Since its establishment in 1979, the Islamic Republic of Iran (IRI) has had to contend with economic sanctions imposed by Western countries, particularly by the United States. This policy has been cyclical: a political escalation involving strict sanctions is followed by intensifying diplomatic relations and a focus on Iran’s reintegration into the world market. The demise of Iran’s reformist movement and the latest escalation of tensions by the Trump administration may have broken this cycle — and also potentially turned Iran towards China and Russia for the long term.
Hamid Mohseni is a freelance writer who has followed developments in Iran since 2009 and participates in left solidarity initiatives that monitor democratic and social protests in Iran from a critical perspective.
Translated by Gráinne Toomey and Hanna Grzeszkiewic for Gegensatz Translation Collective.
Sanctions and Iran’s Nuclear Programme
Sanctions imposed by the US and its partners during the IRI’s relatively short 42-year existence can be divided into four phases. The first sanctions against the IRI were imposed by the Carter administration in 1979 immediately after a hostage-taking incident in the US embassy in Tehran; they affected individual Iranian bank accounts, gold reserves, and other assets. The second phase fell during the Reagan years, whose use of sanctions during the first Gulf War between 1984 and 1987 was intended to weaken Iranian arms operations.
The third and fourth phases of sanctions extend from 1995 until today and stretch across the tenures of five US presidents — Clinton, Bush Jr., Obama, Trump, and Biden. These phases must be considered within their wider political context, since they all relate to Iran’s nuclear programme. Ironically, the programme was made in, or rather, by the. From the 1950s onwards, the USA included Iran, ruled at the time by a pro-Western Shah, in the “Atoms for Peace” programme initiated by Eisenhower. Alongside the US nuclear power lobby and US corporations, companies in Germany, too, were excited by the boom in atomic trade with Iran. Kraftwerk Union AG, a joint venture of Siemens and AEG with a focus on pressurized water reactors, was commissioned in 1975 to build a nuclear power station in Bushehr in southern Iran, which was connected to the national grid in 2011. The project undoubtedly earned the group several billion dollars.
Following the ayatollahs’ bloody rise to power, Iran’s nuclear programme was initially put on hold, but after a 180-degree shift in foreign policy, their former ally the US became the archenemy. The nascent IRI was involved in various domestic and economic crises at the time, and its existence was also threatened from abroad due to a never-ending war with Iraq that had started shortly after it came into being. IRI rulers therefore threw their moral scepticism about nuclear energy overboard, and viewed atomic weapons in particular as a lucrative military option that would satisfy their expansionist aspirations, or at least build a threatening military front. For strategic reasons, however, the official line then (as now) was that the weapons were to be used for peaceful purposes.
As part of this reorientation, in the early 1990s Iran turned to Russia, which in 1995, as part of one of several agreements, committed to aid the IRI in completing nuclear power stations and to provide expertise on uranium enrichment. In post-Soviet Russia (and since then, in Argentina and later also China), the IRI had found a non-Western stakeholder for continuing Iran’s nuclear programme through a total shift in its foreign policy.
This development was a thorn in the US’s side and is the reason for the third phase of sanctions against Iran. In 1995, US president Clinton issued the harshest sanctions yet against the IRI. Initially, they targeted the Iranian oil industry — by far the country’s most important source of income — and were later applied generally to any trade relations between the two states. This was by no means a matter of course, since trade between Iran and the US had been steadily increasing since the end of the first Gulf War. When the reformist Iranian president Mohammad Khatami entered office in 1997 with a pledge to liberalize the country, Clinton loosened the sanctions. This paved the way for specific goods such as pharmaceuticals, medical equipment, certain foods, and so on, to be traded, and the two countries resumed economic relations. Meanwhile, Iran accepted restrictions regarding uranium enrichment.
2005 saw the ultraconservative Mahmoud Ahmadinejad elected as president, who campaigned with intentionally anti-imperialist and nationalist rhetoric for a nuclear programme free of external restrictions. Accordingly, the IRI renounced all agreed-upon restrictions regarding uranium enrichment. Bush Jr., who had only a few years earlier initiated a turning point in foreign and domestic policy with the “war on terror”, began preparing and implementingsanctions against Iran almost as soon as Ahmadinejad assumed office. Bush also targeted the largest Iranian banks to make even indirect transactions impossible. In the following years, an increasing number of larger Iranian accounts were frozen.
