Tuesday, August 30, 2016

The Contrarian

Commentary: Actually, Iran Sanctions Aren't Working

The sanctions are hurting ordinary Iranians, the author argues.
The sanctions are hurting ordinary Iranians, the author argues.
By Dina Esfandiary
There are two misconceptions about sanctions on Iran and the country’s currency crisis: one, that sanctions are the only cause for the rial’s free fall in value last week. And two, that sanctions are achieving their strategic objectives.

The unprecedented fall in the value of the rial last week brought on another flood of accusations from within Iran that the West was waging economic warfare on Iran.

Speaking to reporters, Iranian President Mahmud Ahmadinejad stated that "currency fluctuations” were “due to psychological pressure" from outside. The Iranians were not alone in blaming sanctions for their troubles. The U.S. State Department pointed to the devaluation of the rial as proof that sanctions were working: “The currency is plummeting. And firms all over the world are refusing to do business with Iranian companies…this speaks to the unrelenting and increasingly successful international pressure that we are all bringing to bear on the Iranian economy.”

Sanctions have certainly weakened the economy. They have cut off Iran’s access to the international financial system, making it difficult for Iran to sell and receive payment for its oil. But the collapse of the rial is not as simple as that.

Iran’s economy has been mismanaged for years. The only effort made to redress it -- the removal of the subsidy program in 2010 -- only worsened the situation by contributing to rising inflation and unemployment. Because of this, the Iranian public appears to be having a crisis of confidence in the government’s ability and will to tackle the country’s economic problems. This is exacerbated by the fact that there seems to be no end in sight to Iran’s problems. In fact, the United States and European Union are working on further measures to tighten the squeeze on Iran.

But what is the goal of sanctions? If the objective is to change the Iranian leadership’s strategic decision to continue developing its nuclear program, then clearly, they have not worked. U.S. Secretary of State Hillary Clinton disagrees with my conclusion. In July she stated, “We believe that the economic sanctions are bringing Iran to the table.” The P5+1 have indeed been engaged in negotiations with Iran for most of 2012, but they have not led to anything concrete. Iran continues to make progress in 20 percent enrichment, producing approximately 14.8 kilograms a month.

While sanctions may not change the regime's intentions, they have been effective in curbing Iran’s nuclear progress. Sanctions that target Iran’s access to international financial services, transportation, and trade insurance are the best way to disrupt the illegal black market trade that Iran has turned to. For example, they have limited Iran’s access to foreign parts and components necessary for the improvement of its centrifuges. 

But today, sanctions are going beyond just slowing the Iranian nuclear program. They are affecting all segments of the Iranian population. Iran faces a dire fiscal situation, exacerbated by the massive devaluation of the rial. Although the government maintains that the official inflation rate is 25 percent, it has actually spiraled out of control, with some analysts claiming that actual figures are double the government rate. In addition, unemployment has soared, with estimates stating that between 500,000 and 800,000 Iranians have lost their jobs in the past year.

Businesses are closing up shop -- especially small and medium-sized companies that had already lost out following the removal of the subsidies in December 2010. Such businesses had been hit hard when consumers switched to buying foreign goods, which had not been affected by the rise in prices. “Business is drying up, industry is collapsing. There's zero investment," said an Iranian businessman in September.
Every sector of the Iranian economy has been affected. From the energy sector -- the main source of revenue for the government -- to staples such as foodstuffs, including relatively strong Iranian industries such as automotives. The biggest losers, however, are middle-class Iranians.

The entire population has suffered from the rise in prices, but the government has attempted to shield the lower classes by offering them cash handouts and subsidizing certain imported staple goods, making them relatively affordable for poorer segments of the population. But even these efforts have had a limited effect, as the price of goods such as Barbari bread went from 1,000 rials to 5,000 rials last week.

