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UPDATE 1-U.S. pharmaceutical exports to Iran cut in half in 2012
* Drop supports view that sanctions impair even legal deals
* U.S. official says humanitarian trade not targeted
* Sales of vegetables, butter and surgical instruments go up (Adds Wilson Center study, State Department, Treasury comment)
By Arshad Mohammed
WASHINGTON, Feb 8 (Reuters) - Exports of U.S. pharmaceuticals to Iran were cut in half last year, according to data released on Friday, while overall U.S. exports to the Islamic republic rose about 9 percent because of grain sales.
The official U.S. government statistics appear to support the claims of sanctions lawyers and some independent experts that financial sanctions are making it harder for Iranians to obtain medicine despite loopholes designed to permit such trade.
The United States and its European allies have tightened their economic sanctions on Iran to pressure the government to rein in its nuclear program, which the West suspects aims to produce a bomb. Iran says the program is for peaceful purposes such as generating electricity and producing medical isotopes.
U.S. officials have said they have tried to sanction Iran without unduly harming ordinary Iranians, granting licenses, for example, to U.S. companies that wish to export pharmaceuticals, medical devices, food and other humanitarian goods to Iran.
But sanctions lawyers have said the blacklisting of Iran's major banks has made it extremely difficult to find smaller Iranian banks able to conduct such licensed transactions as well as international banks willing to deal with them.
A report issued on Friday by the Woodrow Wilson International Center for Scholars made the same point.
"Draconian penalties for a potential U.S. sanctions violation are discouraging the involvement of international banks in humanitarian trade with Iran," said the report, entitled: "Sanctions and Medical Supply Shortages in Iran."
The report, written by Dubai-based consultant Siamak Namazi, said researchers in Tehran and Dubai interviewed U.S. and European exporters as well as Iranian importers and found that the financial sanctions tended to scare off banks.
"Even when the most reputable American and European pharmaceutical companies are involved and their lawyers have completed all the necessary paperwork ... nearly all banks that Iran deals with prefer to err on the side of caution," it said. "Their hesitation is understandable given that a mistake could earn a bank the wrath of the U.S. Treasury Department."
A Treasury Department spokesman stressed that U.S. sanctions did not target humanitarian trade and he noted that the department issued fresh guidance this week emphasizing that to U.S. financial institutions.
"Our sanctions are not focused on humanitarian trade," said Treasury spokesman John Sullivan, noting U.S. farm exports to Iran rose in 2012. "It is clear that there are financial avenues that are open for this vital humanitarian trade."
IRAN PARTLY TO BLAME FOR DROP?
While U.S. trade data showed that agricultural exports to Iran rose last year, sales of other humanitarian exports fell.
Overall U.S. exports to Iran rose to $250.2 million from $229.3 million in 2011, according to data released by the U.S. Commerce Department on Friday. Most of the rise stemmed from the sale of wheat, which amounted to $89.2 million last year and constituted the single largest category of U.S. exports to Iran.
In 2011, the United States exported no wheat or such grains to Iran, although it sold $21 million of maize.
Without the wheat sales, U.S. exports to Iran would have declined overall last year, sharply in some cases.
Exports of pharmaceuticals fell to $14.8 million from $31.1 million in 2011, while sales of vitamins, medicinal and botanical drugs decreased to $4.9 million from $10.8 million.
Exports of surgical appliances and supplies also declined to $2.4 million last year from $3.7 million the previous year.
Sales of pulp mill products - which include the raw material for diapers - dropped to $26.3 million from $57.9 million, and exports of cattle fell to $5.3 million from $7.3 million.
On Wednesday, a senior Treasury official briefing reporters on the latest U.S. sanctions said guidance issued on Wednesday was to make abundantly clear that "our sanctions don't preclude either trade in medicine or the payment for trade in medicine."
The official, who spoke on condition of anonymity, partly blamed Iran's government for its trouble importing medicines, saying it gave its Health Ministry too little foreign exchange and fired the health minister when she complained about that.
"Much of the problem in the importation of pharmaceuticals into Iran is properly laid at the feet of the Iranian government, which has chosen to fund other activities, whether it's the Assad regime (in Syria) or Hezbollah or their nuclear program, rather than their health ministry," the official said.
Exports of some health products rose. Surgical and medical instrument sales rose to $7.6 million from $6.5 million as did sales of dental equipment and supplies to $5 million from $1.9 million.
Exports of certain vegetables and melons increased to $18 million from $16 million, while creamery butter exports rose to $25.1 million from $11.2 million. (Editing by Warren Strobel, Doina Chiacu and Peter Cooney)
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