01 Oct 2020
A U.S. proposal to almost totally sever Iran from the global financial system could sharply hinder its ability to secure supplies of food and drugs as it struggles to contain a resurgence of the worst coronavirus outbreak in the Middle East.
The Trump administration is considering targeting more than a dozen banks and labeling Iran’s entire financial sector off limits, three people familiar with the matter said on Monday. That would escalate Washington’s unsuccessful efforts to force Iran into new negotiations over its nuclear program and activities in the region, two years after the U.S. left a landmark 2015 deal and reimposed sweeping sanctions, including on vital oil exports.
“I really don’t know what to say. Access to money will definitely get even harder for us,” said Seyed Abdolreza Hejazi Farahmand, chief executive officer of Tehran-based Behestan Plasma PJS Co., which produces plasma-derived products for hemophiliacs.
Under the plan, the administration would blacklist roughly 14 banks in Iran that have so far escaped U.S. restrictions, under authorities designed to punish entities associated with terrorism, ballistic-missile development and human-rights abuses. The proposal is still under review and hasn’t been sent to President Donald Trump.
Included in the list are Saman Bank and Middle East Bank, the two remaining lenders still able to import food and pharmaceuticals into Iran. Officials at the banks, and the Central Bank of Iran, weren’t immediately available for comment.
Drug and medical supply companies in Iran are now weighing the possibility that the proposed new penalties would all but paralyze their work. That could leave companies increasingly dependent on a small network of informal money changers overseas who can execute financial transfers but who might also find themselves in Trump’s crosshairs under the new sanctions.
“So they want to completely suffocate us. Iran will be completely crushed and many people will suffer,” said Sara, a 33-year-old employee at a pharmaceutical company based in Tehran who didn’t want to be identified because of the sensitivity of speaking with foreign media.
The U.S. State Department says that humanitarian goods are exempt from current sanctions. Yet years of punitive measures imposed by the United Nations and now unilaterally by Washington have turned Iran into a pariah for most foreign banks and companies, with executives wary of infringing penalties.
Iran makes many of its drugs through a relatively sophisticated pharmaceutical research and production sector. But specialist treatments such as those for cancer or donor transplants often rely on imports. Iran reported 3,677 new cases of coronavirus on Tuesday, the second-highest daily number since the outbreak erupted in February. The death toll reached 25,986.
Last year, pharmaceutical purchases from the European Union were down 15% from 2016, according to the European Commission. U.S. shipments of mostly non-sanctioned humanitarian goods dropped to $3.9 million in February — a drop of 88% from four years earlier.
Tehran has sought to bypass sanctions, and in June the Foreign Ministry unveiled an agreement to import medical supplies from South Korea in lieu of $7 billion it owed Iran for oil. The only shipment so far announced amounted to $500,000.
Both the EU and Switzerland have tried to improve Iran’s access to non-sanctioned goods using their own trade channels, but both efforts have only managed to deliver tiny volumes of goods to Iran over the past two years.
Hardliners inside and outside the U.S. administration believe that it would be possible to mitigate the humanitarian costs of the new sanctions, chiefly through so-called comfort letters from the Treasury Department, the people said. The letters could assure banks they wouldn’t be penalized for facilitating a particular trade.
By Golnar Motevalli, Bloomberg, 29 September 2020
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