This approach was initially continued under Obama. Between 2010 and 2013, the US tightened sanctions on the financial sector to such an extent that administration officials warned that “transactions in the rial [the currency of Iran] will expose anyone to sanctions”. The strategy behind the sanctions thus shifted: the focus was now not only on all financial transactions between Iran and the US, but also on transactions by third parties, which were prohibited and made punishable by law.
As a consequence, banks such as the French giant BNP Paribas, the Swiss bank UBS as well as German banks Commerzbank and Deutsche Bank were required to pay fines amounting to millions or billions of dollar. The Obama administration advanced US sanctions policy, while emphasizing its long-term goal of an agreement that aimed on the one hand to restrict Iran’s nuclear programme and to re-integrate Iran into the global trade network on the other. The election of moderate president Hassan Rouhani, who promised to end sanctions, facilitated this goal.
The third phase of sanctions came to an end in 2015 when a historic nuclear deal known as the “Joint Comprehension Plan of Action” (JCPOA) was drawn up with Iran. This in principle suspended all sanctions for a short period and enabled Iran to be re-integrated into the global market. In return, the IRI made a recommitment towards transparency and stricter regulation of its nuclear programme. The hard-hit Iranian economy slowly improved, but this period of recovery only lasted a few years.
In 2018, not only did newly elected US president Trump withdraw from the JCPOA, but pursued the strategy of sanctions against third parties and intensified them. This phase is characterized by Trump’s expansion of the list of areas and sectors for imposing sanctions to such an extent that no real common thread could be clearly traced in US sanctions policy. Previously, focus had been on restricting Iran’s nuclear programme and its military build-up through what were referred to as “smart sanctions”, as well as a targeted weakening of the specific economic sectors pivotal to the build-up. Instead, Trump escalated tensions to an extreme level by pursuing a campaign of “maximum pressureagainst Iran, and his administration never tired of portraying the country as a “criminal regime” that had exploited the deal to collect a “ton of money” in order to arm itself with nuclear weapons and to support global terrorism. According to the administration, this could only be combated using an iron fist approach and by debilitating the regime as a whole through continuous isolation. Under Trump, military tensions with Iran between 2019 and 2021 escalated to their worst level in a long time.
Five Arguments For and Against Sanctions on Iran
The following section aims to examine five of the most common arguments for and against sanctions on Iran.
1) Sanctions are the only political tool that can be used to mitigate the Iranian nuclear programme, integrate the IRI into the global market in the medium term, and stabilize politically liberal forces in Iran in the long term.
This claim perfectly expresses the neoliberal ideology of freedom, peace, and prosperity through trade propagated by advocates of sanctions. In the end, it primarily comes down to a transaction that, while very mundane, is also very important: the world needs Iran’s oil and gas reserves, and the sale of oil and gas is Iran’s biggest income source by far. If this source dries up, it leaves huge holes in the IRI’s budget and leads to existential hardship: during the first two years of the sanctions reimposed by Trump (with the coronavirus pandemic yet to begin), exports slumped by 80 percent, Iran’s economic output shrank by 12 percent and its real wages by 14 percent, while extreme poverty rose by 11 percent. The rial lost almost 25 percent of its value, and the minimum wage collapsed from 260 US dollars to 70 US dollars. A substantial proportion of the Iranian middle class fell into poverty and had to struggle to survive.
This has political implications, since the middle class has traditionally supported more moderate views within the state apparatus of the IRI. During the so-called “reformist” presidency and a period of openness towards the West — most recently, following the 2015 nuclear deal — a reenergized middle class was able to recover economically and to curb the growing monopoly position held by the politico–military–industrial complex, i.e. the Revolutionary Guard Corps. Such activities also tended to involve expanding certain political freedoms, meaning that social movements and workers’ struggles also had some room to breathe.
There is no longer any trace of these efforts, and the reformist camp has now been disbanded and can no longer be truly viewed with hope. The common projection that liberal power can be strengthened through negotiations conducted on an equal footing is, at the present moment, in theory tenable at best.
