The Bandage
Ava was two years old when she died in an Iranian hospital from an infection that should have been preventable.
She had Epidermolysis Bullosa — a rare genetic disorder in which the skin blisters and shears off at the slightest touch. Children with EB are called “butterfly children” because their skin is as fragile as a butterfly’s wing.1 The condition has no cure, but it is manageable — with the right bandages.
The right bandage was Mepilex — a soft silicone foam dressing manufactured by Mölnlycke Health Care in Sweden. Unlike cotton gauze, which adheres to the wound bed and tears away newly formed skin like a wax strip when removed, Mepilex lifts cleanly without damaging tissue. For an EB patient, the difference between Mepilex and a cotton bandage is the difference between treatment and torture. No generic equivalent exists in Iran — domestic substitutes contain adhesives that exacerbate wounds.
Mölnlycke did not stop selling Mepilex to Iran because it wanted to. The company cited a banking blockade — not a desire to withhold treatment. It could not find a single financial institution in Europe willing to process the invoice. The transaction failed not at the border but at a compliance desk in Paris, London, or Frankfurt, where a risk officer calculated that any transaction touching the Iranian financial system carried a probability of catastrophic penalty that no profit margin on bandages could justify.
Between May 2018 and May 2019, fifteen EB patients — mostly children — died from secondary infections caused by the bandage shortage.2 Zahra and Mohammad Mehdi Parvizi, siblings featured in the documentary Flight of Butterflies, survived — but the shortage fused their fingers together and left them severely malnourished from esophageal blistering. In July 2024, an Iranian court ruled the United States government liable for $6.785 billion in damages — legally codifying the chain from American sanctions policy to dead children in Iranian hospitals.3
This is an article about a paradox with three parts. The sanctions against Iran are working — enforcement is increasingly sophisticated, and it should continue. The humanitarian exemptions meant to protect people like Ava exist on paper and fail in practice. And the people the sanctions are supposed to weaken — the Revolutionary Guards, the smugglers, the kleptocrats — are the ones who profit most from the economy sanctions created.
The Chokehold
To understand how a Swedish medical company’s invoice gets killed by an American regulatory precedent, you need to understand how the financial blockade actually works. It is not what most people picture when they hear the word “sanctions.”
The mechanism is elegant and brutal. Most global trade is denominated in US dollars. To clear a dollar transaction, any foreign bank must maintain a correspondent account at an American bank — JPMorgan, Citibank, or their equivalents. US legislation — the Comprehensive Iran Sanctions Act, the National Defense Authorization Act — forces every bank on earth to make a binary choice: process transactions involving Iran, or maintain access to the US dollar clearing system. No major bank chooses Iran.
In 2008, the US revoked the “U-turn” license that had allowed Iranian funds to pass through American banks en route between two foreign institutions — exiling Iran from the dollar clearing system entirely. In 2012 and again in 2018, SWIFT — the messaging network banks use to transmit standardized transfer instructions — disconnected Iranian financial institutions. Without SWIFT, Iranian importers cannot issue Letters of Credit, the standard guarantee instruments for international trade. Pharmaceutical companies require Letters of Credit before shipping high-value biologics. The disconnection forced Iran’s entire trade system into regression — back to hawala networks that are slower, fifteen to twenty percent more expensive, and too opaque for Western compliance officers to approve.
Then came the event that transformed a targeted pressure campaign into a de facto embargo on ninety-three million people.
In 2014, BNP Paribas — one of the world’s largest banks — was fined $8.9 billion by the US Department of Justice for processing transactions that violated sanctions on Sudan, Iran, and Cuba.4 The fine was roughly equivalent to a full year of the bank’s earnings. It was not a regulatory nudge. It was a near-death experience.
The precedent rewired the global banking system overnight. Compliance departments at HSBC, Deutsche Bank, Standard Chartered, and every other institution with American exposure adopted a simple heuristic: reject any transaction with an Iranian nexus. Any transaction — including the ones that are legally exempt. Food. Medicine. Medical devices. Bandages for children whose skin falls off. The legal risk was existential; the profit margin on humanitarian trade was negligible. The calculation was not malicious. It was rational. And it was lethal.
This is the phenomenon that policy analysts call over-compliance — and it is the mechanism by which sanctions that are nominally “targeted” become, in practice, a financial siege against an entire civilian population.
