Economic Sanctions and Transition to Democracy

The impact of Western economic pressure on Iran’s society will not only increase the opportunity to recreate elite cohesion among the country’s extremist currents, but it will also increase the likelihood of oppression and clashes with moderate forces, and the definite failure of sanctions will prepare the foundation for a military confrontation with Iran, leaving no other option but war and military clashes and the creation of another Iraq.

Iran’s failure to prevent the ratification of new UN Security Council sanctions  followed a series of diplomatic efforts revealing the regime’s concerns. Some were odd diplomatic efforts,  such as Mahmoud Ahmadinejad’s presence at the NPT (UN Non-Proliferation Treaty) conference and the New York dinner banquet. These efforts mark the start of a period of confusion regarding the Islamic Republic’s relations with the rest of the world.  The fear of Iran’s leaders regarding the new developments in the international arena, alongside domestic upheavals, emphasizes the increasing significance of the latest economic sanctions; a period that is reminiscent of Iraq in 1991.

In order to review the impact and significance of economic sanctions against Iran, we must investigate the sanctions before and after the Security Council’s 4th resolution against Iran (1835, 2008).  The first round encompasses the period from November 1979 through September 2008 – announcement of Resolution 1835 of the UN Security Council – and the second round starts from the dead end negotiations around the swap of nuclear material produced domestically for uranium needed for Tehran’s research reactor and the gathering of the permanent members of the Security Council for the new round of sanctions against Iran.

First Round

A look at the impact of Western economic sanctions against Iran during this first round shows that these sanctions have not successfully attained their goal of reining in the Islamic Republic or changing its behavior, and have merely left a negative impact on the Iranian economy.  This is because the United States was unable to build a global consensus around the implementation of the sanctions.  On the other hand, the other goals of the sanctions varied in each round and instances where the reining in of the regime or expectations of a changed attitude did not concur with the modification in the form and method of sanctions.  Moreover, unfamiliarity with Iran’s political and economic structure has prevented the conversion of economic pressure to political pressure on the Islamic Republic.  Additionally, domestic developments in both countries have made it impossible to maintain targeted and uninterrupted relations.  In any case, and despite the fact that the main goal was never attained, the sanctions imposed an exorbitant cost on the Iranian economy, especially in the field of energy, radicalized relations between the two countries, and brought a huge blow to the forces of moderation and democracy in Iran.

The upcoming round

The newest round of sanctions, because of its multi-lateral nature, its intelligent and dynamic pursuit of a global consensus, placing the Achilles heel of the Iranian economy—oil production—at the center, the effects of past sanctions on the national economy, and the isolation of Iran by the international community, alongside the particular domestic situation, has created a dangerous environment for Iran.  The balance between the goals and mechanisms of sanctions, the lower cost of imposing sanctions by the executors, the use of widespread financial sanctions, targeting security organizations and institutions, creating international restrictions for certain people, efforts to impose technological controls over Iran’s security regime, and the possible use of a few supporters who are not internationally recognized, will increase the efficiency and impact of such sanctions.  Thus, these sanctions have made a substantial impact, from the point of view of mechanisms and domestic foundation, and their success may determine Iran’s fate.

The mechanisms of sanctions

The choice of the energy sector as the Achilles heel of the Iranian economy has been very effective.  Income from oil exceeds 80% of Iran’s foreign exchange and half of its GNP.  Iran’s economic structure is based on income from oil.  This income has produced the ability to influence regional negotiations, provided for an allied force and increased infiltration and meddling with the Middle East peace process, and has made possible the hegemony of the United States in the region.

This abundant oil income has not only increased the political power of the regime, but it has diminished the authority and power of civic institutions and has greatly shifted the balance of power from the public to the government.  Producing oil in the shadow of previous sanctions and the government’s bad policy decisions have depleted the production of oil from 4.3 million barrels per day in 2005 to 3.5 million barrels per day in 2009.  The exports of 2.6 million per day have been reduced to perhaps as little as 1.7 million barrels per day.  Saudi Arabia can easily make up for the 1.5 million short fallin Iranian production.  In order to take over Iran’s deficit, this neighboring country promised China guaranteed supply and the granting of investment benefits.  Without a doubt China is willing to sacrifice its $20 million volume of trade with Iran in order to safeguard a $400 billion trade exchange with the United States, a $260 billion trade volume with Europe, and a $40 billion exchange with Saudi Arabia.

Should there be sanctions against the exports of 1.5 million barrels of crude oil per day and the purchase of 160,000 barrels of gasoline per day, it would bring to mind the experience of Iraq, a country where an abrupt decrease of income from $60 billion to $10 billion led to the total collapse of the country’s infrastructure.

