October 14, 2020 | Insight

Corruption, Not Sanctions, Is Causing Medicine Shortages in Iran

October 14, 2020 Insight

Corruption, Not Sanctions, Is Causing Medicine Shortages in Iran

Hassan Rouhani, the Iranian president, says that new sanctions on 18 Iranian banks are part of a deliberate U.S. effort to cause shortages of food and medicine. It’s a claim that the Tehran regime has been making for years – not because there is evidence to back it up, but because Western journalists too often fail to report on the underlying causes of Iran’s woes and instead report that sanctions are to blame. Even before Rouhani made his latest claim, Bloomberg ran an article titled “U.S. Sanction Plan for Iran Would Imperil Drug, Food Imports.” The most important reason for this credulity is that Westerners rarely pay close attention to what senior Iranian officials tell domestic audiences, which often undercuts the messages intended for foreign consumption.

Health Minister Saeed Namaki has continually reported that Iran is doing just fine when it comes to supplies of medicine. At the height of the pandemic, Namaki said, “[A]lthough it is hard to fight the coronavirus under sanctions, since the beginning [of the outbreak] we have not faced a shortage of special drugs needed to treat this disease.”

Last December, while U.S. media were reporting on sanctions’ alleged harm to Iranian healthcare, Namaki announced that “despite the enemy’s attempts to create a crisis, today we face no significant shortages in the fields of medical treatment and pharmaceuticals.” He said that “medicine shortages had improved compared to last year,” with Iran amassing a “strategic reserve” of medicine set to last seven months. Namaki also said last year that Iran is 97 percent self-sufficient in the production of medicine and plans to reach 100 percent. In fact, Iran even exports medicine to countries in Europe, Africa, and Central Asia.

In some respects, this should not be surprising, since U.S. law ensures that Washington’s sanctions on Iran do not prohibit trade in food or medicine. European trade data show that Iran’s pharmaceutical imports remained robust in 2019 despite the return of sanctions. And regime insiders such as the chairman of the Iran-Switzerland Chamber of Commerce have admitted that mechanisms such as the Swiss Humanitarian Trade Arrangement allow the import of humanitarian goods without hindrance from U.S. sanctions.

So why are there still shortages? Namaki warned lawmakers that corrupt networks are selling drugs on the black market, “hoarding medicines in warehouses, and distributing counterfeit drugs.” The health minister also blasted “a highly complicated network” within the government responsible for systemic corruption and theft, including the hoarding of “millions of antiviral masks.”

Such problems affect every sector of Iran’s economy. Transparency International’s Corruption Perceptions Index ranks Iran 146th out of 180 countries. The Financial Action Task Force also considers Iran to be a “high-risk jurisdiction” for corruption, money laundering, and the financing of terrorism.

Theft is what feuding politicians have in common, regardless of the faction with which they are aligned. The situation was the same under Rouhani’s predecessor, Mahmoud Ahmadinejad, who fired his health minister, Marzieh Vahid Dastjerdi, after she said on state television 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.”

Dastjerdi spoke out more forcefully after her dismissal. “At the height of sanctions [in 2012] when I joined the government’s Special Measures Headquarters, I saw that the foreign currency situation was very dire,” she recalled. “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. Our medical needs were the eighth priority.”

Even when allocated to medical imports, hard currency often goes missing. Rouhani’s chief of staff admitted that more than $1 billion reserved for the import of medicine and essential goods had just “disappeared.” Mehdi Mirasharrafi, the deputy minister of economy, said the regime “provided government dollars for specialty chemotherapy drugs but imported dry ice and narcotic substances instead.”

In September 2019, regime authorities arrested Shabnam Nematzadeh, the daughter of a former minister and owner of one of Iran’s largest pharmaceutical companies, for hoarding expired medicine and selling it at above-market prices. Nematzadeh’s prosecution is unusual, as the regime allows more senior officials to get away with systematic corruption but at times arrests more marginal figures so it can demonstrate its “fight” against corruption.

U.S. and European leaders should bear this corruption in mind as regime officials such as Foreign Minister Javad Zarif seek to play on Western guilt to secure sanctions relief. The regime knows it is facing an existential threat from a population fed up with graft, oppression, and religious intolerance. To put down the Aban uprising in 2019, the regime had to employ extreme violence, resulting in the death of an estimated 1,500 protesters. Meanwhile, the daily loss of life from COVID-19 is only getting worse thanks to the regime’s cover-ups and incompetence.

The next economic shock and round of mass demonstrations could come at any time. By playing up medical shortages, the regime hopes to secure a financial lifeline such as the $15 billion line of credit the French government suggested last year as an incentive for Iran to comply with the 2015 nuclear deal. Even better for the regime would be a new administration in the United States prepared to re-enter the nuclear deal, which would entail lifting all the toughest sanctions. Yet just as the regime hid its nuclear archive while feigning compliance with the deal, it seeks to divert attention from corruption at the highest levels while pleading for sympathy. The Iranian people are not fooled by such tricks, nor should anyone else be.

Alireza Nader is a senior fellow at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Iran Program and Center on Economic and Financial Power (CEFP). For more analysis from Alireza, the Iran Program, and CEFP, please subscribe HERE. Follow Alireza on Twitter @AlirezaNader. Follow FDD on Twitter @FDD and @FDD_Iran and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy

Issues:

Iran Iran Politics and Economy Iran Sanctions Sanctions and Illicit Finance