Coronavirus: Iran and US sanctions

Heavily weakened and crippled by the US withdrawal from the nuclear deal in 2018, Iran has been in the news for its difficulties in containing the health crisis affecting the whole world. These obstacles are illustrated by the shortage of medicines in this Middle Eastern state.

Foreign Minister Mohammad Javad Zarif called on the international community to lift US sanctions and urgently release 5 billion euros to the IMF (International Monetary Fund).

The current crisis highlights the impact of U.S. sanctions on health. However, the US government has reiterated that medicines and medical equipment are exempt from sanctions because of their essential nature.

So what’s really going on?

In fact, Iran’s health problems already existed before the spread of Covid-19. Renewed US sanctions have led to a sharp depreciation of the rial and severe financing restrictions for financial institutions in third countries.

The combination of these two factors has made transport and finance companies wary, resulting in delays and reluctance to transport or finance medical equipment.

In this sense, the NGO Human Right Watch (HRW) had actually published a report on October 29, 2019 entitled: “‘Maximum pressure’: US economic sanctions undermine Iranians’ right to health”¹⁾https://www.hrw.org/report/2019/10/29/maximum-pressure/us-economic-sanctions-harm-iranians-right-health which called on the United States to ensure the effectiveness of exemptions for humanitarian products.

In addition to the harshness of the sanctions regime, it is also the vagueness that surrounds it that contributes to the fear of American reprisals. The OFAC (Office of Foreign Assets Control) issues general licenses authorizing the export to Iran of certain medicines and basic medical supplies. However, these licenses are restrictive, and financial transactions to support these operations are capped at $500,000.

Medical products not covered by a general license include certain vaccines, and sterilization equipment and machines. This means that these categories require special licenses, even though they are essential to the fight against the coronavirus.

The administrative complexity of such a process and the urgency of the health situation prompted several Democratic senators to unite in a letter²⁾https://iranprimer.usip.org/blog/2020/mar/27/senators-urge-trump-admin-ease-iran-sanctions dated March 26, 2020 to call on the Trump administration for clarification on the scope of the blanket license and a suspension of sector-specific measures.

The government did not follow up and at the same time continued its policy of “maximum pressure” by announcing on March 17, 2020 the addition to the blacklist of 9 entities based in South Africa, Hong Kong and China as well as 3 Iranian individuals allegedly involved in transactions linked to the petrochemical industry³⁾https://www.reuters.com/article/us-iran-usa-sanctions-idUSKBN1ZM2Q8.

Faced with this political escalation and the companies’ persistent mistrust, a diplomatic response was organized.

At the end of March, France, Germany and the UK exported medical equipment worth 5 million euros to Iran through INSTEX⁴⁾https://www.dalloz-actualite.fr/flash/l-instex-nouvel-instrument-europeen-pour-maintenir-transactions-commerciales-avec-l-iran#.Xrc8C8uP7hA
and
https://fr.news-front.info/2020/04/09/donald-trump-accepte-que-la-france-aide-liran-a-lutter-contre-le-covid-19-video/ (Instrument In Support of Trade Exchanges) launched on January 31, 2019. The latter is a mechanism for legitimate trade with Iran, limited to the essential medical and agri-food sectors. Its operation is based on a clearing house, thus avoiding the use of the US dollar.