This is an asinine policy. Put yourself in the position of the counterparty, how is anyone supposed to resolve a disagreement using such a kafkaesque approach?
Simple! They’re not… the point is to be kafkaesque like this in order to frustrate and maximally deny anything that could potentially be a sanctions violation.
I won’t deny it’s a very very stupid design… but the madness does have a consistent logic to it. It’s very similar to the kind of logic that is involved in maintaining the no fly list.