Israel Forms Team With U.S. to Enforce Iran Sanctions

Panel aims to help governments ensure they are not in violation of new American policy

Iranian protesters burn Israeli and U.S. flags in their annual anti-Israeli Al-Quds, Jerusalem, Day rally in Tehran, Iran, Friday, June 8, 2018
AP Photo/Ebrahim Noroozi

In a sign of the 180-degree turn in America’s Iran policy under President Donald Trump, the United States has formed a joint team with Israel to enforce economic sanctions against Tehran.

The joint committee is being formed for countries to learn from their experiences in trying to enforce the sanctions regime, especially anything related to Iranian nuclear ambitions, due to go into effect between 180 and 190 days after Trump announced last month that the U.S. was quitting the Joint Comprehensive Plan of Action.

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An agreement forming the team was reached by officials in Washington with Shai Babad, the Israeli Finance Ministry’s director general, and Eran Nitzan, Israel’s economic attache in Washington. Ahead of the joint team’s formation, Babad and Shaul Meridor, the head of the treasury’s budget division, were in Washington for a series of meetings.

The two countries cooperated closely on sanctions – including a panel formed in 2013 to monitor the sanctions’ progress – before the U.S. dropped most of them after the nuclear agreement was signed in 2015.

Israel, meanwhile, acted to tighten the rule it already had in place through the treasury’s sanctions office. Its activities are based on Knesset legislation passed several years ago that focuses on the Iranian nuclear program. 

In addition, there is a general ban on doing business with Iranian entities based on an ordinance banning trade with enemy states issued by the British Mandate authorities in 1939. 

Israeli individuals and corporations are not only required to observe local rules but also to ensure they are not in violation of sanctions imposed by the U.S., the European Union or the United Nations, or risk Israel being put on international black lists. The rules apply to companies outside of Iran that work as front organizations for Tehran.

The U.S. imposes two kinds of sanctions – those incumbent on American citizens and corporations and those aimed at deterring non-American entities from doing business with Iran. Washington is enforcing the latter by barring violators from using the U.S. financial system – meaning they would be effectively barred from doing business in U.S. dollars and/or operating subsidiaries in the U.S.

The EU is especially concerned about the impact of U.S. sanctions on third countries and has sought to revive an old law that prohibits European companies from honoring sanctions ordered by countries outside the EU. For now, however, a host of European companies have announced plans to leave Iran.

The joint U.S.-Israel team will help governments enforce the sanctions, guiding businesses that are at risk even by accident for violating them, for instance by selling products or services that could end up being used by Iran’s energy industry.

In Israel, banks and credit card companies are monitored by the Bank of Israel’s banks supervisor. Publicly traded companies are required to report to the Israel Securities Authority about any activities that might have involved “enemies” of the State of Israel under the law.

The biggest concern, however, regards small and medium-sized companies, in particular startups working in cybersecurity. 

However, the complexity of the sanctions regime and the long lists of banned entities also create uncertainty in large companies. For example, questions arose about whether the Chinese company CRRC, which is supplying trains for the Gush Dan Light Rail project, should be barred because it is also supplying subway cars to the Iranian city of Mashhad.