Iran under sanctions: no money for medicine but luxury cars aplenty

In 2012, the United States and European Union introduced new financial and energy sanctions designed in part to curb Iran’s oil exports. The US threatened foreign financial institutions dealing with Iran’s Central Bank, making it hard for Iranian companies to acquire the dollars needed to buy imports.

In any case foreign currency dried up, because the sanctions halved Iran’s oil exports – its main source of foreign exchange – and cut oil revenue from $95bn in 2011 to $69bn in 2012. Even when dollars were available, the cost of imports became prohibitive as the rial fell on the open market from 19,000 in 2011 to 32,000 in 2012.

While the sale of medicine to Iran was supposedly exempt from sanctions, most western banks and suppliers were so afraid of problems that they ended all trade. Shabnam Safamanesh, a businesswoman involved in importing pharmaceuticals, told Tehran Bureau that western banks soon refused letters of credit issued by Iranian financial institutions.

“They didn’t trust we could pay them,” she said. “Even after lots of struggles, when we were able to open a letter of credit, the transaction process would take a long time. As a result our suppliers didn’t have confidence in the Iranian banks anymore. We had suppliers in France and Switzerland, and they were telling us they were scared of getting into trouble.”

From March 2012 to July 2013, Iran’s Central Bank made available an undisclosed amount of US dollars at a highly subsidised rate of 12,260 rials to pay for the imports of vital goods, especially food and medicine. This rate would last to July 2013, when the bank doubled the exchange rate to 24,777 rials, still better than the market rate but far less so.

When the subsidised rate was introduced in 2012, Reza Fatemi Amin, a deputy planning minister, made clear it was only for importing essentials, not luxury goods. The health ministry scrambled for currency, but within months the shortage of medicine was critical for millions of Iranians suffering from multiple sclerosis, hepatitis, haemophilia, cancer, diabetes and thalassemia.

“In a normal situation, I inject every day five vials of Desferal,” a drug countering excess iron in the blood, said Sara Valimirza, a 37-year-old with the hereditary blood disorder thalassemia major. “During the sanctions, there were times that I had only ten injections a month.”

As a result, Valimirza suffered from constant fatigue, her skin turned grey and the whites of her eyes went yellow. “I was scared my heart would fail,” she said. “At the same time, I was angry that for 37 years I did whatever I could to keep my body as healthy as possible, and now, for no good reason I couldn’t find my medicine.”

But as the health ministry struggled to acquire dollars, car importers were doing brisk business. Between March and November 2012, Iranian customs data show importers used more than $617m acquired at the preferential rate to import over 5,000 cars. This included $277m for Kias and Hyundais, $109m for Toyotas, and – at the luxury end – $41m for around 200 Porsches and $10m for 35 Maseratis.

In late 2012, Alireza Soltani, a 33-year-old businessman in Tehran’s grand bazaar, bought a nearly new brown Porsche Panamera. The price tag was $123,000, but with additional licences, customs clearance, taxes and fees, Soltani paid $320,000. “A good car gives you self-confidence and in some places buys you respect and attention, especially when it comes to the opposite sex,” he told Tehran Bureau.

Decades-old restrictions on importing luxury cars were eased during the second term of President Mahmoud Ahmadinejad between 2009 and 2013. Before 2009, Porsches and Maseratis were rarely spotted on the streets. Today, both Maserati and Porsche have corporate offices, and luxury cars are a common sight in Tehran.

The year Soltani splashed his $320,000 on his Porsche, the average yearly family income in Iran was around $5950. Those who could afford expensive cars often paid in cash. “In Iran, installment payments aren’t common, especially when you want to buy a car such as Porsche or Maserati,” explained Soltani.

As car imports soared after the tightened sanctions, from $830m in 2011 to $1bn in 2012 and $1.6bn in 2013, imports of pharmaceuticals fell. Medicines sold in measured doses – categorised under the global Harmonised System Code as HS Code 300490 – had risen from $290m in 2006 to $766m in 2011, but in 2012 they dropped to $728m.

Customs data also reveal that from December 2012 until the cancelation of subsidised dollars in July 2013, car importers enjoyed a better exchange rate: the average dollar rate for importing passenger cars was 22,570 rials while it was 24,427 rials for importing medicine with HS Code 300490.

