Sanctions, Smuggling, and the Cigarette: The Granting of Iran OFAC Licenses to Big Tobacco

Abstract

This paper seeks to understand the politician economy implications of nicotine addiction in Iran, focusing on the US office of foreign asset control’s (OFAC) awarding of Iran operations licenses to American tobacco companies. Presuming that tobacco taxes, levied both as import duties and ad valorem, would financially benefit the Iranian Government, such the introduction of a highly desired US product to the market would be antithetical to the sanctions regime currently in place. By comparing Iran’s tobacco industry and the attendant public health crisis that has arisen from high rates of nicotine addiction, to conditions in Turkey, it can be demonstrated that Iran is uniquely unable to extract revenues from the sale of tobacco products. The primary point of comparison between Iran and Turkey is smoking-attributable annual productivity loses of each country as estimated through the use of smoking-attributable mortality, morbidity and economic costs software (SAMMEC) and the available related literature. Based on the calculations derived from the SAMMEC model, Iran is burdened with an incredible cost to the economy borne by a high prevalence of smokers. It is concluded that an awareness of this condition enables OFAC to award licenses to big tobacco without fear of undermining current foreign policy initiatives.

Keywords: Cigarette, sanctions, smuggling, tobacco