2) Harsh sanctions have no comprehensible goal other than the total isolation of the entire country, meaning that the interest in and motivation for negotiations within Iran cannot be communicated, and hard-line political factions in particular are strengthened.
During the short-lived period of economic recovery following the 2015 nuclear deal, Rouhani was unable to distribute prosperity fairly. While urban areas and a few specific sectors were finally able to reexperience growth and stability, wide swathes of rural regions did not experience any change from the time before the deal. Those in the IRI who conducted negotiations in the interests of recovery and support, and who endorse them to this day, thus also bear responsibility for the failings of this strategy.
This will become even more problematic if a US administration with a doctrine similar to Trump’s closes any potential window for diplomatic agreements. In all cases, those standing on the side-lines laughing are the hardliners and ultraconservatives within the IRI. They twist things politically to portray the short-term strategy selected by someone such as Rouhani as a mistake, and to provide proof that negotiations with Iran’s archenemy the US cannot be considered reliable. They opine that Iran should bow to no one.
This attitude, which currently prevails, has serious consequences: the militarization of the economy is increasing at a rapid pace, and the Revolutionary Guards now hold large shares in bankrupt, middle-class, and — every now and then — progressive companies, and are expanding their grip on the entire Iranian economy even further. Their political hegemony and interpretive authority over the meaning of diplomatic relations with the West is extremely evident at present.
3) Through its “maximum pressure” doctrine, the US is shirking its commitments regarding liberalization, global market re-integration, and freedom, weakening its hegemony within the Western alliance, and straining relations with its own partners.
All phases of the sanctions against the IRI certainly have general geopolitical significance and growing influence particularly in West Asia, which is geostrategically still a vitally import region for the US. In principle, sanctions represented a political solution that promoted peace and prosperity through trade for all stakeholders.
Trump contravened this, obviously, and did not want to hear his allies’ objection that Iran was too important to be boycotted long-term or effectively, or cut off from the world market. They alleged that this move would be irrational and unviable from a global trade perspective. What proved that they were right was that even under the harshest sanctions, business with Iran continued, especially in oil, and it was done illegally and in secret, if necessary; as Bijan Zanganeh, then Iran’s Minister of Petroleum, boasted at the beginning of 2021: “[w]e set the highest record of exports of refined products in the history of the oil industry during the embargo period.”
Statements by Iranian officials should always be treated with a degree of caution, as they are first and foremost a performance with the intention of demonstrating the country’s strength. Other cases have shown, however, that the US will encounter problems if allies conduct business themselves and are sanctioned for it. In 2019, while Obama was still in power, semi-state-owned Turkish bank Halkbank was accused by the US Department of Justice of channelling several billion dollars to Iran. This was one of the biggest court cases connected to Iran sanctions.
But after pressure from his ally Erdoğan, Trump personally saw to it that the investigation was dropped, which resulted in a political scandal. Exemptions as generous as this are not unheard of worldwide and undoubtedly result in other parties operating under the radar to circumvent US-enforced stipulations. The US has thus itself enabled Iran to evade sanctions.
4) The aim of sanctions is to isolate the regime, bring its economy to its knees, and trigger political unrest in the country. This is the only way of ensuring that the balance of political power can change in a sustainable manner and of opening up the country long-term.
This kind of assumption is definitely more realistic and sustainable than the illusion that still persists of enforcing a “regime change” through military means. And indeed, protests in Iran are becoming increasingly radical, changing character, and increasing in frequency. Arguably the recently best-known political movement in Iran, the Green Movement, arose in 2009 after ultra-conservative president Ahmadinejad was fraudulently re-elected. Involving many members of the urban middle class, it was a rebellion within the political system that had the goal of replacing the conservative president with a moderate candidate.
This kind of movement could never rise up today. Firstly, there is no remaining credible reformist camp to offer a political alternative; secondly, the middle class continues to shrink and no longer constitutes a representative force within the country; and thirdly, more and more Iranians view finding a solution within the existing system as unrealistic.
