On August 10, 2023, it was reported that the U.S. and Iran, with mediation from Oman, Qatar and Switzerland, are engaging in a multi-step prisoner swap that will play out over several weeks.
- Five Iranian-American dual nationals have been transferred out of prison in Iran and most are now housed in a secure hotel. Within weeks, they will be fully released and allowed to leave Iran. Three of the individuals’ names have been publicly reported: Siamak Namazi, the longest-held dual national in Iran (imprisoned since 2015); Morad Tahbaz (imprisoned since 2018); and Emad Sharghi (imprisoned since 2018). Two additional individuals are reportedly included in the swap but have not disclosed their names. One may be an Iranian-American woman and former aid worker whose name has not been disclosed. Green card holder Shahab Dalili (imprisoned since 2016) and Iranian-German national and U.S. resident Jamshid Sharmahd (imprisoned since 2020) are reportedly not included in the swap, with their families protesting and calling for their inclusion.
- A handful of Iranian nationals convicted of sanctions violations in the United States will be released in the coming weeks, after the dual nationals have left Iran. They will reportedly be welcome to return to Iran, though it is unclear if they will avail themselves of that option.
- In the coming weeks, roughly $6 billion in Iranian assets held in South Korean banks will be transferred to Qatar and made available for humanitarian purchases. As reported by Amwaj Media, “the money will be moved out of South Korea, exchanged in Switzerland, and then transferred to Qatar in multiple tranches. The currency conversion and money transfer process is slated to take four to six weeks to complete. Subsequently, Tehran and Washington will release the respective groups of detainees.”
- The transfer of these funds has already been initiated. Reuters reported on August 21 that the funds were transferred from South Korea to Switzerland, where they will be converted. As reported, “The Swiss National Bank plans to exchange its $6 billion holdings in won for dollars and then euros in the currency market, converting about 300 billion won ($223.85 million) to 400 billion each day for next five weeks.”
Where are the $6 billion funds from and why were they held by South Korea?
- After abandoning the Iran nuclear deal in 2018, the Trump administration granted short-term waivers for South Korea to continue to purchase Iranian oil and deposit the payment for the oil in restricted accounts within South Korea that could theoretically be used by Iran to purchase non-sanctioned humanitarian goods within South Korea.
- However, due to practical complications, including concerns by South Korea of potentially running afoul of additional U.S. sanctions, the funds in this account remained largely untouched.
- The funds initially totaled $7 billion but reportedly depreciated to $6 billion as they sat in South Korean banks without accruing interest.
Would the funds really be used just for humanitarian purchases?
Multiple U.S. and Iranian officials have been clear that the funds would just be used for humanitarian purchases.
- U.S. Deputy National Security Advisor Jon Finer explained that the $6 billion “can only be used for humanitarian purposes,” saying that “the reason we can be confident of that is that the U.S. Treasury Department has oversight over all of the funds in this account, and we’ll be able to monitor any transactions that they are used for to make sure that they’re used for the proper purposes…we are going to be very carefully monitoring and using very careful oversight, again, through the Treasury Department to make sure it’s used the way it’s intended.”
- Some in Iran initially tried to dispute that Iran does not have full control of the funds, likely reflecting political sensitivities to agreeing to conditions on the use of Iran’s own money, but this has since been contradicted by Iranian officials.
- Iran’s Central Bank Governor Mohammad Reza Farzin confirmed that the funds “will soon be transferred into six Iranian banks in Qatar where they will be used for bank payments to purchase non-sanctioned goods.”
Additional “de-escalatory measures” underway?
For several months, a possible prisoner swap has been reported along with other de-escalatory steps, including on Iran’s nuclear program:
- After the prisoner swap news broke, Wall Street Journal reported that Iran has “significantly slowed the pace at which it is accumulating near-weapons-grade enriched uranium and has diluted some of its stockpile,” citing individuals familiar with the situation.
- U.S. officials have not officially remarked on this development, and have been clear that they are doing the current swap “to try to release the five Americans who are still inside Iran on the merits and on its own, not as some precursor to some other potential arrangement.”
