How US sanctions are fatal to Iran’s COVID19 fight

More than the inaction of the Iranian government, questions have been raised regarding the role of US sanctions in crippling Iran’s economy, infrastructure and public health facilities. These factors combined have severely incapacitated Tehran from providing the best response to the pandemic.

COVID19, coronavirus pandemic, Joint Comprehensive Plan of Action, Obama, Trump, US sanctions, JCPOA, Iran, humanitarian impact, US Office of Foreign Assets Control, mismanagement, resources, nutrition, health infrastructure, medical outcomes, medicine, mortality, medical products

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Iran is one of the hardest hit countries by the coronavirus pandemic, with a total of 62,589 confirmed cases and 3,872 deaths as on 8 April 2020. A quick tally reveals that it has the 7th highest number of confirmed cases, and the 6th highest number of COVID19 related fatalities. The contagion was first detected on 19 February 2020 in the holy city of Qom, and thereafter spread quickly to the country’s 31 provinces. The virus has indiscriminately attacked the public and the upper echelons of the Iranian government, including members of the parliament, religious leaders and senior ministers.

The Iranian government has been criticised for its botched response to the coronavirus crisis, where its politicised health policy entailed denial and misinformation as a preferred response to the unfolding crisis. However, more than the inaction of the government, questions have been raised regarding the role of US sanctions in crippling Iran’s economy, infrastructure and public health facilities. These factors combined have severely incapacitated Tehran from providing the best response to the pandemic.

Resultantly, the European Union, US Congress members, rights groups and the Iranian government have appealed to the US government to suspend sanctions for this duration. Allies like Russia — a country that is also facing sanctions for its 2014 annexation of Crimea — called for a joint moratorium on sanctions affecting essential goods and financial transactions, and stressed the need to establish “green corridors free of trade wars and sanctions” to supply medication, food, equipment and technology.

Sanctions were first imposed after the 1979 Tehran hostage crisis, and gradually expanded under a multilateral sanctions regime to combat Iran’s controversial nuclear programme. These sanctions were put on hold when the Obama administration entered into the Joint Comprehensive Plan of Action (JCPOA) in 2015 — a historic agreement under which Iran agreed to meet specified nuclear disarmament targets in return for lifting sanctions against it.

Iran has been under US sanctions for around four decades. Sanctions were first imposed after the 1979 Tehran hostage crisis, and gradually expanded under a multilateral sanctions regime to combat Iran’s controversial nuclear programme. These sanctions were put on hold when the Obama administration entered into the Joint Comprehensive Plan of Action (JCPOA) in 2015 — a historic agreement under which Iran agreed to meet specified nuclear disarmament targets in return for lifting sanctions against it. However, with President Trump’s withdrawal from the JCPOA, sanctions were re-imposed by November 2018 and are now proving fatal to Iran’s fight against the COVID19 pandemic.

The US administration has adopted the strategy of “maximum pressure” on Iran, by imposing sanctions on its energy, shipping and financial sector until the government stops funding terrorist activities and nuclear weapons development. US sanctions are enforced through a wide array of instruments that includes 11 statutes, 25 executive orders and 4 federal regulations. Certain categories of sanctions, such as those on banking, finance and shipping have directly caused shortages of medical equipment and created an overall negative impact on Iran’s health sector.

Financial sanctions, for instance, prohibit US banks from transacting with Iran, which in turn, limits its access to dollar denominated transactions. Additionally, the sanctions block Tehran’s access to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) — a global banking messaging system that facilitates international financial transactions. Lastly, secondary sanctions measures target non-US entities that conduct financial or commercial transactions with Iran, and are thus, at risk of facing prosecution in the US. The sanctions make transactions with Iran lengthy, complex and even impossible, in some cases. Further, the added legal, financial and administrative costs for businesses and financial institutions leads to excessive caution or over-compliance, and effectively deters them from entering into transactions with Iran.

To be sure, sanctions instruments have a built-in exception for humanitarian assistance, including transactions for sale of agricultural commodities, food, medicine and agricultural services. Despite this exemption, sanctions have severely impaired the country’s ability to finance humanitarian imports. Businesses and financial institutions consider it a significant risk to transact with Iran, even if it is for exempted categories like essential medicines and medical equipment to Iran.

There has been a significant decline in the number of license applications sent to the OFAC, from 220 in 2016 to 36 in 2019. This indicates how US sanctions can deter companies from entering into transactions with Iran.

The exemptions themselves are regulated through a complex export control regulatory process. Trade in humanitarian goods are subject to two categories of licensing requirements. The general license category includes most medicines and is easier to export, while the specific export license category is harder to export, and increases compliance costs for companies and institutions. The latter category includes medical supplies, instruments, equipment, equipped ambulances, institutional washing machines for sterilisation, and vehicles carrying medical testing equipment. The rationale for this classification — and hence, stricter regulation — is to prevent the misuse of dual use chemicals and equipment.

As per data from the US Office of Foreign Assets Control (OFAC) — an agency responsible for enforcing sanctions — the US administration approved only 14% of license applications for humanitarian goods in 2017 and 2018, out of which only 11% applications for medical devices were approved. Further there has been a significant decline in the number of license applications sent to the OFAC, from 220 in 2016 to 36 in 2019. This indicates how US sanctions can deter companies from entering into transactions with Iran.

US sanctions have also adversely impacted Iran’s economy, which directly affects its ability to purchase medicines and medical equipment. Following Trump’s withdrawal from the JCPOA, the rial depreciated sharply by 172%, and rose to over 100,000 rials per dollar. As an economy that is highly dependent on the hydrocarbon sector, its oil exports have been slashed by more than 80% leading to a significant loss of revenue and foreign exchange earnings. Moreover, according to IMF, Iran’s GDP growth has also contracted by an estimated 4.8% in 2018, and is forecast to shrink by 9.5% by 2019. Volatility in exchange rate, high inflation and an ongoing recession, has made it difficult for Iran to purchase humanitarian goods, food and medicine.

This is not the first and only case of how sanctions can have a grave humanitarian impact. In August 1990, sanctions were imposed on Ba’athist Iraq following its invasion of Kuwait. Medical professionals and policy researchers have pointed out the devastating effect of sanctions across different health parameters — with one stating that there have been more sanctions related death than casualties in the US-Iraq War. Health facilities, infrastructure and public services also deteriorated due to sanctions on Iraq, and disproportionately impacted the health of children, women and adolescents.

This is not the first and only case of how sanctions can have a grave humanitarian impact.

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