Sanctions have not been effective at changing Iran’s behavior
Reviewing the impact of economic sanctions on Iran, analysts have concluded while they did have an effect on their overall economic output, the ruling elite were shielded for the most part from the economic costs and were therefore not compelled to change their behavior or policies.
Quicktabs: Arguments
One obvious “opportunity cost” of sanctions is that they exclude U.S. and allied firms from potentially lucrative business opportunities in Iran.70 As global energy companies wind down or pull out of the Iranian energy development market, in order to comply with or win an exemption from the United States’ secondary sanctions,71 they are ceding the field not only to some IRGC firms, but also to firms from China, Vietnam, Belarus, Malaysia, Ukraine, and other countries willing to ignore U.S. sanctions. Iran has welcomed invest- ment from these companies,72 although most deals are said to be in preliminary stages and many of the foreign companies involved are not as technically capable as those that have withdrawn from Iran. China, in particular, stands to benefit by lining up steady supplies of Iranian oil as a result of its investments. China is now Iran’s biggest oil purchaser (although China recently has reduced its oil purchases from Iran, perhaps because of concerns about the reliability of the supply in a time of increasing sanctions), and overall, China is investing $1 billion in Tehran’s infrastructure.73 These economic relationships—some call it the “Asianization” of the Iranian economy—may have lasting negative implications for the economies of Europe, as described below.74
Washington could further use international sanctions to cut Iran's trading access to the global market, particularly for oil exports, to increase pressure on Tehran to accept assertive IAEA inspections and a stoppage in Iran's nuclear fuel cycle efforts, but that course could suffer from numerous pitfalls. Sanctions would have to be sustained for a prolonged period of time before they began to hurt Iran's economy, and after that time, much like the sanctions implemented against Saddam's regime, they would hurt the livelihood of the general populace more than regime elites. As a consequence the United States might undercut its objective of looking to the Iranian population to usher in a political change in Tehran—under the stress of such international sanctions, the population could rally around the regime rather than taking up political actions against it.
Expansion of Iran’s domestic arms industry. The effectiveness of sanctions in reducing Iran’s conventional military power (discussed above, under Benefits) is at least partly undermined by Iran’s increased determination to expand its domestic arms industry. Unable to purchase some armaments from abroad, Iran has been developing survivable and lethal ballistic and cruise missiles, building more small boats to use in the Persian Gulf, and acquiring additional ships and submarines, according to an April 2012 report by the U.S. Department of Defense. Previous Defense Department reports, such as one issued in 2010, were largely disparaging of Iran’s military capabilities. The revised assessment suggests that Iran might have circumvented the Resolution 1929 arms ban, to some extent, by domestic developments in arms building—or that the level of sophistica- tion of its arms industry is increasing despite the ban.58 The result is an elevated threat to U.S. forces in the Persian Gulf.
Even if the parties do succeed in reaching an international agreement, its longevity is questionable, although the very perseverance over time is critical for the success of such actions. Sanctions take time until their effect is felt, especially if the Iranian political echelons endorse continuing the nuclear program. However, the time demanded by sanctions also defers the possibility of a military option and buys Iran time to proceed with its nuclear plans. Moreover, imposing sanctions against the oil sector could be expensive in two ways. First, achieving international cooperation to this end might obligate the United States to compensate other countries for losses they would sustain due to the economic embargo, in order to persuade them to participate – an expensive course for the United States. Second, harming Iranian oil exports is likely to cause another significant rise in oil prices, as Iraqi oil exports have already dropped since the 2003 war. The prohibition of the export of Iranian products is likely to present fewer problems. Still, many governments may avoid this undertaking as well and even try to make a profit from the partial embargo, while Iran is likely to respond with a temporary reduction in oil production.
The United States has framed international sanctions as an alternative to military action—and many reluctant countries have signed on to the sanctions regime in hopes of avoiding conflict. But to Iranians whose lives are negatively affected by sanctions and who see their country being targeted for increasingly harsh treatment, the international sanctions look like hostile acts. Iranian leaders have claimed that the sanctions regime is a “declaration of war.”54 Some U.S. analysts have suggested that sanctions ought to be understood as part of a “force curve”; in this light, the function of sanctions is to “pre- cede or accompany armed hostility,” not to prevent it.55 Certainly, as suggested earlier in this paper, the United States and other states have chosen to use military force in some other instances when sanctions were perceived to have failed.56
The international sanctions, combined with threats from Israel and a U.S. mili- tary buildup in the Persian Gulf, may have heightened Iran’s readiness for asymmetrical retaliation against United States and allied interests. American intelligence suggests that Iran’s Qods force (the unit of the IRGC that operates outside of Iran’s borders) is already undertaking such action—for example, the purported Iranian plot, revealed by U.S. law enforcement in October 2011, to assassinate the Saudi Ambassador to the United States, and the IRGC’s participation in the Syrian conflict.57 Other contributors to an increased potential for conflict are Iran’s expansion of its arms industry, and threats by Iran to hamper shipping through the Strait of Hormuz.
