Under Trump, US Sale of Medical Goods to Iran Down Nearly 40%

With just two weeks until Trump reimposes secondary sanctions on Iran, administration officials are under increasing pressure to prove that the returning sanctions will not adversely impact humanitarian trade.

Secretary of State Mike Pompeo has declared that “sanctions and economic pressure are directed at the regime and its malign proxies, not at the Iranian people.” But a review of US trade data shows that humanitarian exports from the US to Iran have withered under the Trump administration, lending credence to claims that while sanctions exemptions for humanitarian trade persist in principle, companies are struggling to avail themselves of these exemptions in practice.

In August, US exports to Iran surprisingly surged to nearly USD 150 million dollars, levels not seen since late 2008, when the Bush administration oversaw the sale of a significant volume of wheat to Iran, pushing monthly exports above USD 100 million for several months. The sudden increase in US exports to Iran was even reported upon by Iranian media outlets.

Looking into the content of those exports, just over USD 140 million dollars of the August trade is attributable to the sale of American soybeans to Iran, the number one destination for the crop that month. Due to Trump’s trade war, the export of soybeans to China has collapsed 95 percent, making commodities traders eager to offload supply to Iran.

But August’s sharp increase in exports to Iran remains exceptional for the Trump administration. Looking to data for the twenty months of the Trump presidency, a clear pattern emerges—along with overall trade, the export of humanitarian goods like food and medicine remains significantly lower than average monthly values registered during the Obama years.

Isolating humanitarian trade within United States Census Bureau export data can be done by analyzing twenty-one of ninety-nine standard “Schedule B” commodity codes, used to categorize trade in live animals, cereals, food oils, pharmaceuticals, and medical devices, among other goods that may fall under sanctions exempt or readily licensed trade.

Looking to the average monthly export value for goods in these categories, the Trump administration’s average of USD 15.4 million is actually about 6 percent higher than the monthly average of 14.5 million dollars registered during the Obama years. However, the Trump average is significantly distorted by the bumper trade in soybeans during July and August. When excluding these two months from the calculation of the Trump average, the monthly export value falls to just USD 7.1 million dollars, about half the level seen during the Obama years.

The significant decline in humanitarian trade is also evidenced by looking to the median monthly export value, which may better account for the natural volatility in US exports to Iran. In the 96 months of the Obama presidency, the median value of humanitarian exports to Iran was USD 9.4 million dollars per month. In the 20 months of the Trump presidency so far, the same figure has fallen to USD 5.8 million dollars per month, a 40 percent reduction.

The most regular kind of humanitarian trade between the US and Iran is the export of pharmaceutical goods. There was just a single month during the whole Obama presidency in which no exports of pharmaceutical products to Iran were registered. Likewise, pharmaceutical exports to Iran have so far been registered in every month of the Trump presidency. However, even in this routine trade, the Trump administration is falling short.

Under Obama, the United States exported an average of USD 2.1 million in pharmaceutical products to Iran each month. Under Trump, that monthly average export value has collapsed to just USD 720,000, a paltry one-third of the former level.

Importantly, in the last few years, the trade in medical devices to Iran has outpaced trade in pharmaceuticals, which may point to Iran succeeding in finding other suppliers of key medications while also boosting domestic production. The shift begins around March 2014, shortly after the January 2014 implementation of the Joint Plan of Action (JPOA)—the precursor of the nuclear deal—in accordance with which the Obama administration began to expand secondary sanctions relief for humanitarian trade, including pharmaceutical exports to Iran. It is likely that European exports continue to offset the fall in American exports, including the reexport of American-made products from European divisions of American companies.

However, when adding medical devices and equipment into an overall calculation of exports of medical goods, the picture remains dire. During the Obama years, the US exported an average of USD 6.3 million in medical goods each month. In the first 20 months of the Trump administration, that figure has fallen to USD 4.6 million, a significant 37 percent drop.  

The decline of medical exports to Iran is unlikely to reflect falling Iranian demand. There were no exports of medical devices or equipment to Iran during the first nine months of the Trump presidency. But in October 2017, the same month when Trump “decertified” the JCPOA nuclear deal, exports of medical devices and equipment began again, and have recently reached the highest monthly level since 2015, despite the fact that the sharp devaluation of the real has made such imports much more expensive. Add to this the clear evidence from Iran that sanctions are beginning to result in shortages in key medicines and foodstuffs, and it is obvious that there remains significant scope for the Trump administration to expand its humanitarian trade with Iran.

It would seem that the Trump administration has reached a kind of crossroads when it comes to its strategy for humanitarian trade with Iran. It has publicly insisted that it will allow trade to flow and export volumes in the last few months are more consistent with the decade-long pattern of exports in food and medicine sustained by the US concurrently with the imposition of secondary sanctions.

At the same time, moves such as the recent sanctions targeting Parsian Bank, suggest that the administration is unwilling to send reliable signals to those companies and financial institutions engaged in vital humanitarian trade with Iran. Whether the administration will make good on its own reassurances and meet its moral obligation to facilitate humanitarian trade with Iran remains to be seen.

Photo Credit: IRNA

Trump Stance on JCPOA Nuclear Deal Poses Legal Dilemmas for Iran

With the May 12 deadline for the issuing of key sanctions waivers as part of the Iran nuclear deal fast approaching, what could be the impact of the collapse of the 2015 agreement? While Donald Trump's conditions for the review of the current arrangement have yet to be met and Iran's clear rejection of any amendments to the plan, the breakdown of the Joint Comprehensive Plan of Action (JCPOA) seems inevitable.

The nuclear deal is the most important multilateral agreement reached in the global nuclear non-proliferation system in the last decade. It is now at risk of collapse.  There are three options for Iran should the US withdraw from the JCPOA.