Imagine you need a specific medication for your child. The medication exists. The company that makes it wants to sell it to you. Your country’s humanitarian imports are theoretically exempt from sanctions. But the transaction requires a bank to process the payment — and no bank will touch it, because a compliance officer in another country has calculated that the risk of a billion-dollar fine outweighs the benefit of processing your child’s prescription. You are not sanctioned. The drug is not sanctioned. The company is not sanctioned. But your child cannot get the medication, because the system that moves money has been paralyzed by fear.
That is what happened to Ava. That is what “smart sanctions” look like from a hospital bed.
The Teeth
Here is the part that makes this a paradox rather than a simple indictment: the enforcement machinery works, and much of it should continue.
In March 2025, the United States revoked the sanctions waiver that had allowed Iraq to purchase Iranian electricity. For years, Iraq had deposited payments into restricted accounts at the Trade Bank of Iraq — a loophole that gave the regime access to approximately $10 billion in accumulated assets. The revocation froze those assets and forced Iran to cut electricity exports, depriving Tehran of a critical revenue stream while triggering blackouts in Baghdad. The signal was unmistakable: Washington was willing to risk instability in an allied nation to tighten the vice on Tehran.
In February 2025, the Department of Justice unsealed a forfeiture complaint against the crude oil tanker Abyss, seizing over five hundred thousand barrels of fuel. The legal theory was novel — the oil was classified as property of the IRGC-Qods Force, a designated terrorist organization, making it subject to immediate seizure. The $25 million in proceeds was redirected to the US Victims of State Sponsored Terrorism Fund. The precedent permanently altered the risk calculus for every insurer in the maritime market.
In September 2025, the E3 — France, Germany, and the United Kingdom — triggered the UN “Snapback” mechanism, reinstating six suspended Security Council resolutions.5 The Snapback closed the “Euro Loop” that had protected European banks, reimposed ballistic missile restrictions that had expired in 2023, and relisted hundreds of entities — including Bank Sepah and the Islamic Republic of Iran Shipping Lines — that had been delisted under the nuclear deal.
Iran’s oil still flows — through a Ghost Fleet of three hundred to four hundred aging tankers that use flag-hopping, AIS spoofing, and forged paperwork to deliver crude to independent refineries in China’s Shandong province. But it flows at a discount of $10–$15 per barrel below the Brent benchmark, bleeding approximately $4–5 billion annually from the Iranian treasury. When Operation Rising Lion destroyed Iran’s energy infrastructure in June 2025, the financial architecture was already in place to ensure that the economic collapse would be total. The rial lost seventy-five percent of its value in 2025 alone, reaching 1.4 million to the dollar.
The Enforcement Scoreboard
Action Impact Iraqi electricity waiver revocation (March 2025) ~$10B frozen; direct driver of late-2025 currency collapse DOJ civil forfeiture (Abyss, Feb 2025) 500,000+ barrels seized; $25M redirected; insurer risk calculus permanently altered UN Snapback (Sept 2025) 6 UNSC resolutions reimposed; hundreds of entities relisted; “Euro Loop” closed Oil discount to Chinese teapot refineries $4–5B/yr in lost revenue; feeds directly into hyperinflation Banking isolation (FATF blacklist + secondary sanctions) Rial lost 75% in 2025; exchange rate: 1.4 million per dollar
The enforcement works. It has crippled the regime’s finances, degraded its ability to fund proxies, and contributed to the economic pressure that destabilized the Islamic Republic from within. The question is what else it does — to the ninety-three million people who are not the IRGC.
The Fiction
The “humanitarian exemption” is the answer policymakers give when confronted with dead butterfly children. Medicine is exempt. Food is exempt. Medical devices are exempt. On paper, the exemptions are comprehensive. In practice, they are a legal decoration on a wall of financial refusal.
There is a name for the rhetorical technique at work: the precision fallacy — the claim that a blunt instrument is actually a scalpel. “Smart sanctions” and “targeted measures” are the vocabulary of surgical precision. The evidence shows collective punishment.
The European Union created INSTEX — the Instrument in Support of Trade Exchanges — specifically to facilitate humanitarian trade with Iran outside the US financial system. INSTEX processed one transaction. One. A single shipment of medical goods. It was dissolved in 2023, having demonstrated nothing except the absolute dominance of US secondary sanctions over European political will.6 The Central Bank of Iran called it a monument to European “lack of courage.” The assessment was accurate.