Importing specialized goods, an activity reserved to merchants, businessmen, and the middle classes, is considered a lower priority. The government maintains a less advantageous rial-to-dollar exchange rate, driving businessmen to the black market. The collapse of the currency then seals their fate. The middle class can no longer afford small luxuries like new electronic appliances, travelling abroad, or even paying for the education of their children abroad. International banking sanctions have also affected many Iranians who are unable to access their funds or are being forced to close their accounts. Surely affecting the middle class, the primary agents of social change, is contrary to the goal of encouraging democracy in Iran?

The way sanctions were discussed in the past made it sound like it was only about the nuclear program -- “squeezing” the Iranian Revolutionary Guards and the government to make them change their strategic calculation. They were called “smart sanctions” and were targeted. But today, we’ve gone beyond that. Some U.S. officials are talking about regime change and punishing Iranians for their government’s choices. In the words of a sanctions proponent: “Critics…argued that these measures will hurt the Iranian people. Quite frankly, we need to do just that."

Sanctions have a habit of polarizing the population: those who support the government blame foreigners for their worsening economic situation, and those who do not, blame their government. But only up to a point. The most dire economic situation will eventually turn those most loyal to the regime against them. It seems that with the latest round of sanctions and those being currently negotiated we are reaching this point. Is the goal now to push a nation of 75 million people to starvation and poverty to encourage regime change?

Dina Esfandiary is a research associate in the nonproliferation and disarmament program of the International Institute for Strategic Studies (IISS). Her research focuses on nonproliferation and security in the Middle East, including Iran and Syria’s WMD programs. The views are the author's own and do not represent those of RFE/RL
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Comment Sorting
by: Eugenio from: Vienna
October 10, 2012 19:19
The article is saying: "If the objective is to change the Iranian leadership’s strategic decision to continue developing its nuclear program, then clearly, they have not worked".
Increadible!!! Congratulations, RFE/RL: who knows, maybe it's the first time in your long history that you managed to say to your bosses in Washington D.C. what is obvious to the entire humankind - US "policy-makers" are a bunch of incompetent losers whose policies do not achieve any goals at all. Well, coming from the pages of the RFE/RL, this obvious thought even sounds like a mutiny on the ship. Who knows, maybe budget cuts will finally reach you, guys, after this publication :-))).

by: Muslim from: Earth
October 10, 2012 22:47
Economic forecast by the International Monetary Fund (IMF) released on October 9, is another sign that the effects of illegitimate Western sanctions against Islamic Iran are greatly exaggerated.

In its semi-annual World Economic Outlook report, the IMF stated that Iran's balance of trade in goods and services is expected to see a surplus of 3.4 percent of GDP in 2012 and 1.3 percent next year. In June 2012 Brookings Institute stated that “apart from the fact that sanctions have disrupted Iran’s foreign trade, the foreign-exchange situation of Iran is the envy of the developing world, with virtually no foreign debt and substantial reserves of various currencies and gold.”

These facts are a clear indication that the impacts of sanctions against Islamic Iran are exaggerated in order to conceal the fact that Islamic Iran is able to challenge Western imperialism. From time to time Western power institutions have to admit the inefficiency of imperialist sanctions in order to explain their failure in toppling the Islamic system of government in Iran.

One of the primary reasons why Western powers have failed against Islamic Iran was eloquently summarized by the prominent Middle East scholar and journalist Patrick Cockburn. In his analysis published on October 8th by the widely known US newsletter, Counterpunch, Cockburn quoting an Iranian journalist writes that “the problem is that the picture of what is happening in Iran these days comes largely from exiled Iranians and is often a product of wishful thinking.”

In 1979 right after the Islamic Revolution, Western powers imposed an economic embargo, launched a proxy-war through Saddam Hussein and instigated internal sabotage through backing terrorist groups like the MKO, but the Islamic system survived against all odds. Therefore, the current situation in comparison to the previous Western aggressions against Iran is not so challenging.

