Impact of US Sanctions on Iran's Healthcare Sector

EghtesadOnline: A crisis is emerging in Iran’s healthcare sector, as patients are reporting shortages in life-saving medicine.

News ID: ۷۴۶۰۰۴

15 September 2018

The situation is expected to worsen once US sanctions on Iran are reimposed early November. European and US companies that can provide the advanced medicine and equipment needed to treat chronic diseases inside Iran are grappling with how to sustain their operations.

The goods entering Iran are being sold at soaring prices due to a sharp currency downturn following US sanctions decision, reads an article published on the website of pan-European think tank the European Council on Foreign Relations. Below is the full text:

Millions of ordinary Iranians are bracing themselves for the impact of these sanctions. The UN special rapporteur for human rights warned that the sanctions will undermine human rights in the country, drive people into poverty and make imported goods unaffordable, Financial Tribune reported.

The impact of incoming sanctions on the humanitarian sector contradicts the US administration’s repeated statements in support of the Iranian people.

> Similar Experience

Iranians experienced similar hardship between 2012-13 when the United States and Europe introduced stringent sanctions to pressure Iran to restrict its nuclear program.

At the time, the US Treasury provided broad authorization and exceptions for the sale of medicine and medical devices. Yet only a limited number of western companies managed to operate under those conditions. Many were forced to halt or downsize trade due to disruptions in banking and high operational costs.

A repeat of this situation must be prevented. Unilateral US sanctions must not be allowed to needlessly cause suffering to millions of Iranian citizens. This is especially the case, given the fact that Iran continues to implement restrictions on its nuclear program under the 2015 deal. Europe, China and Russia have also vowed to uphold the agreement.

> Transactional, Banking Hurdles

The overarching hurdle facing many companies that export medical goods and services to Iran is related to securing banking services and finance to enable such transactions to happen. This includes a recent foreign currency shortage with which to reimburse European companies.

The lack of clarity over how the US will enforce its sanctions has exacerbated these problems. For example, while the latest US OFAC guidelines reaffirm that there is broad authorization for humanitarian transactions, there is ambiguity over how extensively the US will use secondary sanctions to target private Iranian banks.

Since the nuclear deal, such banks were clearly exempt from secondary sanctions. That meant that non-US companies could establish ties with such banks to facilitate payments for the sale of humanitarian goods to Iran. Their position is now unclear. The US has outlined plans to sanction the Central Bank of Iran, but it is inevitable that any local private Iranian bank will have to transact with the CBI.

Under the current US sanctions framework, it is unclear if this would trigger a designation for that local bank, meaning that European banks would most likely refuse to transact with that entity.

Such uncertainty can effectively block payment channels into Iran and prevent life-saving assistance from reaching doctors and Iranian patients. Indeed, several leading pharmaceutical companies currently engaged in Iran have shared with us their concerns that banks, insurance companies and distribution channels, which have facilitated humanitarian trade with Iran, are getting cold feet, fearing they could fall foul of US sanctions.

Competing interpretations of the OFAC guidelines are also causing overcompliance by European companies whose board members are reluctant to accept reputational damage in the US even for humanitarian exchanges with Iran.

> Improved Conditions in Recent Years

For Iranians, access to basic healthcare is a constitutionally protected fundamental human right. In recent years, health conditions in Iran have been gradually improving for underprivileged patients.

In part, this has been due to the easing of international sanctions that have made healthcare products more affordable and easily accessible.

President Hassan Rouhani’s government also introduced new reforms that offer healthcare to almost 11 million previously unprotected people.

Treatment for chronic diseases is a major challenge for Iran where successful treatment requires advanced devices, training and pharmaceuticals that are often provided by western companies. Protecting access of such companies to Iran is, therefore, imperative.

As global powers look to salvage the nuclear deal despite the US withdrawal, they should seek to preserve humanitarian trade with Iran. Despite opposing views between Europe and the US on the nuclear agreement, saving the lives of Iranians should not be a topic of debate. Brian Hook, the newly appointed US special representative for Iran, recently stated that the US and Europe should be working together to “find lasting solutions that truly support Iran’s people”.

Europe should press the US to fulfill this offer by working to immediately facilitate and remove obstacles to humanitarian trade with Iran.

> What Europeans Should Do

European governments should urge the US Treasury to quickly clarify the ambiguities created by its latest guidelines and ensure that a reasonable number of Iranian private financial institutions remain exempt from US secondary sanctions.

The European Union should double down on efforts to ensure payment channels with Iran are preserved, including Iran’s access to the SWIFT financial messaging service.

As a matter of priority, it should aim for banks in Europe to remain open for humanitarian trade with Iran. To help foreign companies sustain the profit margins of operations inside Iran, the Iranian government could also offer cost-saving incentives for companies that import medicine and medical goods into the country.

The European Commission recently announced it will provide an €18 million economic package for the social benefit of ordinary Iranians. If required, it should introduce similar new provisions after November to bridge any gaps in funding and payment facilities for medicine exported by European companies.

This lending mechanism (in euros as opposed to US dollars) should be large enough to at least cover the import of life-saving medicine into Iran and should be flexible enough to respond to new needs. The EU and Iran could also consider establishing a medical fund for donating pharmaceuticals and equipment to Iran. In such instances, no banking transactions will be required and therefore the risks to European companies will be reduced.

The EU could also encourage expanded scientific cooperation with Iran in medical research and training. Relative to many countries in the Middle East, Iran has advanced public and private medical research institutions that are likely to welcome such bilateral cooperation.

In fact, Iranian and US scientists have long engaged in successful health diplomacy projects. European governments can support and facilitate such humanitarian-focused projects. Such measures from Europe can demonstrate that their commitment to the humanitarian needs of Iranian people goes beyond rhetoric.

Many western governments view sanctions as an effective economic tool to alter the actions of adversary states. Yet sanctions have repeatedly hit ordinary people the hardest and resulted in a negative impact on health in the targeted country.

The human cost of sanctions in countries such as Iraq, Iran, Syria and Venezuela has been severe. Going forward, the international community must implement safeguards to fully protect humanitarian sectors of trade. As Europe pledges to demonstrate its commitment to the Iran nuclear deal, it could take a lead in this dialogue and provide concrete solutions.