Iran was able to resist sanctions for several reasons. First, and most importantly, the costs were manageable, allowing Iran to offset much of the potential damage. Although the United States was a major market for Iranian products, Tehran diversified its trade partners and worked through third countries to reach the United States. Second, Iran'smajor export—oil—is in essence a global commodity, and the cutoff of one market to one supplier has no significant impact on a country's ability to gain the maximize price for its exports. Because Iran's regime depended for legitimacy on Islamic radicalism and Persian nationalism, both of which opposed any perceived kowtowing to Washington, the costs of complying with U.S. pressure were considerable. Iranian leaders risked being branded as puppets of the United States if they gave into U.S. pressure, a particularly heavy charge as the regime came to power in part on a wave of anti-Americanism. The consolidation of conservative power in Iran in recent years, symbolized by the election in June of Mahmoud Ahmadinejad as Iran's new president, will only worsen this problem. The cost to the United States was also considerable. Sanctions, of course, meant that U.S. companies lost trade and investment opportunities. Indirect sanctions proved particularly costly. ILSA led to vociferous protests from European and other governments.
As comprehensive sanctions take their toll over the longer term, Iran’s hardline factions are likely to flourish, and the United States risks losing the admiration of many of Iran’s people—including the younger generation.52 Resentment over the hardships caused by sanctions could reduce the prospects for improving or normalizing U.S. and Iranian relations over time, even if the current Iranian regime were to be replaced.
The Iranian uprising in 2009—called the Green Movement—was initiated by young Iranians who came out to the streets to protest fraudulent elections. As the crowds grew in cities throughout the nation (at their peak, nonviolent mass protests involved millions of Iranians), protesters began to demand greater political freedoms. This reform movement has been repressed, but not crushed or eliminated.53 We suspect that the young activists in the Green Movement represent a broader population of Iranians who admire American freedoms and want to live in an Iran where they have some of the same kinds of rights. The sustained imposition of crippling sanctions on Iran risks alienating Iranians under 30 years of age (nearly two-thirds of the entire Iranian population), as well as older Iranians. Reform-minded Iranians might decide that their first priority is to support their country and its government against the outside enemy.
In addition, sanctions have made it even more difficult for Iranian students and others to visit the United States or participate in cultural exchange programs—activities that the Iranian government has already done much to suppress.
Although unsuccessful in stopping terrorism, the range of U.S. sanctions did hurt Iran considerably. Financial pressure, in particular Washington's successful efforts to block IMF and World Bank funding to Iran, made Iran's debt crisis more debilitating. Until the 1998 waiver for Total, ILSA also discouraged foreign investment, which along with other sanctions delayed the development of Iran's dilapidated oil infrastructure. Meghan O'Sullivan, however, contends that sanctions are only a small part of the explanation for Iran's economic morass. She notes that the plunge in the price of oil (in the 1980s and 1990s), along with the war with Iraq, and political mismanagement would have led to a crisis in any event.Although the economic impact of sanctions on Iran was damaging, it did not affect the political orientation of the regime, particularly with regard to terrorism. Iran did shift its terrorism away from Europe and the Gulf and toward Israel, but this shift did not advance, and arguably set back, overall U.S. objectives. Moreover, the sanctions increased Iran's hostility toward the United States, enabling the regime to cite sanctions as "proof" that Washington sought to crush the Islamic revolution.
Escalating international sanctions may help the Iranian regime, including an ever-more-powerful Iran Revolutionary Guard Corps (IRGC), to rally public support for the government by portraying sanctions as U.S.-led aggression, even “economic warfare.”47 Iran’s leaders used international sanctions to encourage voter turnout in the parliamentary elections of March 2012, claiming that Iranian citizens had a duty to show their solidarity at a time of heightened international threat. After the elections, the regime hailed a purported turn- out of nearly 65%, calling it evidence of public support for Iran’s defiance of international pressure.48 (Other explanations for a high turnout are also possible, including public displeasure with the regime’s domestic policies.)
According to some analysts, Supreme Leader Ali Khamenei believes that overturning the Islamic revolution of 1979 is the true intent of the United States. Regime propaganda claims that sanctions are aimed at regime change, not at pressuring Iran to negotiate on nuclear and other issues. The longer sanctions go on, the harder it becomes for anyone in power to tell a different story.
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Trita Parsi questions the assumptions that underly the debate about the nuclear deal with Iran, specifically the idea that it was sanctions and pressure that brought Iran to the table finding instead that "the negotiations took off because the pressure path was leading to a dead end— a war neither side wanted."
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