By Ian Talley in Washington and Benoit Faucon in London 

The U.S. and Switzerland formally launched a humanitarian trade channel for Iran on Thursday, a move meant to counter criticism of Washington's economic pressure campaign while opening the way for the release of Americans detained by Tehran.

The humanitarian link allows international firms trade in goods such as medical supplies, agricultural commodities and basic necessities without risk of U.S. sanctions-enforcement penalties. The Trump administration has come under fire, including from European allies and domestic political opponents, for inadvertently choking off such trade.

Some U.S. officials and diplomats involved in the matter say that the trade move, if reciprocated by Tehran with the release of five Americans held in Iran, could cool building tensions and lead to a temporary halt in months of escalating provocations.

"We think our humanitarian gesture should be met with a humanitarian gesture of releasing innocent detainees in Iran," a senior administration official told The Wall Street Journal. "This should be a confidence-building measure, that would then lead to a consular dialogue so that we can get all of the remaining Americans out of jail."

Iran's mission to the United Nations didn't respond to requests for comment.

The opening of the trade channel also comes as Iran scrambles to contain a rapidly spreading coronavirus epidemic. With the official death toll at 26, the government has closed schools and banned somepublic gatherings.

The senior administration official said the U.S. is working on providing assistance to help Iran address the problem, but expressed skepticism Tehran would accept it.

Iran worries "they will reveal to the world that the crisis is much worse than the regime has been broadcasting," the official said.

Iran accuses the U.S. of using the coronavirus outbreak to fan fears.

The U.S. has been working to get the humanitarian trade channel operational after the blacklisting of Iran's central bank in September for allegedly financing terrorist activity. That cut into trade flows already battered by earlier U.S. sanctions.

The Swiss-American channel aims to reassure firms that are skittish about incurring U.S. penalties by vetting their deals through the governments. Swiss-based firms can use the process without running afoul of Washington's stringent sanctions, worries that until now had inhibited unsanctioned humanitarian trade.

"This operationalizes the humanitarian channel because it removes the uncertainty," said Justin Muzinich, deputy U.S. Treasury secretary. The agreement will serve as a template for other countries to replicate, he said, with talks already under way.

The coronavirus hit Iran amid the country's loss of medicine, agricultural imports and other basic necessities, adding to its economic crisis. Those woes have compounded escalating U.S.-Iran tensions as Tehran accelerates uranium enrichment and the two nations have traded military strikes.

U.S. officials see the new humanitarian channel formally opened Thursday with Switzerland as an overture to Tehran that could prevent further escalation, an intensification that some analysts feared could spiral out of control and into a full-frontal war.

Brian Hook, State Department's special envoy for Iran, late last week said the administration planned to ramp up international efforts to pressure Tehran to release the Americans.

The renewed push comes ahead of the 13th anniversary of the disappearance of Robert Levinson, a retired federal agent who was investigating the illicit tobacco trade and gathering information for U.S. intelligence analysts.

There also are growing concerns that 83-year-old U.S.-Iranian Baquer Namazi may not survive amid deteriorating health. Iran also holds his son, businessman Siamak Namazi, and two other Iranian-Americans.

Other U.S. officials say negotiations over the American detainees already have geared up through the established diplomatic channel by which the Swiss represent U.S. interests. Those officials say the new trade channel and a possible prisoner release could be a first step before what they call a temporary cease-fire between Iran and the U.S., negotiated through third parties.

Under such an option--which officials acknowledge hasn't yet gathered traction -- the U.S. could temporarily agree not to levy additional sanctions and Iran would promise to temporarily halt additional strikes against U.S. targets. If that interim agreement was secured, it would then pave the way for more formal security negotiations.

A senior U.S.official involved in Iran policy said he wasn't aware of such considerations, but said the French encouraged American counterparts to provide Iran relief from sanctions to spur negotiations on a new nuclear and security deal.

But the official said "both sides recognized after the last prisoner exchange that even in the midst of a lot of tensions, we can work together."

Write to Ian Talley at ian.talley@wsj.com and Benoit Faucon at benoit.faucon@wsj.com

(END) Dow Jones Newswires

February 27, 2020 18:44 ET (23:44 GMT)

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