First, Iran could exit the deal immediately and continue to fulfill the obligations under NPT and to the IAEA based only on the safeguard agreements with the agency. This is seen as the worst case scenario by the EU, E3 and the IAEA.

Second, Iran could exit the deal immediately, but continue to fulfill its commitments to the International Atomic Energy Agency (IAEA) based on both safeguard agreements with the IAEA agreed as part of the JCPOA and its preceding agreement, the Joint Plan of Action (JPOA). Under these safeguards Iran has suspended enrichment of uranium to 20 percent.  

Third, Iran could opt to remain  in the deal on the basis that the European Union and E3 (UK, France and Germany) will provide additional  benefits to Iran to compensate for the negative effects of US withdrawal.Iran’s deputy foreign minister, Abbas Araghchi, one of the key architects of the JCPOA, has stated that as long as Iran continues to benefit from a removal of sanctions, it will remain committed to the deal, but has expressed doubts that the France, Germany and the UK will be able to guarantee Iran’s interests in the absence of the United States.

Regardless of which route Iran takes, the withdrawal of the United States from the JCPOA will have a legal impact on its parties. Any possible change in the partnership or the provisions of the agreement will be reflected within the domain of international law.

The Threat of Snapback

Trump has threatened not to issue the crucial waivers that have suspended US secondary sanctions on Iran. On May 12, Iran may find itself in a position not of its own making. Despite unprecedented international monitoring and scrutiny of its nuclear program, and despite the IAEA's approval of its commitments without the slightest deviation for military purposes, it may once again face significant economic sanctions, even over the vital sale of its oil. However, snapback of US secondary sanctions could actually preclude snapback of UN sanctions, if the deal remains intact following Trump’s withdrawal.

One of the provisions of the JCPOA, unprecedented in the 70-year history of the Security Council, is the decision-making process of the partners required to resume sanctions. According to Article 37 of the JCPOA, if the dispute resolving mechanism is unsuccessful, the UN Security Council will vote on a resolution to continue the lifting of sanctions.

In such a case, the United Nations Security Council would vote for a resolution to suspend sanctions. As described in a recent report by Stephen Mulligan, an attorney with the Congressional Research Service:

The ‘snapback’ mechanism thus places the onus on the Security Council to vote affirmatively to continue to lift its sanctions by stating that those sanctions will be implemented automatically unless the Security Council votes otherwise. As a permanent member of the Security Council, the United States would possess the power to veto any such vote and effectively force the reinstatement of the Security Council’s sanctions on Iran.

In this process, the vote of all five permanent members of the Council is critical. If one of these members does not agree with the suspension of sanctions, it alone can easily restore a series of Council sanctions under Article 41 and Chapter 7 of the United Nations Charter (threats to global peace and security).

However, if the United States pulls out of the JCPOA, triggering the snapback of its secondary sanctions against Iran, it may lose the ability to use the UN sanctions snapback threat which is articulated with Article 37 under JCPOA. In other words, only parties to the Iran deal are able to trigger the UN nuclear sanctions snapback procedure. If the US withdraws from the deal, it loses the ability to trigger this mechanism.

This would be a reprieve for Iran, but there are further legal pathways that should be considered in order to prevent more damages by the US to the non-proliferation regime and international law.

Recourse to the International Court of Justice

The IAEA has verified in eleven reports that Iran has fully complied with its commitments under the nuclear agreement. On this basis, Iran feels it is facing punishment without justification.

Iran can, on the basis of Clause 2 of Article 21 of the Treaty of Amity, Economic Relations, and Consular Rights (1955), file a complaint with the International Court of Justice (ICJ) against the United States on the basis that it has had a detrimental effect on its business and trade with other countries. 

Punishing Iran with various economic sanctions, including the vital sale of its oil, may result in Iran’s withdrawal or limited implementation of its political commitments under JCPOA. Depending on whether Iran completely abandons JCPOA or suspends some of its commitments under the agreement, it means the end of the current inspections and the IAEA's ability to continue a complete and unprecedented monitoring of Iran's nuclear program. The result is the inability of a United Nations agency to carry out its mission.

The current situation has created a legal impediment, despite the wishes of Iran, for the IAEA and the members of its board of governors including the United Kingdom, France and Germany. According to the definition of the Vienna Convention on the Law of Treaties 1969, the JCPOA is not considered to a treaty, under which definition a violation would result in a case directly taken as a complaint to the International Court of Justice. 

However the IAEA is an agency authorised by the UN and if it cannot reciprocate with its obligations to a UN member state that has been in compliance with the nuclear agreement (Iran) due to the interference of a third country, the IAEA can, on the basis of Article 96 of the UN Charter, and Clause 1 of Article 65 of the Statute of the International Court of Justice, for the first time in its history, resort to the ICJ for an advisory opinion on the legal status of the JCPOA.

There is some precedent for such a request by an international organization like the IAEA. The World Health Organisation has taken a similar action on threats to the use of nuclear weapons in armed conflict, requesting a referral from the International Court of Justice. The ICJ’s response would not be legally binding but it would be a new source of international law, and may be considered by the other parties to the nuclear agreement as an official advisory about their treatment of deadlock with the United States.

The JCPOA is an improbable achievement, an agreement reached after Iran had been subjected to the harshest sanctions regime ever imposed. In political practice and in the domain of international law, the JCPOA provides a new way of resolving disputes in support of the nuclear non-proliferation regime.  the agreement collapses it would be, as in the words of Yukiya Amano, Director General of the IAEA, a “great loss for nuclear verification and for multilateralism” and in my view also for international law more generally. 

Photo Credit: Wikicommons