The Swiss Humanitarian Trade Arrangement processed €2.3 million in cancer and transplant drugs in its pilot transaction. Iran’s annual medical import needs exceed $2.5 billion. The throughput covers less than one-tenth of one percent of the need. The OFAC licensing system — the American gateway — received thirty-one medical license applications in the first quarter of 2024 and issued twelve. Each specific license takes months of bureaucratic processing. Cancer does not wait for months.
The Humanitarian Channels
Channel Created Throughput Iran’s Annual Need Status INSTEX (EU) 2019 1 transaction $2.5 billion Dissolved 2023 SHTA (Swiss) 2020 €2.3 million $2.5 billion Largely dormant OFAC licensing Ongoing 12 of 31 applications approved (Q1 2024) Continuous Months of delay per shipment
The Medical Toll
Condition Impact Thalassemia 1,100+ deaths since 2018; 93 in one year from cardiac iron overload; 12% of medication imported Hemophilia 6 deaths in 6 months from Factor IX shortage; hundreds permanently disabled Cancer 70% of essential drugs in short supply; 50% increase in mortality rates
The toll is counted across every ward. Thalassemia patients die because chelation drugs manufactured by Novartis cannot be paid for — the domestic generic fails thirty-five to forty percent of patients, allowing iron to accumulate in the heart until it stops. Hemophilia patients suffer permanent joint destruction from repeated bleeds that prophylactic treatment would have prevented. On Nasser Khosrow Street — Tehran’s pharmaceutical black market — families sell land for a single course of chemotherapy, sometimes purchasing counterfeits from sellers who exploit their desperation. An art student’s sister, dying of leukemia, needed the German-made drug Endoxan. Her family exhausted their resources. The drug was unavailable at any price.
The “enhanced due diligence” standard completes the architecture of impossibility. To process a humanitarian transaction, a bank must verify that the “ultimate beneficiary” of every product will not be a sanctioned individual. In a country where the state — and by extension, the IRGC — runs the hospital system, proving that a shipment of bandages will never touch a sanctioned entity is, as compliance experts describe it, “statistically and logistically impossible.” The standard does not create a pathway through the blockade. It creates the blockade.
The Beneficiary
The cruelest dimension of the paradox is who profits from the economy that sanctions created.
When legal trade channels are severed, imports must flow through illegal ones. The IRGC — the entity sanctions are designed to weaken — controls Iran’s borders, ports, and clandestine financial networks. It operates “invisible jetties” — unauthorized ports outside government customs control — where goods enter tax-free and quality-unregulated. It manages the crypto-laundering platforms, the shell companies in the UAE and Singapore, the fuel-smuggling operations in the Persian Gulf. Every consumer good that enters Iran through a smuggler’s route arrives with the IRGC’s markup — the consumer pays for the bribe, the transport risk, and the currency arbitrage. It is a tax on the population, collected by the Revolutionary Guards, enabled by Western sanctions.
The legitimate private sector — shopkeepers, manufacturers, small business owners who operate legally and pay taxes — cannot compete with smugglers backed by a military-intelligence apparatus. They are the backbone of the middle class, and they are being destroyed. Iran’s middle class has shrunk by twelve to seventeen percentage points annually since 2012.7 Meat, dairy, and fruit have vanished from the national diet — the “shrinking sofreh,” the diminishing dining table, is the metaphor every Iranian family understands. A specialist doctor in a public hospital earns a few hundred dollars a month. An engineer with a Master’s degree drives for Snapp — Iran’s equivalent of Uber.
The IRGC has built what economists describe as a “Casino Economy” — wealth generated not through production or innovation but through speculation in gold and currency, and through rent-seeking access to smuggling monopolies. A new class of profiteers thrives specifically on Iran’s isolation. These nouveau riche have a vested interest in the continuation of sanctions — because sanctions are what makes their smuggling routes valuable. The sanctions designed to weaken the authoritarian state have created an economic elite whose wealth depends on the state’s continued isolation.
The civilian toll extends beyond the economic. Iran’s aviation fleet averages twenty-eight years — more than double the global average.8 Prevented from purchasing new aircraft or certified spare parts from Boeing or Airbus, airlines fly planes maintained with smuggled, uncertified components. Nearly ninety percent of Iran’s seventeen hundred aviation casualties have occurred in the sanctions era. Iranians call them “Flying Coffins.” They board them because there is no alternative.
Meanwhile, the professional class that would form the constituency for any democratic transition is fleeing. Thousands of doctors emigrate annually. Iranian students abroad have bank accounts frozen solely for holding an Iranian passport. GitHub, Coursera, and Slack have blocked Iranian IP addresses — cutting the most globally connected generation in Iranian history off from the knowledge infrastructure of the modern world.
