Following up on yesterday’s post, some have asked why OFAC would have licensed Bank Melli, Bank Sepah, and Bank Saderat to maintain representative offices in the United States following the imposition of the comprehensive U.S. trade and investment embargo with Iran beginning in 1995. What could have been the purpose of permitting these Iranian banks to maintain a “skeletal presence” in the United States, all the while prohibiting them from engaging in normal banking activities?

The reason is outlined in that same Statement of Interest filed by the U.S. Government in The Bank of New York v. Rubin, 2005 WL 6105186 [S.D.N.Y. 2005):

The Iranian Banks had expressed to OFAC their concern that, if forced to close operations entirely under the ITR [Iranian Transactions Regulations], they would lose their licenses to operate under New York banking law.

Pursuant to License No. IA-3537, Bank Melli was “authorized to conduct activities related to research in the United States and to act as a liaison with United States holders of correspondent bank accounts held by its head office and foreign branches and affiliates, in accordance with the terms of a conditional Representative Office license to be issued by the Superintendent of Banks of the State of New York.”  (As a side-note, that is an interesting example of coordination between the U.S. federal government and its agencies and the New York Department of Financial Services — which can be at loggerheads regarding sanctions-related issues these days.)

The fact that OFAC provided license authorization to the Iranian banks to maintain a physical presence in the United States – particularly, in New York – in order that such banks not lose their license to operate under New York banking law suggests that the U.S. trade embargo with Iran was initially understood as a sanctions program intended to be of limited duration. Certainly, there would be no need for Bank Melli, et. al., to maintain their New York banking licenses if U.S. officials believed that the U.S. trade embargo would last more than two-plus decades, as it has. Indeed, it seems as if – though I admit to not having proof – that Bank Melli, et. al., had their licenses revoked by the U.S. government only upon the dramatic escalation in the decade-long dispute over Iran’s nuclear program beginning around 2005, when it became apparent that the U.S. trade embargo with Iran was here for the long haul.

This is an aside, but nonetheless a fascinating one.  Well into the third decade of the U.S.’s trade embargo with Iran, it is easy to lose sight of the fact that prior U.S. government officials understood the embargo to be of limited duration. We are reminded only as a result of reports like the one issued by NBC News, revealing OFAC’s grant of specific licenses to Bank Melli, Bank Sepah, and Bank Saderat to maintain representative offices in the United States in order to keep their New York banking licenses.