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Corruption and Mismanagement Caused Medicine Shortage in Iran

By INU Staff

INU - Even before the renewed American sanctions against Iran were reimposed in August, Iran’s markets began to destabilize. The 2015 nuclear agreement, officially known as the Joint Comprehensive Plan of Action (JCPOA) ended the previous round of sanctions.

At that time, the United States made an exception for medicine and medical equipment. Still, Iranian officials attributed the country’s medicine shortage to the sanctions.
Dr. Hassan Ghazizadeh Hashemi, the minister of health, said on July 29th, that the claims that medicine supplies had not been affected by the sanctions were untrue. The US State Department has denied this.

The American Treasury Department announced that as long as it was done in a financially transparent manner, and the transactions did not go through Iran’s Central Bank or other Iranian banks that appear on the sanctions list, Iran would be able to buy medicine and medical equipment. However, the Iranian banking system does not operate under international rules for financial transparency, including those of the Financial Action Task Force on Money Laundering (FATF), making it more difficult for international banks to work with Iran
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The former undersecretary of the US Treasury under President Obama, David Cohen, and other US officials, have said that the effect of sanctions on medicine was manageable and Iran had exaggerated the problem. Still, Iranian officials insist this is a lie.

Richard Nephew, author of the book, The Art of Sanctions: A View from the Field, was responsible for the development and execution of US sanctions strategy for Iran for the American National Security Council (NSC) from 2011 to 2013.

He writes that the success of sanctions under President Obama was partly due to the “propaganda” that accompanied them. According to Nephew, the exemption of medicine and food from sanctions allowed the US to argue that the measures were not inhumane.

International banks hesitate to deal with Iranian banks because their sources of funds are not transparent. It is also believed that Iranian pharmaceutical companies or importers were possibly providing a front for the Revolutionary Guards, as the real identities of the banks could not be ascertained. So-called “private” banks might actually be owned by the Revolutionary Guards or the Paramilitary Basij Organization.

Countries, business, or individuals dealing with these banks could be forced to pay heavy fines, so doing business Iran became dangerous.
Because of their connections to the nuclear industry, the purchase of radiation therapy equipment and radio-pharmaceuticals was nearly impossible.

President Ahmadinejad’s first term minister of health, Kamran Bagheri Lankarani, said that in the winter of 2008 Iranians “were told as we woke up that they would no longer give us radio-pharmaceuticals … Some governments that claimed to be our friends called us and offered to sell us radio-pharmaceuticals that [should] cost around $200 for $2,000.”

The shortage of medicine and medical equipment reached a crisis level in 2011, with the intensification of sanctions and the near exhaustion of Iran’s medicine reserves. Imports of medicine fell by one third.

Official reports showed that 40 percent of the raw material used by Iranian pharmaceutical companies was imported. Prior to the first round of sanctions, most of the materials were imported from Europe, the United States, and Canada. After the sanctions began, China and India became the major suppliers.

The crisis did not arise from the sanctions. Marzieh Vahid Dastjerdi, President Ahmadinejad’s second term health minister and Iran’s first female cabinet minister, publicly criticized the mismanagement and misappropriation of funds that had been earmarked for importing vital medicine.

“I have heard that luxury cars have been imported with subsidized dollars but I don't know what happened to the dollars that were supposed to be allocated for importing medicine," she said on state television.

She was subsequently dismissed by Ahmadinejad. Following her dismissal, she continued to speak about it. “At the height of sanctions] when I joined the government’s Special Measures Headquarters, I saw that the foreign currency situation was very dire,” Dastjerdi was quoted as saying.

“I told my colleagues that they must do their best to find currency to acquire medicine. We needed around $2.5 billion to buy medicine and medical equipment for treating heart illnesses and the like, but they gave the Health Ministry only $41 million. This made my blood boil…Our medical needs were the eighth priority. Dog food and horse saddles were the fourth and fifth priority.”

“We are under sanctions but we ourselves have put sanctions on medicine imports,” said Mohammad Reza Naderi, the deputy head of Iran’s Department of Customs. he was referring to medicines that patients desperately needed, that remained inaccessible in customs warehouses.

It is alleged that the government consistently delayed release of supplies to pharmaceutical companies, and there were many reports about medical teams using out-of-date anesthetics — a direct threat to the lives of Iranian patients.

Mahmoud Bahmani, who was the governor of Iran’s Central Bank at that time, denied accusations that the government had failed to supply the foreign currency needed to import medicine.

He accused the medicine importers of using the currency to bring in luxury cars. In fact, the Central Bank actually announced that there were plans to use the government’s foreign currency to import dozens of luxury cars.

Nephew claims that when the United States was preparing to impose sanctions on Iran, it removed luxury items from the sanctions list so that,
A. The Islamic Republic’s currency reserve would be exhausted quicker
B. “the feeling of pain due to sanctions” would intensify among Iranians.

So we see that both medicine and luxury items were exempted from the sanctions regime by design. Mismanagement and corruption within the Iranian government assured that the goals of the US sanctions as defined by Richard Nephew would be successful.

The sanctions reimposed in August affects Iran’s access to US currency, gold and precious metals, and full sanctions resume in three months’ time. Iranian officials have said that they are prepared to provide Iranians with the medicine and medical supplies they need.

For instance, an agreement was signed in July during President Rouhani’s state visit to Switzerland, that will counter the effects of US sanctions in the areas of medicine and health. As well, Iran’s Food and Drug Administration announced that it has identified what is necessary to supply medicine to Iran under sanctions.

Life became difficult for ordinary Iranians under pre-JCPOA sanctions, with basic necessities and medicine unavailable or unaffordable. However, the corruption and mismanagement at that time played a larger role in the shortfalls than the sanctions did. As sanctions are reimposed, and Iran’s corruption and mismanagement issues remain unaddressed, the Iranian people may once again face great hardship.

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