COVID-19 and Biden’s Gambit: The Opportunity for Diplomacy with Iran

COVID-19 has proven much more than just a pandemic of biological proportions. The virus has shone a spotlight on the cracks both within and between countries globally. Nowhere is this situation more urgent than in the U.S.’ relationships with its embargoed nations, most notably Iran. Due to the current sanctions imposed on  Iran by the U.S., Iran finds itself at an impasse when it comes to receiving consistent humanitarian aid. This unfortunate dynamic also presents an opportunity for engagement through a potential vaccine diplomacy effort between the U.S. and Iran.

With 3,851, 162 confirmed cases according to the World Health Organization and 90,344 deaths as of July 30, 2021 coupled with the reality of sanctions, the situation in Iran is particularly dire. In the U.S.’ absence, China and Russia have stepped in to fill the vaccine void. The first foreign vaccine received by Iran was Russia’s Sputnik V, used to vaccinate frontline health workers. Sinopharm, produced by China, will be the second. 

According to Iran’s ambassador to Moscow, Kazem Jalali, Tehran signed a contract with Russia to purchase 60 million doses of the Sputnik V COVID-19 vaccine. The Sputnik vaccine was approved for domestic usage in January, with plans to start domestic production in April. A local Iranian pharmaceutical company, Actoverco, produced a local version of the Russian vaccine in June. 

COVID-19 shows no signs of abating, especially in Iran, with the Delta variant sparking a resurgence in cases. This would be a good opportunity for the U.S. to consider pursuing a track of vaccine diplomacy with Iran. Not only would it save lives and contribute to lessening the spread of the virus globally, it would also be a stepping stone to better economic and political bilateral relations between Iran and the U.S.

A targeted approach to normalizing trade relations through selling vaccines to Iran could make the case for the U.S. to enter the Iranian market for numerous other products that directly relate to public safety. Take for example, aviation. Between 2011 and 2016, Iranian airlines were subject to sanctions under the U.S. Executive Orders 13382 and 13224. Order 13382 was meant to financially isolate proliferation of weapons of mass destruction and those who supported them. Order 13224 was intended to curb terrorist financing and spending after 9/11. The blacklisted airlines included Mahan Air, Caspian Air, Meraj Air, Pouya Air; these entities were all designated in 2014. 

Due to these orders, sales of spare parts to Iran were prohibited. After the Joint Comprehensive Plan of Action (JCPOA) was signed Iran was allowed to buy finished commercial aircraft and Iran Air was taken off the US sanctions list. By March 2016, a general license was reissued for these sales. Unfortunately with the US exiting the JCPOA in 2018, primary and secondary sanctions were reinstated and Iran Air was once again blacklisted in November 2018. 

Despite these challenges, Iran’s civilian aircraft remain operational. Most of the fleet of Iranian airlines, however, are aged and have a high cost of maintenance. This is a unique opportunity for U.S. companies to step in once vaccines have paved the way for targeted trade normalization. This is Biden’s gambit, and his hand to play.

OFAC Updates: General License N Issued for Iran in response to COVID-19

On June 17, 2021, the US Department of Treasury’s Office of Foreign Assets Control (“OFAC“) issued General License N (“GL N“) authorizing certain COVID-19 related transactions and activities through June 16, 2022, involving Iran. The recent authorization from OFAC is an effort to “further aid the global fight against COVID-19” according to its press release. GL N is part of OFAC’s efforts under National Security Memorandum-1. This new authorization may provide much-needed support to Iran, which is greatly affected by the COVID-19 outbreak in conjunction with the broad restrictions imposed on trade with Iran due to U.S. sanctions.

GL N authorizes certain transactions and activites related to the diagnosis, treatement, or prevention of COVID-19. These transactions and activites range from the exportation of pandemic technology (e.g, surgical gloves, facial shields, respirators, etc.) to importation of non-functioning medical technology for the purposes of maintenance. The three major categories of activites that OFAC outlines in GLN is (1) exportation of goods or technology; (2) importation of, or dealings in, certain COVID-19 related goods and; (3) exportation or importation of COVID-19 related services. To ensure these transactions and activites can occur, OFAC is authorizing certain transactions to occur with the involvement of the Central Bank of Iran (“CBI”), as well as the National Iranian Oil Company (NIOC). 

In addition to issuing GL N, OFAC issued six Frequently Asked Questions (“FAQs”), clarifying the scope and effect of GL N and other additional general licenses for similar purposes—FAQ 906, 907, 908, 909, 910, and 911.  In particular, FAQ 910 explains OFAC’s expectations for US financial institutions when processing funds transfers (or trade finance transactions) when handling the abovementioned transactions. For example, a US financial institution can rely on the originator to ensure compliance with GL N so long as that financial institution does not definitely know the funds transferred are not in compliance with the GL N. 

Additionally, according to FAQ 911, engaging in activites authorized by the GL N would not, generally, put a non-US person at risk of being designated as a Specially Designated National. However, understanding GLN and the potential risks that it carries can be complicated—even if the intent of the person using GL N is well intentioned. It is important to consult a U.S. sanctions attorney prior to engaging in any COVID-19 related trade with Iran.