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After Iran Tech Sanctions Fix, are Medicine Shortages Next?

Last week, a senior State Department official acknowledged something the U.S. government had previously chalked up as simply Iranian propaganda: that sanctions are contributing to medicine shortages in Iran. The official, Ambassador Wendy Sherman, was talking to BBC Persian to announce that the U.S. was lifting sanctions on communications technologies that help connect the Iranian people to the outside world, in a policy shift that has been widely praised. During the interview, Sherman indicated that the U.S. is "so concerned" about shortages of medical supplies inside Iran that the Obama administration has "sent a team around the world talking to countries who said they are having difficulty getting their medicines into Iran, because we want to make sure that they don't think they may get sanctioned by the US if they send medicine to Iran."

Acknowledging that there is a problem is a crucial step that raises expectations that the administration might finally take action to address the problem, alleviating medical shortages and ensuring that Iranians are able to access humanitarian goods.

Reassuring exporters of food and medicine that they won't be targeted for selling their products to Iran is an important step. Alone, however, experts warn that it is not enough to stop U.S. sanctions from continuing to contribute to shortages of medicine and other humanitarian goods inside Iran. Due to the breadth of sanctions on Iran and severe penalties for violating them, the conditional authorization for facilitating humanitarian transactions with Iran has proven insufficient, as demonstrated by massive medicine shortages in Iran.

It is legal to export humanitarian goods to Iran in theory, but sweeping sanctions on nearly the entire Iranian banking sector make doing so either very difficult or impossible. Ensuring that banks are willing to facilitate transactions largely depends on a company's ability to browbeat a foreign bank into facilitating transactions by threatening to withhold other business. In other words, large multinationals with dedicated teams can find a way, but most others often find a closed door.

The reason for foreign banks' hesitancy is that if they deal with Iran's blacklisted banks, directly or indirectly, they could be cut off from the U.S. financial system. These fears have been reinforced by the Treasury Department's active discouragement of any financial transaction with Iran for many years. As we learned in the 2008-2009 financial crisis, banks are deeply interconnected, and it can be difficult for a foreign bank to know for sure if a blacklisted Iranian bank might somehow be indirectly involved in any given transaction. As long as U.S. regulations are putting these foreign banks at such risk, there will continue to be medicine and other shortages. The banks simply will find the risks too great to facilitate humanitarian transactions.

There's no doubt that increasingly severe Executive and Congressional sanctions are imposing tremendous hardships on the Iranian people. Yet, even the most hardened sanctions proponents have claimed to support enabling humanitarian trade items like medicine sales.

The administration should stand with the Iranian people by opening banking channels for humanitarian goods and other U.S.-authorized transactions by providing third country banks a blanket waiver that they will not be sanctioned for facilitating legitimate humanitarian transactions. Alternatively, the Obama administration could heed the recommendation of a recent Atlantic Council report by "[d]esignating a small number of US and private Iranian financial institutions as channels for payment for humanitarian, educational, and public diplomacy-related transactions carefully licensed by the US Treasury's Office of Foreign Assets Control." This measure would completely cut out the need to use foreign banks as intermediaries. As the Atlantic Council notes, this would be a major step to facilitate people-to-people ties with Iranians, whose opinion of U.S. policy has suffered under indiscriminate sanctions.

Several other expert organizations have drawn attention to this issue in recent reports. The Wilson Center published an extensive report highlighting the key role sanctions play in contributing to shortages of advanced Western medicine used to treat serious afflictions such as cancer and hemophilia. By blacklisting Iranian banks and deterring foreign banks with massive sanctions, the banking channel needed to facilitate transactions inhighly-patented Western medicine has been closed. Siamak Namazi, one of the authors of the report, stated in a New York Times op-ed, "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." Facing shortages, Iranians have been forced to substitute cheaper drugs from China and India that are not nearly as effective in dealing with serious medical conditions.

The Iran Project's recent report, which was signed by three dozen former policymakers and experts, including Amb. Tom Pickering, Sen. Richard Lugar, Rep. Lee Hamilton and Anne Marie-Slaughter, confirmed these findings. Although the Treasury Department's Office of Foreign Assets Control (OFAC) exempts humanitarian aid to Iran, "U.S. firms are not always willing to undertake the licensing process that is required, while foreign firms and banks may hold back from any transactions with Iran for fear of U.S. penalties and the risk of rapidly plummeting rial." As a result, the suffering caused by sanctions is not only undermining global support for U.S. policies but also further inflamespublic resentment from Iranians. They warn, humanitarian shortages "could produce mass human suffering that would be morally repugnant and contrary to past American policy."

A new sanctions bill being considered in the House (H.R.850) would likely worsen the humanitarian crisis by forcing countries that currently trade with Iran, such as China, Turkey, India and South Korea, to reduce all of their commercial trade with Iran or face sanctions. Without an exemption for humanitarian goods including food and medicine, this would deepen shortages of such goods in Iran while angering our allies.

The President does not have an excuse to let this problem fester; he can fix the regulations unilaterally without an act of Congress. Fortunately, Ambassador Sherman's comments appear to indicate that the administration is ready to acknowledge its role in humanitarian shortages in Iran, and is ready to take steps to fix the problem. Doing so would be another major victory to ensure that the U.S. does not contribute to the suffering of ordinary Iranians.

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