IRANIAN SANCTIONS FAILURE

PLATTS - 21 Mar 2024  - US sanctions on Iran have not worked as intended, in part because comprehensive sanctions are so difficult to remove that they no longer motivate Iran to change its behavior, panelists said March 21 during a webinar hosted by the Middle East Institute.

While sanctions did reduce oil exports from Iran, they also consolidated power in government-owned companies that have the resources to evade sanctions, which has allowed more money to flow to the government's coffers and solidified conflict in the region, the panelists said.
"Sanctions are only effective if you can remove them, and if you can't remove them and it becomes a one-way ratchet, I think it really undermines the effectiveness of the strategy," said Ali Vaez, Iran project director at the International Crisis Group.

The Obama administration discovered this when it struggled to lift many of the sanctions on the Iranian economy after Iran signed on to the Joint Comprehensive Plan of Action to limit Iran's nuclear activities, said Narges Bajoghli, assistant professor of Middle East Studies at Johns Hopkins School of Advanced International Studies.

"So the decision-making within Iran and as well as in other spaces has become that once you come under US sanctions, you are not coming off of them, so you have to build infrastructure and build your economy in such a way in order to be able to resist that kind of economic pressure," Bajoghli said.

Maximum pressure

When former President Donald Trump backed out of the nuclear deal and imposed so-called maximum pressure sanctions on Iran in 2019, Iranian production and exports did drop. Iranian crude initially loaded for international markets, excluding loadings bound for anchorage, fell from 2.1 million b/d in 2018 to 733,000 b/d in 2019 and 432,000 b/d in 2020.

But the sanctions also meant that the Islamic Revolutionary Guard Corps, which helps funds proxy groups in the region, took on a larger role in the economy, said Djavad Salehi-Isfahani, a professor at Virginia Tech.

Small private sector companies have a hard time evading sanctions, Salehi-Isfahani said. But IRGC companies are larger and benefit from government support, so they can find ways to get around sanctions more easily, he said. Oil trade is also easier to work with under sanctions, he said.

"In terms of relative power, IRGC and government-owned companies, and larger industries, are likely to do better than the smaller ones," Salehi-Isfahani said.

At times that sanctions are used broadly, Tehran also sees it as a threat to the regime's survival, Vaez said.

Regime survival becomes main mission

"Because they are more concerned about regime survival, they also start cracking down on any kind of dissent at home," he said.

Sanctions have damaged the middle class that had been pushing for more global engagement, Salehi-Isfahani said. Poverty doubled after Trump withdrew from the JCPOA, and about 9 million Iranians dropped out of the middle class, he said.

The panelists on the webinar are the authors of a new book, "How Sanctions Work, Iran and the Impact of Economic Warfare."

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