LegiStorm

Summary:

Overview The spread in Iran of COVID-19 (the disease caused by the virus SARS-CoV-2) has raised questions about the possible effects of U.S. policy on the capacity of Iran to cope with the outbreak. Since May 2018, when the Trump Administration withdrew the United States from the 2015 multilateral Iran nuclear agreement (Joint Comprehensive Plan of Action, JCPOA), the Administration has reimposed all U.S. sanctions that were in place prior to that agreement and added further sanctions. The U.S. sanctions target virtually every economic sector in Iran, but at least technically exempt transactions involving humanitarian items. Iranian officials argue that the U.S. sanctions—which constitute the core of a U.S. "maximum pressure" campaign intended to alter Iran's objectionable behavior—are impeding Iran's ability to respond to the coronavirus outbreak. Scope of the Problem Iran has been the epicenter of the COVID-19 pandemic within the Middle East region, reporting a number of COVID-19 infections and deaths from the infection (27,000 and 2,075, respectively, as of March 25) many times higher than those of other regional states. Several senior members of key regime decision-making bodies have died of the disease, and numerous officials, including about 10% of Iran's 290-seat parliament, have tested positive for COVID-19. Reflecting widespread skepticism of Iran's transparency about the extent of the outbreak, Secretary of State Michael Pompeo has said that Iran's regime has "lied about [the extent of] the Wuhan virus outbreak [in Iran] for weeks." Whereas unrest has broken out in Iran in recent months over reduction of fuel subsidies and other government actions, to date the coronavirus outbreak apparently has not sparked renewed domestic unrest. U.S. Policy Dimension Iranian leaders, as well as a wide variety of observers claim that the extensive U.S. sanctions on Iran are impeding Iran's ability to cope with the COVID-19 outbreak. Since 2018, the Trump Administration has articulated a policy of "maximum pressure" on Iran, based on imposition of economic sanctions on every sector or Iran's economy. Sales to Iran of humanitarian items, including medicine and medical equipment, are generally exempt from any U.S. sanctions. However, executives of many global firms, particularly major international banks, have indicated that they are uncertain about how U.S. sanctions might be applied and have therefore refrained from undertaking any transactions involving Iran, including sales of humanitarian items. Some accounts draw a direct connection between the effect of U.S sanctions and Iran's struggles to contain COVID-19 cases. As the number of confirmed cases in Iran increased, Iran began to face shortages of personal protective equipment and other items needed to address the disease: respiratory masks and contamination suits, symptom relief medication, disinfectants, and related equipment. Iran produces many of these products domestically, but supplies in pharmacies and stores began to run low in February 2020. Iranian importers have had difficulty importing new inventory, at least in part because of U.S. sanctions, and Iran's factories are struggling to ramp up production to keep up with the rising demand. Yet, there are no proven treatments or preventive vaccines for COVID-19, making it difficult to conclude that U.S. sanctions are preventing Iran from curing those infected. Iran has shut numerous shrines and other religious and cultural sites to encourage social distancing, but President Hassan Rouhani has refused, to date, to impose broad lockdowns to mitigate the outbreak. As the spread of COVID-19 worsened in Iran, U.S. officials sought to ensure that U.S. policy did not impede Iran's response to the disease. In early March 2020, U.S. officials issued guidance that transactions involving Iran's foreign exchange assets held abroad, when used to buy humanitarian items, would not face U.S. sanctions. The intent of that guidance was to facilitate Iran's ability to use its Central Bank accounts abroad, which might hold nearly $90 billion in total assets, to purchase medical supplies. The revised guidance came after U.S. officials, in January 2020, activated a new "Swiss Humanitarian Channel" program, announced in October 2019, to facilitate sales of humanitarian items to Iran. The Swiss channel, and other U.S. initiatives, represented an apparent response to criticism that U.S. sanctions are having the unintended effect of prohibiting the flow of medicines to Iran. At a White House briefing on the COVID-19 pandemic on March 20, Secretary of State Michael Pompeo stated that "We've offered to provide assistance to the Iranians as well. I talked with Dr. [Tedros Ghebreyesus] from the World Health Organization about this. We're doing everything we can to facilitate both the humanitarian assistance moving in, and to make sure that financial transactions connected to that can take place as well. There is no sanction on medicines going to Iran." On March 22, Iran's Supreme Leader Ayatollah Ali Khamene'i confirmed that Iran refused U.S. aid, claiming that the offer was a U.S. plot to undermine Iran's regime. The Administration may support, or at least abstain from blocking, Iran's request for a $5 billion loan from the International Monetary Fund (IMF) that Iran says it needs to respond to the COVID-19 outbreak. Section 1621 of the International Financial Institutions Act (22 U.S.C. 262p-4q) et seq.) requires the United States to vote against a loan by the IMF or other international financial institutions to designated state sponsors of terrorism. Iran is so designated. Although the Administration could refrain from a negative vote for humanitarian reasons, press reports quoting Administration officials say the Administration is seeking to influence other IMF executive board countries—most of whom have publicly supported the loan—to deny Iran the loan on the grounds that it is likely to use the funds for regional malign activities and other issues rather than on medical imports. Some Members of Congress have called on the Administration to support the loan and to ease other U.S. sanctions, temporarily and with adequate oversight of any funds given to Iran, to help Iran deal with COVID-19.