Sanctions campaign against Iran has proven its effectiveness
Perhaps the most important basis on which to assess the effectiveness of the maximum pressure campaign against Iran are the comments made by Iranian officials themselves — despite their routine distortions of the truth.
Any Iranian official speaking about the problems besetting the country, whether economic or social, or other crises, will cite the US sanctions as a reason one way or another. This also brings with it the worn-out propaganda parroted by Iranian media about how the country is engaged in steadfastness, resilience and resistance “in order for the US sanctions to be lifted.”
Even though the US embargoes have had a limited impact when it comes to changing Iran’s regional behavior, they have created many economic challenges and forced Iran to grapple with its domestic woes, which have affected all economic sectors without exception.
In September 2020, Hassan Rouhani, the then Iranian president, estimated the total losses resulting from US sanctions imposed on the country since mid-2018 at $150 billion, while his vice president, Eshaq Jahangiri, said in July 2021 that oil revenue losses alone had hit $100 billion. All losses were suffered in the form of “direct revenues.”
If we also take into consideration the fact that Iran’s oil sector is the essential locomotive of the country’s economic growth, the indirect losses, such as those involving businesses and jobs, could be much greater than the announced figures. It is certain that US sanctions have had a negative impact on all the economic and living indicators in Iran.
In broader terms, we can point to inflation surging to almost 50 percent — with the rate much higher when it comes to food and housing prices — and an economic recession that has dragged on for two years. In addition, Iran has experienced capital flight worth billions of dollars in investments; increasing unemployment rates, reaching 40 percent among university graduates; foreign trade that has been cut by nearly half, with the regime banning imports of thousands of items and products as the national currency has lost 75 percent of its value against hard currencies; a widening budget deficit; and, on top of all this, a crisis concerning the woeful handling of the coronavirus pandemic due to the shortage of funds, vaccines and medicine.
Even before the actual announcement of the sanctions, major industrial companies decided to leave Iran or suspend investment agreements with the country primarily in the industrial sector, including the automotive, oil and petrochemical segments. The industrial sector alone accounts for 34 percent of the Iranian workforce (almost 9 million Iranians). Makers of European cars, which enjoy widespread popularity in Iran, have left the country, with hundreds of thousands losing their jobs, leading to car prices skyrocketing. This is in addition to the termination of contracts worth hundreds of billions to develop the country’s aging aviation and oil sectors.
When the nuclear deal was signed in 2015, Iran’s then oil minister Bijan Namdar Zangeneh announced a major plan to develop and revive the country’s outdated oil and petrochemical industries, which had fallen behind its global peers and not seen any development since the imposition of sanctions in 2012 under former Iranian President Mahmoud Ahmadinejad.
The estimated cost of these investments amounted to $200 billion, with Iran signing the first agreements with European countries as part of its upgrade plan in 2012. These contracts were subsequently terminated in 2018 as a result of the sanctions. Today, the need to develop and upgrade Iran’s most important industry has become even more urgent. Iran remains shackled by the US sanctions.
This prompted Javad Owji, the oil minister in the government of Ebrahim Raisi, to announce a new Iranian plan for bartering or exchanging oil and gas condensates with any investor in return for goods or investments in the oil sector.
In light of the aforementioned, how can anyone claim that the sanctions have been ineffective when the Iranian situation has deteriorated to this extent?
Perhaps the greatest challenge for the Iranian regime resulting from the sanctions has been the massive decline in value of the national currency and the subsequent collapse in purchasing power, dealing severe blows to Iranian society, as well as causing the prices of all goods and services to surge. In early 2018, the US dollar traded at 4,500 tomans; as of October 2021, this has spiraled to more than 27,000 tomans.
A new report from the Iranian government’s Planning and Budget Organization provides a grim analysis of government debt, warning that without a “fundamental overhaul of the country’s unhealthy economic structure,” the Iranian government will face bankruptcy in the near future. The report, prepared in the summer but only recently published, examines the outlook for the Iranian government’s debt with two scenarios: Lifting or continuing sanctions. It warns that with continued sanctions, the government will be on the brink of bankruptcy by 2024.
Besides the various economic and social consequences stemming from the sanctions, there is no doubt that there are also security consequences, such as the many protests that have flared over the past three years. It could also be argued that there are psychological consequences, an issue that requires deeper analysis; certainly, the international isolation that the regime has imposed on the Iranian people must have had a damaging psychological effect on some parts of society, especially among the young.
Perhaps the greatest challenge for the Iranian regime resulting from the sanctions has been the massive decline in value of the national currency and the subsequent collapse in purchasing power.
Dr. Mohammed Al-Sulami
There are still some who question the effectiveness of the sanctions, citing the Iranian regime’s continued survival despite the economic crises gripping the country. While this analysis may hold some truth, the regime remains in power at the expense of a crushed people who have borne the brunt of the embargoes.
The regime is gambling that its blind adherence to a policy of infinite patience and resilience will pay dividends. However, while Iran’s regional approach has not changed in concept or ideology, its financial and military support for its overseas militias has been curbed to some extent due to a lack of financial resources, while its apparatuses, the most important being the IRGC, experienced a budget cut by 17 percent in 2019. According to Brian Hook, the former US special representative for Iran, Tehran’s support for foreign militias has declined due to US sanctions.
Keeping the sanctions in place, addressing the loopholes exploited by Iran to circumvent them, and hunting down the companies that bypass the curbs in order to force the Iranian regime to the negotiating table is the least harmful solution for the region and the world — certainly in comparison with other options that are much more difficult and dangerous for everybody.
- Dr. Mohammed Al-Sulami is President of the International Institute for Iranian Studies (Rasanah). Twitter: @mohalsulami