There are no official figures of deaths due to the lack of medicines, but in 2012 several experts including Mohammad Mehdi Ghiamat, chair of the board of anaesthesiology, and Ahmad Ghavidel, chair of the Centre for Haemophilia, said lives had been lost. In November 2012, Iranian media reported that a 15-year-old boy suffering from haemophilia had died because he could not be given medicine.

But if the media reported on the lack of essential drugs, it ignored the use of subsidised dollars by car importers, at least until November 2012 when the health minister Marzieh Vahid-Dastjerdi appeared on state television. After she said the ministry was not being given sufficient dollars to pay for imports, she was asked whether subsidised dollars were being used to import luxury cars. “We have heard such a thing and hope someone is going to respond,” she said.

The following month, Dastjerdi went further, telling state television that while the Central Bank had granted only $850m of the $2.5bn needed to import medicine, she had obtained Central Bank documents showing importers of luxury goods such as cars were being authorised to use subsidised dollars.

“There should be an investigation of who spent the subsidised dollars intended for the import of medicine,” she said. “According to the law, no one is allowed to use this artificially low currency rate except medicine importers. The budget should only be spent on medicine, not cosmetics, luxury goods and cars.”

Mahmoud Ahmadinejad’s government reacted quickly, denying car importers had used subsidised dollars. Later that month, December 2012, Dastjerdi was replaced as health minister.

Dastjerdi’s public criticism of the Central Bank led members of parliament to criticise car importers, with some deputies accusing them of improper links to the government. Between November 2012 and March 2013, parliament published three reports that confirmed subsidised dollars had been misspent on importing cars, but the reports lacked specific information about the amounts. Nor did they name the individuals responsible.

                                

The third report, presented in May 2014, was written by the parliament’s Article 90 Commission, whose mandate is to investigate complaints against the government and “announce the results in a proportional period of time”.

The report was vague. It noted “mismanagement in some government bodies and failure in abiding by their legislative duties” and pledged to refer the matter to the courts. Hossein Azin, spokesman for the commission, confirmed to Tehran Bureau that the commission had referred the report to the judiciary but he refused to say whether a legal case had been opened.

Iran’s judiciary also refused to reveal whether there was a legal case, citing “confidentiality.” The Central Bank refused to comment as well, saying it would not “explain economic matters to a journalist.”

In 2012, Mahmoud Bahmani was governor of the Central Bank. He would or should have had knowledge about the allocation of subsidised dollars, but his name is not mentioned in any publicly available parliamentary reports.

When Hassan Rouhani was elected president in 2013, Bahmani was replaced, and he has since become a senior advisor to the president of Setad, the headquarters for executing the order of the Imam, a powerful economic organisation overseen by the leader, Ayatollah Ali Khamenei.

Bahmani is currently under scrutiny for alleged connections to Babak Zanjani, an Iranian billionaire arrested in December 2013. Zanjani apparently helped circumvent the oil embargos, channelling revenue back to Iran through his companies, but has also been accused by Bijan Zanganeh, the oil minister, of owing the ministry $1.9 billion.

In January 2015 Rouhani’s public relations office alleged Zanjani had stolen $2.7bn from public funds, including $1bn in Central Bank deposits, while Eshagh Jahangiri, the first vice-president, linked Bahmani to the billionaire, saying the two of them had had many private meetings. Bahmani denies this and insists that he had no role in any oil corruption. Zanjani has also denied any wrongdoing.

But while such accusations fly, none of the car importers has been summoned before a court. And despite some restrictions on the import of cars during the past year, the luxury car market remains vibrant.

Even so, the matter seems to have not died. In late July, in an interview with Iran’s Isna news agency, Farhad Ehteshamzad, chairman of Iran’s automobile imports association, was asked about the matter. Ehteshamzad denied all the reports, saying any “subsidised dollars that were allocated to import medicine” was not used to import cars.

Meanwhile, medicine shortages continue, though officials deny it. “We have no drug shortages whatsoever at this time,” deputy health minister Iraj Harirchi was quotded as saying last month.

As for Valimirza, the woman suffering from hereditary blood disorder, the market remains the same, she said. Her Desferal quota, which was 150 vials per month, is still only 15 vials a month, the exact amount that she received during the height of sanctions.

“But the tensions are less,” she added. “People are less stressed. I am feeling better, because I am hopeful that things are going to get better. We are all hopeful.”

Source: The Guardian(UK.)