Sanctions cause Iranian airplane crashes

On August 10, a Sepahan Air regional airliner crashed in a neighborhood in densely populated Tehran, killing 39. This latest incident is just one in a spate of air accidents in Iran, where the imposition of sanctions by the West has severely impacted the safety of civilian aircraft.

In the last 25 years there have been more then 200 accidents involving Iranian planes, resulting in 2000 deaths and many more debilitating injuries. With this abysmal safety record, the odds an Iranian air passenger will die on a flight are 100 times higher than those for passengers on the world’s major carriers. Statistics like this, and the human tragedies they belie, demonstrate how the sanctions levied against Iran serve to collectively punish the Iranian people

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The crashed aircraft was an Iranian-built Iran-140, a domestic version of the Russian Antonov An-140. Skeptics may argue that it was the outdated Soviet-era design that explains the plane’s lack of airworthiness. However Iranians have little choice but to fly these planes because U.S. sanctions prohibit Iran from purchasing Boeing or Airbus planes on the open market, even second hand. Iran’s aging civilian fleet includes planes, which first entered service before the Iranian Revolution in 1979, when the U.S. first began to institute sanctions on the country. In the subsequent years, airlines have struggled to source parts and technical support for their aircraft.

A 2005 report by the International Civil Aviation Organization, a UN body, noted that the “United States sanctions against the Islamic Republic of Iran have adversely affected the safety of civil aviation.” The authors urged American regulators to recognize that “Aviation safety, as it affects human life and human rights, stands above political differences.” Since 2005, there have been 700 fatalities in air accidents. Unfortunately, sanctions policy has little concern for human life. Although under the interim nuclear deal Iran has been allowed to purchase some spare parts for its aging fleet, there remains no way for Iranian airliners to purchase sorely needed new aircraft.

Every US administration for 35 years has increased the scope and strength of sanctions levied on Iran. The purported rationale has been to punish the Iranian government for its financing of terrorism and acceleration of its nuclear program. Nonetheless, evidence suggests that groups like the Revolutionary Guard and other kleptocracies have only come to control larger swaths of Iran’s economy as the sanctions starve Iran’s private sector businesses. (Sanctions on airplane parts far precede recent sanctions that the US claims brought Iran tto the negotiation table.)

Such unintended consequences of the sanctions program harm the Iranian people in numerous ways. United Nations Secretary General Ban Ki Moon has acknowledged that sanctions are having a detrimental effect on health of average Iranian, noting, “It is difficult, if not impossible, for importers to pay for medical supplies and equipment.” Last year, there were shortages for around 100 vital medicines in Iran each month.  

Similarly, food prices in Iran have increased dramatically, leaving the country’s food system in a crisis as the cost of milk quadrupled, the cost of bread doubled, and the cost of rice increased from just 3 cents per kilogram to nearly $2.40 between 2007 and 2013.

It is the architecture of the sanctions that leaves the Iranian people so vulnerable to shortages, inflation, and price rises in everything from food to medicine to aircraft parts. Iran’s banking infrastructure was blacklisted by United States Treasury in 2012. Iran’s Central Bank-CBI (The equivalent of the US Federal Reserve) was sanctioned as were the six largest financial institutions. These banks were critical to facilitating trade on behalf of Iranian merchants looking to import food and medicine.  U.S. regulators have imposed heavy fines on European banks conducting business with Iran. This has had a chilling effect of having those very same institutions shying away from opening letters of credit from Iranian customers.

As a result merchants have had to turn to smaller, private banks in Iran with limited pools of capital and restricted access to Iran’s foreign exchange reserves. These smaller banks have to request special allocations from the CBI so as to access Iran’s hard currency held in overseas accounts of countries that purchase Iranian crude oil.

Iran’s revenue comes mostly in its sale of oil and gas to Asia (Europe and the United States have sanctioned itself from buying Iranian crude). Proceeds of these sales are held in accounts of the CBI in denominations of the country buying the crude.  For instance Chinese purchases of Iranian crude are held in renminbi in Chinese Banks.  When Iran approaches these countries about accessing its own funds to buy goods such as penicillin, insulin, or essential commodities the banks of those countries sense an opportunity to reap huge profits from Iran by forcing Iran to use its own money to buy goods from their own domestic companies at huge premiums. These “commissions” a sometimes rate as high as 10% of the total contract amount, and the extortionate premiums are passed on in the inflationary cycle and price increases endured by the Iranian consumer. Moreover, in the case China and India food and medicine are often inferior to those that are produced in the West.

Today, as the U.S. remains close to a historic nuclear deal with Iran, members of the United States Congress, untrusting that diplomacy will work, are pressing the Obama administration to impose even more sanctions. This leaves Iranians concerned not so much about their own government, which has shown early signs of reform and commitment to dialogue with the West. Instead, they fear and resent lawmakers in Washington, who continue to pursue devastating sanctions with a fundamentalist zeal. 

Handjani is a managing director at Pt Capital in Dubai. He tweets at @ahandjani.