The domestic situation

The closed structure of politics, lack of competition, lack of accountability on the part of the government, and non-existence of a commanding public arena and influential civic institutions inhibit the ability of economic pressures stemming from sanctions to inflict adequate political pressures, thereby diminishing the potential success of such sanctions.  However, the vulnerable domestic situation in Iran intensifies the effects of external sanctions.  The post-election events and the impatience of the government with the people caused a deepening of the rift in state-society relations.  Under these conditions, the middle class has put aside its passive attitude towards the form and nature of the regime and has taken on a critical stance.  Increasing inflation and social insecurity has led to widespread poverty and dissatisfaction.  The political ideology of the Islamic Republic, which is founded on the legitimacy of the velayat-e faqih (rule of the Jurisprudent), is undergoing an intense theoretical crisis and the ruling elite itself is experiencing the crisis of fragmentation and internal conflict.  The ruling elite is also experiencing a crisis of confidence and division.  And even among the classes that support the regime, a crisis of confidence and fragmentation is prevalent.  The predicament of inefficiency and lack of resources has rendered the government powerless in providing suitable services.  A prestigious role in the Islamic world and the image of regional sovereignty are being wiped away and gone are the days of a bright revolutionary and anti-imperialist posturing among the Arab and anti-American intellectuals of the region.  By this account, the implementation of international sanctions along with domestic upheaval may mean a proliferation of problems to come for the Islamic Republic.  The ultimate outcome in such a situation is the radicalization of the regime, the security focused form and content of government, and the acceptance of the rogue image offered by North Korea and Iraq.   It seems as if the government’s extremists are purposely creating such an impression.

[Translation of figure on page 2]
Center: The Islamic Regime of Iran
Clockwise starting from the top: The crisis of intra-elite conflict and fragmentation; crisis; crisis of acceptance among the middle class; the crisis of prestige in the Islamic World; international sanctions; crisis of international cooperation; crisis of national resources; crisis of confidence

What prospects do Western sanctions face in this crisis-ridden state of affairs?  Is there a possibility for transforming economic pressures into effective political pressure in order to change Iran’s behavior?  Without a doubt, the success of sanctions depends on the working together of international economic pressures and domestic political pressures.  The way in which the cooperation of these two forces will affect Iran’s political power may help determine the outcome of the sanctions.  Thus, two distinct prospects can be imagined for the economic sanctions, each of which will produce a distinct effect on Iran’s democracy movement.

Insistence on past methods

The global insistence on the goal of containing the Islamic Republic’s nuclear capabilities and disregard for issues concerning Iran’s middle class, as the class responsible for bearing the torch for democracy, goes along with the government’s desire to eliminate this potential for democracy and will prove to be a strain on the middle class.  The experience of previous sanctions has shown that economic pressures from sanctions have a direct effect in weakening the middle class and the forces for change in Iran.  This is at the same time that the policies of the 9th and 10th administrations (2005-9, 2009-2013) are based on this exact outcome of eroding the strength of pro-change forces.  During the past five years, the government has considered the middle class to be a serious threat and has set out to create confrontation between the social classes.  Policies such as cash payments of subsidies, equity shares, reneging on a pledge to pay billions of dollars to the private sector, and the creation of monopolies in the economy in favor of the security forces, are all viewed as steps in undermining this class.  Harmful economic policies have ruined the self-reliance of this class in accumulating capital.  With a severe rise in inflation, all indicators of social welfare, total or relative poverty, and employment indicators have declined, thereby deteriorating living conditions for the middle class.

The persistence on previous methods of imposing sanctions, inattention to Iran’s political and economic structure, and disregard of the middle class and its demands in choice of mechanism have led to the deterioration of this class, the transmission of economic pressures from the government to the people, the radicalization of the political atmosphere and increased violence between the government and the people, and an increased tendency to develop patron-client relationships, have undoubtedly increased internal contradictions in society and this will prevent the economic pressures to create political pressures that will ultimately change the behavior of the ruling class.

Thus, the insistence on carrying out this prior approach and the preference to pursue the nuclear containment of Iran follows the goals of Iran’s extremist forces.  The impact of Western economic pressure on Iran’s society will not only increase the opportunity to recreate elite cohesion among the country’s extremist currents, but it will also increase the likelihood of oppression and clashes with moderate forces, and the definite failure of sanctions will prepare the foundation for a military confrontation with Iran, leaving no other option but war and military clashes and the creation of another Iraq.

Connecting with the central demands of Iran’s democracy movement

Creating strategic interests with Iran’s pro-democracy middle class and including their demands and the issues that concern them, such as human rights, into the goals of the sanctions can prepare the foundation for aligning the objectives of economic and political pressure.  In this way, if goals such as increased pressure to abide by civil rights and political freedoms, a shift in the balance of power in favor of pro-democracy forces in the public arena, and a concerted effort to build self awareness among the middle class, are included in the preparation and selection of mechanisms, then political pressures will transfer into political pressure.  In effect, we can say that the success of sanctions has a direct and strong relationship with the conditions of the middle class, particularly the current state and future of the Green Movement.  If the design of such sanctions includes the strategic interests of this movement, the promotion and propagation of the movement will increase and there will be greater focus on sanctioning the forces of oppression and the regime’s reinforcement of its security forces.  Moreover, if the government’s anti-human rights policies get as much attention as its military exercises, and if external economic pressures align themselves with pro-democracy forces, there is bound to be a transformation in the regime’s repression and reactive behavior.  Therefore, the effectiveness of sanctions is linked to the success of the Green Movement and pro-democracy currents in Iran and the balance of power in favor of the middle class.