- Iran’s Atomic Energy Organization chief, Mohammad Eslami, issued remarks that neither confirmed nor denied the reported slowing pace of enrichment, stating “Our nuclear enrichment continues based on the strategic framework law,” which was passed by parliament in 2020 following the assassination of nuclear scientist Mohsen Fakhrizadeh.
- Officials have indicated that negotiations on de-escalation are on separate tracks from the prisoner swap, though a collapse of the swap would appear likely to sour the U.S. on broader de-escalation.
- The news on enrichment seems in line with U.S. calls earlier in the summer, amid reports of negotiations between the U.S. and Iran, for Iran to take steps to de-escalate tensions. A senior U.S. official affirmed that the administration told Iran “we are interested in a de-escalatory path…The question is whether they are willing to take steps that will show that they are open to trying to change the current trajectory. That could open up different possibilities and create a different context for a potential diplomatic process.”
Is the U.S. easing or lifting sanctions as part of the agreement?
No, setting aside the potential merits of lifting sanctions – which are plentiful – U.S. officials have been clear they are not lifting any sanctions in this swap, sending a hostage payment to Iran or allowing Iran unrestricted access to its own money. Funds are merely being transferred from South Korea to Qatar through Switzerland, where they will be expended on non-sanctionable humanitarian purchases for food and medicine, as is supposed to be allowed under existing U.S. sanctions.
Did Trump do anything like this?
Yes, the Trump administration authorized several steps aimed at complying with U.S. law that shields humanitarian goods like food and medicine from sanctions. During the Trump administration’s escalation of “maximum pressure” sanctions, it greenlit new financial channels intended to enable Iranian funds held abroad to be used for humanitarian purchases.
- This includes the establishment of the Swiss Humanitarian Trade Arrangement, aimed at facilitating transactions for Iran to use its frozen funds to purchase specialized medicine to treat cancer, thalassemia and organ transplants that are exempt from sanctions.
- Notably, this financial channel was undertaken shortly after a 1-for-1 prisoner swap between the U.S. and Iran, with individuals involved clarifying that the initial exchange “was designed to be part of a series of releases and humanitarian steps over time.”
- As Finer noted, “this is a process that was actually set up under the previous administration that were used during that administration for Iranian purchases.”
Why have there been medicine shortages in Iran?
- U.S. sanctions have long exempted humanitarian trade on paper, but in practice it is a different story. Financial institutions, cognizant of the major fines of violating sanctions, often over enforce sanctions and refuse any Iran-related business – including in humanitarian goods. This leads to severe complications, including shortages of life-saving medicine and rising costs of food. Even the Trump administration acknowledged this reality with its moves on sanctions, including authorizing the Swiss Humanitarian Trade Arrangement.
- Hossein Ali Shahriari, the head of the Parliament’s Health and Treatment Commission, in a recent interview with Donyaye Eghtesad, underscored the dire nature of medicine shortages inside Iran. While a recent parliamentary report announced a scarcity of 131 drugs, Shahriari warned that the reality is actually far worse, with approximately 170 to 180 types of drugs becoming increasingly scarce in the country and expectations that this number will continue to grow. From specialized medicine to treat blood diseases and cancer, to more basic medicine like cough syrup and antibiotics, medicine that so many around the world take for granted is desperately needed by Iranians.
- Decades of sanctions – with the exception of the 2015 nuclear deal period – have made obtaining medicine and the raw materials to produce medicine domestically in Iran incredibly difficult. The Trump administration’s implementation of maximum pressure sanctions after withdrawing from the nuclear deal in 2018 worsened these conditions all the more, which appears to have been at least partially intentional.
- When something as vital as medicine becomes increasingly scarce, ordinary Iranians are forced to turn to shadow economies to get their hands on the medications they need to survive. And inevitably, these sanctions-driven, underground economies become a hotbed for corrupt actors to profit off of the smuggling networks used to bring in medicine, leaving ordinary Iranians in an even more vulnerable position.
- This underscores that sanctions ostensibly targeting the Iranian state fail to harm the well-connected elite, who find new ways to profit through the shadow economy. But ordinary people are hit doubly: first by the impact of sanctions on the economy as a whole, and second by predatory smuggling networks that raise the price and lower the availability of medicine and other key goods like medicine.