Blocking Medicine to Iran

ednamaziPatients in Iran are dying of treatable diseases because of shortages in life-saving medicines. The past year has been nothing short of catastrophic for the Iranian health-care sector: Imports from American and European drug makers in 2012 were down by an estimated 30 percent since 2011, and they continue to fall.

Over the past three months, I led a group of independent business consultants with expertise in Iran to evaluate the problem. After conducting extensive interviews in Tehran and Dubai with Iranian importers and manufacturers of pharmaceuticals and medical equipment and their Western counterparts, we concluded that even though in theory the sanctions regime imposed on Iran by the United States and the European Union is supposed to allow humanitarian trade, in reality it impairs the delivery of drugs and medical equipment to Iran.

Although the Iranian government deserves firm criticism for incompetence in handling the crisis, poor allocation of scarce foreign currency resources and failing to crack down on corrupt practices, the main culprit are the U.S. and European sanctions that regulate financial transactions with Iran.

The system is irrational: There is a blanket waiver to the sanctions to facilitate humanitarian trade, but other laws restricting financial transactions with Iran make it impossible to implement that exception. So the trade of medical supplies is legal in theory and virtually impossible in practice because Iran cannot pay for the Western medicine it needs.

One problem is that when sanctions were tightened in 2012, Iran’s ability to sell oil was further limited and its main source of hard currency restricted. Another problem is that Iran’s main banking infrastructure — including the Central Bank of Iran and Bank Tejarat, Iran’s main trading bank — is blacklisted by Washington.

Sanctions have also choked-off Iranian banks from the global financial arena by putting draconian restrictions on international banks that deal with Iran, including by cutting them off from the Society for Worldwide Interbank Financial Telecommunication. Penalties for violating U.S. sanctions are so stern as to discourage most international banks, which are generally risk-averse anyway, from engaging in humanitarian trade.

A senior representative from a reputable Iranian pharmaceutical company told our study group that when he presented a French bank in Paris with documentation showing that a deal to ship vaccines to Iran was fully legal, he was told, “Even if you bring a letter from the French president himself saying it is O.K. to do so, we will not risk this.” Today, only one international bank — in Turkey — is willing to take the chance.

In simple terms, even when Iran can get its hands on dollars or euros to buy medical supplies, it cannot find a banking avenue to clear the trade. A senior representative at one American pharmaceutical company told me about a $60 million order for an anti-rejection drug for liver-transplant patients that fell through even though the sale was fully legal, all the needed licensing from the U.S. Treasury was in place, and Iran had allocated the needed hard currency. No bank would perform the transaction.

To compensate, Iran has been importing more drugs, or the active ingredients for them, from China and India. But these products are usually of inferior quality and more limited effectiveness than the equivalent from American and European manufacturers. And in the highly patented world of pharmaceuticals, substitution often isn’t an option at all, particularly when it comes to advanced medicines used to treat complex diseases like cancer and multiple sclerosis.

There are solutions. With fewer than 100 American and European companies holding patents to the most advanced medicines needed, it should be possible to craft narrow exemptions authorizing Iranian and international banks to do business with those companies for the exclusive purpose of providing medication to Iranian patients without undermining the sanctions regime overall.

This would mean carving out special exceptions for at least some of the 20 or so Iranian banks that the U.S. government currently blacklists wholesale, at least for the narrow purpose of purchasing medical drugs and supplies.

Washington must also reassure international financial institutions by clarifying existing regulations and stating unambiguously that no sanctions will be imposed on international banks that facilitate licensed or exempted humanitarian trade with Iran.

Another solution would be to narrowly adjust the terms of the exemptions allowing foreign countries and companies to purchase Iranian crude oil.

Despite existing restrictions, Iran currently sells around one million barrels of oil annually. But the terms of these special sales translate into a complex bartering system that ultimately leaves Tehran short of U.S. dollars and euros. For example, Iran’s oil sales to China are bought in renminbi, which it must keep in Chinese banks and can only use to pay Chinese companies for imports into Iran.

Iran should be allowed to convert some of its current holdings in Chinese, Indian and other banks around the world into hard currencies for the exclusive purpose of buying medical supplies. European states could also be authorized to buy small quantities of Iranian oil and hold the funds in escrow for Iran to use solely to that end.

The West must relax and rationalize the terms of its sanctions regime against Iran to allow more medical goods into the country. If it doesn’t, more Iranian men, women and children will suffer needlessly.

Siamak Namazi is a Dubai-based business consultant and a former Public Policy Fellow at the Woodrow Wilson Center for International Scholars.
Ellen WeinsteinBy SIAMAK NAMAZIPublished: March 1, 2013
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