UN measures including travel bans and asset freezes have been imposed for many years against named Iranians allegedly linked with nuclear weapons research and procurement. But those targeted sanctions have not worked and Iran has shown little inclination to obey security council demands to suspend uranium enrichment.

Over the past year, the US and the European Union have imposed sweeping financial sanctions and an oil embargo, partly in frustration and the failure of UN sanctions, partly in the hope of stalling Israeli military action.

Despite fundamental damage to the Iranian economy and accounts of deep divisions in the Tehran heirarchy as a result of the intense pressure, there is still no evidence that Iran is more willing to do a deal that would involve restricting its uranium enrichment programme, the focus of the impasse with the west.

At the moment, it is the Iranians who are dragging their heels over agreeing a date and a venue for the next diplomatic round. They have also been shy of direct bilateral talks with the Americans, thought by many as the quickest, surest path to a grand bargain that would avoid a conflict.

At the same time, the sweeping nature of the new sanctions has had an array of unintended consequences, worst of all is the crisis they triggered in the Iranian pharmaceutical market, and the impact that it has had on millions of Iranians with chronic health problems.

The US and EU have both ensured that explicit exemptions and waivers have been inked into the sanctions legislation, but the evidence on the streets and in the bazaars of Iran is that those exemptions are not working.

One of the reasons for the dysfunction is that having been warned for years of the potential for huge fines for doing business with Iran, many big companies, including pharmaceutical companies, do not think it worth the hassle and potential risk to their reputation.

"Their legal counsels stand a long way behind the red lines, and for good reason," said Siamak Namazi, an Iranian-American business consultant who is coordinating a study on sanctions on the pharmaceutical industry.

More importantly, the humanitarian waivers granted to trade in medicines are not coordinated with any corresponding waivers in the US and EU bans on doing business with Iran's main banks. So you might find suppliers willing to sell you the drugs your patients need but have no way of paying the bill.

Naser Naghdi, the head of the country's largest pharmaceutical company, Darou Pakhsh told the Guardian: "Our biggest problem is the banking restrictions and the problem of transferring money. We have the currency but we can't transfer it. We can't pay companies outside Iran for the products."

Mahak, a charity helping Iranian children with cancer, agreed. It said in a statement: "The main problem faced by Iran today is less related to non-availability of medicine and more related to limitations on international banking transfers and convertibility issues as a whole. Logic dictates that as long as financial sanctions are as severe as they are, shortages of pharmaceutical products will continue."

As a result of the pariah status of the Iranian banking system, the bulk of transactions involving Iranian pharmaceutic purchases are being channelled through a single Turkish bank with a long backlog of clients and exponentially increasing facilitation fees.

There are many indirect ways in which sanctions squeeze Iran's domestic pharmaceutical industry, which supplies 70% to 90% of the market. The oil embargo and the financial sanctions have triggered a currency run leading to multiple rates for the rial. The official rate is about 12,000 rials to the dollar. The market rate is 35,000 to the dollar. The prices dictated by the government for medicines is based on the official rate plus a mark-up. So pharmaceutical companies can only afford to buy imported drugs or chemical ingredients for their own production if they can get access to hard currency at the official rate. But they have to bribe and are kept out by firms with regime connections.

Meanwhile, domestic inflation is pushing up the costs of bottles, packaging and distribution squeezing profit margins further, to extent that medicines with narrow margins are no longer made.

US, UK and EU spokespeople point out that the Iranian regime could avoid problems if it focused resources on buying medicines as it does on the nuclear programme. However, ordinary Iranians were able to obtain the medicines under the same flawed government system before the West's punitive measures. What has changed is the sanctions, and if Iranians start dying because hospitals cannot get their chemotherapy or haemophilia drugs, the west is unlikely to escape blame.