Whether large or small, the number of protests is by no means falling, but since 2017 their nature has been changing: an increasing number of protesters are from the working class and the lowest levels of society; demonstrations address existential matters such as food, wages, freedom, and dignity; they take place nationwide, with all ethnic minorities taking part; and they are becoming more militant and often of a common anti-systemic and radical nature.
These protests are the result of Iran’s decades-long impoverishment, for which sanctions can be held partially, but not wholly, responsible. This responsibility lies first and foremost with the corruption, mismanagement, and nepotism of the ayatollahs and the Revolutionary Guards — a situation where imposing sanctions simply adds fuel to the fire. All protest movements in Iran have one thing in common, however: since the establishment of the IRI, they have been in all instances declared illegal, at times violently suppressed, and are continually antagonized. Highly equipped and highly repressive, the IRI knows no mercy, and it has enhanced its counter-surgency methods to a professional level.
In view of this, the argument that sanctions create political unrest and long-term change is in the case of Iran unfortunately a red herring, as it misdirects hope into a bloodstained vicious circle instead.
5) The harsh sanctions policy imposed by the West has led to Iran turning its back on Western countries and ultimately approaching China and Russia.
In March 2021, Iran signed a 25-year cooperation agreement with China. The latter is set to invest 400 billion dollars in all sectors of the Iran’s economy, military, and infrastructure over this period, in exchange for a steady and heavily-discounted supply of Iranian oil and gas. Just four months later, Iran extended a cooperation agreement drawn up with Russia in 2001. The IRI has had agreements with Russia and China since the 1990s, and it would be much too reductionist and simplistic to romanticize these partnerships as homogeneous.
There have historically always been tensions, since the IRI has a clear ideological foundation with expansionist and imperialist aspirations; the first revolution leader Khomeini always emphasized that Iran should never bow to another power, but rather aspire to become a global power itself. However, by the time Trump escalated tensions, if not earlier, the IRI had virtually no choice: if the ayatollahs wanted to stay afloat financially, they would have to look to the East to essentially “sell” the country to Russia and China.
This amounts to a political paradigm shift and is likely to haunt the current US president Biden, who as US vice-president jointly designed Obama’s deal and was a proponent of the plan to curtail Iran on economic, and therefore political, terms. A return to this paradigm seems a long way away. First, there must be a return to the primacy of diplomacy that informed Obama’s foreign policy, and this must be credibly communicated (or indeed recommunicated). Second, following its agreements with China and Russia, Iran is now in a significantly stronger position for entering into negotiations with the West. Third, the position of US’s biggest competitors and opponents of sanctions will become much stronger as a result of this increased access to Iran, given its multi-layered strategic importance.
Putting People First
The question of sanctions proves to be extremely complex, and harbours many contradictions. An analysis of the above arguments illustrates what hopes a prudent sanctions strategy can entail and what goals could be achieved. However, it also demonstrates how sanctions fail politically when tensions are escalated, only serving to strengthen the position of hardliners in Iran.
Viewing the phases of sanctions historically suggests the existence of a cycle, but Trump’s exacerbation of the situation not only seems to signal a new episode within the loop, but may have permanently affected relations between the US and Iran. Of course, selling its key resources of oil and gas to China will not in itself enable Iran’s economy to recover: business with Western countries including the US is also crucial. China is ready and willing to pay its way, however, and the IRI’s new alignment with China and with Russia may represent the beginning of a long-term paradigm shift in foreign and economic policy.
In conclusion, we should be cautious about reducing Iran solely to its geopolitical importance. It is, after all, one of the region’s largest countries, with over 80 million inhabitants. The fact is that since the ayatollahs came to power, people in Iran have been increasingly embroiled in disasters, war, impoverishment, and existential hardship. Prisons are full, protesters are often killed or have to flee, and the Iranian diaspora continues to grow.
When examining Iran or the sanctions imposed upon it, the focus must be placed on its people. This means rethinking the specific, hardened stereotypes and geopolitical notions that satisfy our own world view, and rejecting them if necessary.
 W. Altvater, “The Iran-1 and Iran-2 nuclear power station on the Persian Gulf”, Atomwirtschaft – Atomtechnik, 22(2) , pp. 74-80.