christie Digital Systems USA, Inc. for alerting me to the original Bloomberg story.]

Nothing much of interest at the Sanctions breakout yesterday during the 2011 Update conference held by the Bureau of Industry and Security. The panel members included two people from the Office of Foreign Assets Control (“OFAC”) who went over some aspects of the new Libya sanctions and who conceded, during the Q&A session, that all the work on these new sanctions had slowed down their processing of licenses to Iran for food, medicine and medical devices. (Those exports are permitted under the Trade Sanctions Reform and Export Enhancement Act of 2000, commonly known as TSRA.)

The real jaw-dropper came from panel member John-Marshall Klein, Foreign Affairs Officer, Office of Terrorism Finance and Economics Sanctions Policy, at the State Department. In discussing the recent sanctions on Iran Air, he noted that these sanctions did not preclude travel on Iran Air due to the provisions of 50 U.S.C. § 1702(b)(4) added by the Berman Amendment. But Mr. Klein didn’t stop there. He went on to say that he wouldn’t advise Americans to travel now on Iran Air because the sanctions would prevent Iran Air from getting spare parts.

Because Iran Air is now designated under the Weapons of Mass Destruction Proliferators Regulations, this means that the provision in section 560.528 of the Iranian Transaction Regulations which permits OFAC to license on a case-by-case basis spare parts necessary for the safety of civil aviation would not be strictly applicable. But that is not an exception made by OFAC out of the goodness of its own heart; that exception is required by the United States’s adherence to the Convention on International Civil Aviation, article 44 of which would prohibit the United States from taking actions that endanger civil aviation. And there is nothing that would prohibit a case-by-case licensing policy under the WMD proliferation regulations in cases of parts needed to promote the safety of civil aviation.

What Mr. Klein is saying is that it’s now the policy of the United States to use the sanctions against Iran Air in a way that will endanger the safety of its aircraft and its passengers. Even if true, and even if consistent with the United States’s treaty obligations, is this something that the U.S. government should openly admit? It can only be hoped that Mr. Klein was wrong.