Who Benefits from Iran Sanctions Relief?
The author argues that the endemic corruption and waste in Iran means that the expected sanctions windfall will not be directed towards expanding Iran's funding of militants but flow towards the elites, meaning "more mansions and Ferraris on Tehran’s streets."
Much of the money repatriated to Iran will have to be spent on addressing the government’s inherited problems. In addition, Iran needs an estimated $200 billion in investments for its dilapidated energy sector. But perhaps more importantly, at least some of the economic benefit from sanctions relief has to trickle down to the average Iranian. Rouhani was able to win his election because Iranians were desperate for change, especially economic relief. Of course, Iran is not a democracy, and the Guards and bonyads will take a large cut of sanctions relief, whether it is the repatriated money or wealth created through future oil export or investments. But the Rouhani government and the regime as a whole also have to pay attention to popular demands. After all, the regime faced a national crisis before Rouhani’s election: the 2009 mass protests that shook Iran were in no small part the result of the economic and social pressures faced by the population. The need to prevent future unrest had a role in Supreme Leader Ayatollah Ali Khamenei’s decision to support Rouhani’s nuclear negotiations. Of course, Khamenei also had to ensure the loyalty of the Guards and Iran’s traditional merchant class, both of which were hit hard by international sanctions.
This doesn’t mean that Iran wouldn’t use some of the sanctions relief on maintaining or expanding its influence in the Middle East. But this won’t take a tremendous amount of money. Iran’s support for the Syrian regime is likely to be the biggest of its foreign policy expenses. To date, Iran may have provided billions of dollars in financing and weaponry to keep the Assad regime alive. Hezbollah has developed some measure of financial independence, although Tehran may increase funding to the group if it can afford to. Relations between Hamas and Iran are lukewarm at best; if Iran provides additional funding to Hamas, it is unlikely to exceed millions of dollars a month, as was the case when Iran and Hamas had warmer relations (before the Syrian civil war.) And finally, Iran has been able to expand its influence under severe economic constraints due to a collapse of central authority in much of the Arab world, and not because it is the richest country in the Middle East (that title belongs to Saudi Arabia.)
A nuclear deal, if successful, is likely to improve Iran’s economy. But Iran is unlikely to witness rapid economic growth that would empower the regime regionally. Corruption, waste, and unaccountability are endemic and are likely to present challenges to Rouhani’s economic goals until the end of his presidency. Rouhani would like to privatize Iran’s economy and integrate Iran into the global community, but he has to contend with forces that have thrived off of Iran’s state controlled economy for decades. The Revolutionary Guards, fearful of Rouhani’s economic and political agenda, may boost their spending abroad, but they are likely to pocket much of the money from sanctions relief. In Iran, creating a revolutionary society often means creating immense riches for the elite few. Rouhani has to give something to Iranians who have looked up to him, but sanctions relief is likely to flow to those with the deepest pockets. This may not necessarily translate into greater Iranian influence abroad, but rather more mansions and Ferraris on Tehran’s streets.
Obama administration officials readily concede their concerns that the sanctions relief in the nuclear deal with Iran will free up $50-100 billion in funds that Iran could direct towards funding its aggressive foreign policy but argue that there are several mitigating factors that make this a manageable risk.