It needs to be remembered that it was not only the Western power block that was trying to overthrow the Islamic system in Iran in its early years, but also the Soviet Union, by supplying arms to Saddam Hussein and through supporting the Tudah party in Iran in order to destabilize the country internally. Taking into account Iran’s existing global influence and the economic crisis in the West; the chances of Islamic Iran to withstand the current Western aggressions are high.

by: Mr. Roboto from: Midwest America
October 11, 2012 13:19
The author is obviously young and somewhat inexperienced. But most importantly she is impatient. Like so many young people today she expects everything to have immediate response and feedback.

The sanctions against Iran have and will take time to affect and influence events and actions inside Iran. As this transpires it will not be pretty or fair, especially to the poor of Iran. Oh well...the poor have always gotten the shaft from the rich and the powerful.

Frankly, there is little else the rest of the world can do to attempt to influence Iran besides these economic sanctions. It is my considered opinion that they will indeed modify and change the behavior of Iranian leadership. Exactly how is impossible for anyone to predict.
In Response

by: Feridoun
October 11, 2012 16:46
When the people marched in protest during Green protest they protested against the regime. The basiji stopped them because they support the regime. But now the basiji cannot buy bread or chicken and maybe they will join the protest this time.

But high officials in government and high ranking clerics do not suffer.
In Response

by: Danram from: Dallas, Texas, USA
October 11, 2012 19:21
No, actually she is completely clear-headed and is willing to state the obvious. The mullahs in Qom don't give a rat's patoot if their people are suffering. They see it as a religious duty to develop atomic weaponry and absolutely nothing is going to prevent them from doing so.

Of course, once the Iranians have nukes, then the Saudis, Jordanians, Egyptians, et al are going to want them too in order to deter Iran.

Is it starting to dawn on you yet just how serious this is?

You state "Frankly, there is little else the rest of the world can do to attempt to influence Iran besides these economic sanctions."

Ummmmmm .... wrong. The US and Israel can launch punishing air strikes to obliterate Iranian air defenses and nuclear sites, followed immediately by an land invasion to overthrow Iran's repressive theocratic regime. That's what should have been done long ago and what will need to be done to prevent Iran from acquiring nuclear weapons. Anyone who seriously thinks there there is a third option is living in a dream world.

by: Danram from: Dallas, Texas, USA
October 11, 2012 19:15
Of course they're not working. They were never gonna work.

Sanctions are merely a fig leaf for gutless western politicians who don't want to confront the unpleasant reality, which is that Iran's mullahs want their bomb and nothing other then decisive military action is going to prevent them from getting it.

by: eric d from: IF Idaho USA
October 11, 2012 21:13
I'd like to ask the author:

Yes, no! Sanctions aren't working! So what's the alternative? Brutal attacks by Israel & the US (as "Danram" suggests) which would, de minimis, also obliterate a few hundred thousand innocent Iranian civilians? (...Including Green Party members who oppose the theocratic regime?...) Not to mention spewing deadly radioactive fallout over the whole Mid-East & the whole world...

What can "the West" & the international community do to promote "regime change" in Iran that doesn't create anti-Western backlash & make the regime even more impervious to change? As, for example, an Israeli/US strike would polarize the whole Muslim world (and siome of US Westerners, too!) against "the West" (the US) & cause an eternal war between "the West" & Islam...`

by: Bill Webb from: Phoenix Arizona USA
October 14, 2012 02:49
Stopping the mullahs from developing nuclear weapons is a goal that is supported by the entire international community.The sanctions are having the desired effect. If the regime or the people of Iran want the Persian Empire to go down the toilet, they can continue on their present course. If not, they could allow unfettered inspections by the IAEA to all of their nuclear facilities. It's their choise.
In Response

by: Bob from: Texas
October 15, 2012 21:43
This has got to be the dumbest comment I've seen so far. No wonder Americans are considered laughingstocks when it comes to knowledge about current events. International community? Really? I suppose you don't count the 150 nations that attended the Non Aligned Movement summit in Tehran last month, which just so happens to comprise 2/3 of the world's population. Idiot.