Iran has made two humanitarian transactions using funds from its energy trade with Iraq that were released under a sanctions waiver from the U.S. earlier this month, a Treasury Department official revealed yesterday.

The administration last month renewed a waiver on U.S. sanctions on Iran, which has been in place under multiple administrations and renewed 21 times, to allow Iraq to continue to purchase electricity from Iran. The funds released under the arrangement are held in an account in Oman, and are restricted to humanitarian transactions.

Iran has utilized funds in that account twice since the waiver, Elizabeth Rosenberg, the assistant Treasury secretary for terrorist financing and financial crimes, said during a House Financial Services Committee subcommittee hearing on Wednesday.

Pressed on whether there had been “problems” with the account, Rosenberg said she could not answer the question in an unclassified setting. Rep. Bill Huizenga (R-MI), the chair of the Oversight and Investigations Subcommittee, suggested that this response meant there had been issues.

The administration has argued that this sanctions waiver mechanism is necessary because Iraq does not have an alternative source for electricity, and cutting this channel could destabilize the U.S. partner.

Rosenberg denied claims that the U.S. had allowed or facilitated the transfer of the Iraqi payment from Iraqi dinars into euros, which are seen as more flexible, explaining that Iraq had made the payments in euros initially.

Abram Paley, the deputy special envoy for Iran who has been leading the Iran office at the State Department and was testifying for the first time in that role, emphasized that no funding under the arrangement would enter Iran and that it could only be used for humanitarian, non-sanctionable transactions benefiting the Iranian people.

Paley argued that the funds are actually safer and better supervised in the Oman account than they were in Iraq, where Iran was better able to use them as a “point of leverage” over Iraq.

Republicans have argued that these resources can be misappropriated or provide the Iranian regime with more funds for malign activities despite the controls on the account.

“We do not believe that restricting the availability of humanitarian goods to the Iranian people would decrease Iran’s support for terrorism,” Paley said. “Iran has proved it prioritizes destabilizing activities and terrorism regardless of the country’s macroeconomic conditions.”

Addressing a separate tranche of $6 billion in Iranian funds unfrozen as part of a hostage deal with Iran earlier this year, Paley said the “funds will not go anywhere any time soon” but did not indicate that they would be permanently re-frozen.

Amid a growing focus on the presence of leaders of Hamas, an Iranian proxy group, in U.S. partner nations in the Middle East, Rosenberg acknowledged that Hamas leaders “live and move freely in Turkey, Qatar and elsewhere, publicly solicit funds and enjoy financial services,” which she said requires an international response to work to cut off Hamas’ financial networks. Qatar is a key financial backer of Hamas.

“[Qatar] has been and remains extremely helpful in securing hostage releases” of individuals kidnapped by Hamas on Oct. 7, Paley added. “At the same time, we have discussed with Qatari leaders that there is no going back to the status quo of Oct. 6, and they have expressed their agreement with that.”

Rosenberg was also pressed on reports that a U.S.-based company had been providing insurance for an Iranian oil smuggling vessel. She said she didn’t have any information to share on that specific company but she wasn’t aware of any other U.S. companies providing insurance or other services to Iranian smuggling vessels.

“Anyone involved in the movement of Iranian oil has obligations and liabilities in our jurisdiction,” Rosenberg said. 

Paley said he was not able to share any information about the status or security clearance of his putative superior, Iran envoy Rob Malley, who has been suspended for months. But Paley said that the Iran office’s work has continued unchanged in Malley’s absence.

Paley said that the U.S. remains committed to using “all appropriate measures” to prevent Iran from acquiring a nuclear weapon. He also urged U.S. citizens and residents not to travel to Iran.

Rosenberg and Paley outlined a range of steps they said the administration had taken to disrupt Hamas and Iranian financing since Oct. 7, including multiple new tranches of sanctions, meetings and working groups with international partners to coordinate efforts to investigate and crack down on Hamas financing and continued work to disrupt the Iranian-Russian military partnership.