The political logic completes the paradox. When people are consumed by the daily struggle for survival, the capacity for organized political action diminishes. As the private sector collapses, the state becomes the only viable employer — making citizens more dependent on the regime the sanctions are meant to weaken. Civil society organizations cannot receive international grants because banks will not process the transfers. The sanctions have not produced a democratic constituency. They have produced a population trapped between two systems of extraction — an authoritarian state that represses them and a sanctions architecture that impoverishes them — with diminishing capacity to challenge either.
The Honest Ledger
The paradox demands honest accounting from every direction.
Iran concealed aspects of its nuclear program from the IAEA — the P-2 centrifuge program, the military dimensions research at Parchin. These were real deceptions that provided the legal and political foundation for the sanctions architecture. The “Resistance Economy” narrative — the regime’s claim that all economic suffering is a Western plot — is propaganda designed to deflect responsibility for decades of corruption, mismanagement, and the prioritization of proxy warfare over social welfare. GAMAAN survey data shows that over eighty percent of Iranians blame domestic corruption for their economic misery.9 The regime bears primary responsibility.
But secondary responsibility is not zero responsibility. The sanctioning powers maintain a “Maximum Pressure” architecture they know — through their own intelligence assessments and UN reporting — primarily devastates the civilian sector while failing to alter regime behavior. The humanitarian channels they created to mitigate civilian harm have processed, by their own throughput data, less than one percent of the need. UN Special Rapporteur Alena Douhan has stated explicitly that Iran’s sanctions violate the right to health, the right to development, and the right to life.10 The regime bears the primary burden. The architecture bears the secondary burden. And the people who bear both — the ninety-three million Iranians who chose neither — are the ones paying.
The enforcement machinery that catches tankers, freezes assets, and closes financial loopholes should continue and intensify — it is the only non-military tool that constrains the regime’s ability to fund proxies and pursue nuclear weapons. But the humanitarian channel must be rebuilt — because a policy that cannot distinguish between an IRGC commander’s bank account and a two-year-old girl’s bandage supply is collective punishment with a bureaucratic alibi, a blunt instrument of economic warfare that has enriched a smuggling mafia, hollowed out the productive economy, and killed children whose names are documented in court filings.
Ava’s bandages existed. The company wanted to sell them. The exemption was on the books. The transaction died at a compliance desk because the system that moves money was more afraid of a fine than of a child’s death. That is the sanctions paradox — and until the channel between the exemption and the patient is rebuilt, every enforcement victory will be shadowed by a ward full of butterfly children whose treatment was technically legal and practically impossible.
For the forensic case files of Iran’s medicine crisis, see The Butterfly Ward. For the maritime smuggling operation that moves Iranian oil past sanctions, see The Ghost Fleet. For how sanctions destroyed Iran’s middle class while enriching the Revolutionary Guards, see The Shrinking Sofreh.
Footnotes
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Atlantic Council, “Iran’s ‘Butterfly Children’ Impacted by Sanctions and Corruption,” IranSource blog, 2023 ↩
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People’s Daily, “U.S. Sanctions Deprive Iran’s EB Children of Special Wound Dressings: NGO Chief,” March 2023 ↩
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Anadolu Agency, “Iranian Court Orders US to Pay $6.7 Billion in Damages to ‘Butterfly’ Patients,” July 2024 ↩
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US Department of Justice, “BNP Paribas Agrees to Plead Guilty and to Pay $8.9 Billion,” Press Release, June 2014 ↩
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Gorrissen Federspiel, “EU Reimposes Wide-Ranging Sanctions Against Iran,” Legal Analysis, September 2025; Steptoe, “The EU Reimposes Nuclear-Related Sanctions on Iran,” September 2025 ↩
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French Ministry for Europe and Foreign Affairs, “The 10 INSTEX Shareholder States Have Decided to Liquidate INSTEX,” March 2023 ↩
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Economic Research Forum (ERF), “Sanctions and the Shrinking Size of Iran’s Middle Class,” September 2025 ↩
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Simple Flying, “How Have Sanctions Impacted Iranian Aviation Over the Years?,” aviation safety analysis, 2024 ↩
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GAMAAN, “Iranians’ Attitudes Toward International Relations: A 2021 Survey Report,” October 2021 ↩
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UN Human Rights Council, Report of the Special Rapporteur Alena Douhan, A/HRC/51/33, 2022 ↩