U.S. Sanctions on Iran Hit Health Care
Posted by Clif Burns at 6:06 pm on September 6, 2012
Category: Iran Sanctions • OFAC
ABOVE: Pharmacy in Iran
The Washington Post reprinted on Tuesday a Financial Times report that indicated that U.S. sanctions on Iran were making it difficult for Iranian doctors and hospitals to provide health care to sick patients.
The tightening of U.S. banking sanctions against Iran over its nuclear program has had an impact on all sectors of the economy but is increasingly hitting vulnerable medical patients as deliveries of medicine and raw materials for Iranian pharmaceutical companies are either stopped or delayed, according to medical experts.
But, but, you ask, how can that be? Doesn’t U.S. law permit exports of medicine to Iran even under the new sanctions? Well, yes, in theory, but in practice, maybe not. The article points out difficulty in delivering raw materials to pharmaceutical factories in Iran as one factor, but U.S. law has only permitted exports of medicines, not raw products for medicines, so there’s nothing new here.
Perhaps it’s this:
“We hold a license from the OFAC, but our imports have dropped by more than half while we pay much more than before,” one importer said.
“The exemption of medicine from sanctions is only in theory,” said another. “International banks do not accept Iran’s money for fear of facing U.S. punishment.”
It seems reasonable to conclude that U.S. sanctions have a chilling effect which extends beyond their actual scope. Even if banks might be permitted under General License A to deal with certain Iranian financial institutions in connection with exports of medicine, banks may well decide that parsing the General License, and the risk of punishment if mistakes are made, makes the enterprise more trouble than it’s worth. Not to mention, of course, that this General License would only cover licensed exports of medicine from the U.S. to Iran and not exports of medicine to Iran from other destinations.
And even if the sanctions that can be imposed on foreign banks under the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”) seem limited to specific situations that don’t involve financing medical exports, the recent action by OFAC in blocking two foreign banks for their dealings with Iran may make banks worry about the risk. In that instance, OFAC appeared to be saying that transactions in the petroleum sector could be seen as aiding Iran’s nuclear program, which is one of the bases for imposing CISADA sanctions. By that logic, all transactions with Iran might be seen as aiding the nuclear program, so what bank is going to want to run the risk of financing any exports to Iran?
Its not just OFAC: BIS has refused to classify otherwise eligible medical devices as EAR99, even when the application software was EAR99, when the operating system contained an encryption module. In one case involving a foreign-origin open source operating system, BIS still refused even when given proof that there were 61 holders of an open-source copyright license for that operating system in Tehran (probably open-source software designers or engineers). Since the medical device wasn’t EAR99, it didn’t qualify for the TSRA license from OFAC.
Two to three years ago (long before the most recently-imposed sanctions), I worked on behalf of a client to get a license to export insulin to Iran. As I recall, it took something like 18 months to get the license. The agency has absolutely no incentive to process the licenses applications very quickly. I can only imagine what it takes these days, pretty much effectively shutting down any actual exporting. This doesn’t even take into account the issue of getting paid. As I recall, the licenses are only good for one year. You’d have to submit multiple license requests back to back in order to have an ongoing export program.
The transactions are failing because of Presidential Banking Sanctions. Presidential Sanctions implicate the entire civilian financial infrastructure of Iran necessary for licensed trade under TSRA, or licensed humanitarian aid YET DO NOT exempt humanitarian. Helpful is to understand the difference between legislatively enacted sanctions, and sanctions from the Office of the President.
Legislatively, the provision for licensed humanitarian trade is a long established Capitol Hill lore,
(1) as embodied in the Trade Sanctions Reform Act of 2000 (TSRA);
(2) then Capitol Hill specifically reinforced in the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010 (CISADA) (See, CISADA 103 (b)(2)(B)(ii) which reaffirmed the humanitarian trade promulgated in TSRA; see also, Notes to Section 202 which establishes a TSRA Preemption to State Divestiture),
(3) then Capitol Hill specifically protected licensed humanitarian trade in the National Defense Authorization Act of 2012 (NDAA) which while sanctioning transactions involving the Central Bank of Iran (CBI) specifically exempted transactions for licensed humanitarian exchanges,
(4) Then Capitol Hill again endorses licensed humanitarian Trade in the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA) with its Technical Correction in section 503 (which fixed an inadvertent error in the NDAA Exemption) and with the Chairman of the Senate Banking Committee Senator went on record and told the “[Administration] … make it clear that no U.S. sanctions will be imposed against third-country banks that facilitate OFAC-licensed or exempted humanitarian
Presidential Sanctions (The Presidential Sanctions are E0 13224 and EO 13382) implicate the entire civilian banking infrastructure but (unlike Capitol Hill) has decided not to exempt humanitarian aid/trade AND RATHER specifically target humanitarian aid/trade. All licenses (general and specific) contain PRIMA FACIE prohibitions seeming from these Presidential Sanctions; Presidential Sanctions (again) implicate the entire civilian banking infrastructure of Iran necessary for licensed humanitarian exchanges BUT DOES NOT EXEMPT HUMANITARIAN TRADE.
The paradox for the Executive Branch emerge with the new EO’s for human rights violations in Iran, because when these EO’s are connected we have a narrative of “Don’t beat these civilians who we have targeted with denial of food and lifesaving medicine and agricultural goods”.