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The Strategic Ramifications of anti-Iran Sanctions

Mahan Abedin is Visiting Fellow at the Institute for Defence Studies and Analyses, New Delhi. Click here for details profile
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  • August 13, 2010

    The international community led by the United States has hitherto focused on sanctions as the most effective tool to contain Iran’s nuclear ambitions. But with a fourth round of United Nations sanctions imposed in June, followed by even harsher unilateral sanctions by the United States and the European Union, it is worthwhile to take a step back and critically evaluate the sanctions policy.

    Aside from evaluating the practical effects of sanctions on Iranian policy, the most important question to be posed at this juncture is how the Western powers led by the United States will react in the event of the current round of sanctions not producing the desired outcome, namely to force Iran’s rulers to suspend all enrichment-related and reprocessing activities.

    The Islamic Republic of Iran is currently subject to a dizzying array of United Nations, European Union and United States sanctions regime. The United Nations Security Council passed resolution 1929 on June 9, imposing additional sanctions on Iranian military purchases, trade and financial transactions. This was the fourth such measure adopted by the UN Security Council since 2006. In addition, the European Union and in particular the United States have gradually established a complex and formalised sanctions regime against Iran since the mid-1990s, targeting, amongst other things, the Islamic Republic’s financial institutions and Iran’s ability to modernize its vital energy sector. A far less extensive and formalised sanctions regime (targeting for the most the sale of certain military items) had been in place since 1980.

    There is some anecdotal evidence that the latest round of sanctions (enshrined in UNSC Resolution 1929) is having a serious impact. Iranian businessmen trading with the outside world and even Iranian Government employees posted abroad are openly complaining about the potentially crippling effect on Iran’s ability to use the international financial system to manage its day-to-day affairs. While the financial dimension of the sanctions had begun to bite as early as 2007, previously Iranian businessmen and officials posted abroad tried to shrug off the impact.

    Western businesses on the other hand were less sanguine about the prospects. For example, Michael Thomas, who is the director-general of the Middle East Association and one of the main consultants to the UK Government on trade with Iran, told the Times on 27 October 2007 that: “For British firms in Iran, at the minute it’s like pushing water uphill. It’s very hard to find a bank that will take a letter of credit, and companies are having to do barter deals with Chinese firms to get paid.”

    There is a greater recognition on the part of Iranian officials that this time round the United States is serious about enforcing every aspect of the sanctions regime. Previously the US had shown only a half-hearted approach to bringing sanctions-busters to account. This even applied to the Iran Sanctions Act of 1996 that required the American President to sanction companies, entities and persons that make an investment of more than $US 20 million in one year in Iran’s energy sector.

    American determination notwithstanding, the Iranians are likely to come up with new innovations and even more sophisticated techniques to evade and circumvent the sanctions regime. It is worth noting that Iran has been subject to different forms of sanctions since 1980 and all elements of Iranian society, including the military, government agencies and the private sector are well-versed and psychologically prepared to operate in a difficult and even hostile international trading environment.

    There is unanimous consensus in Iranian society to defy the international sanctions regime. Iranians across the political spectrum regard the sanctions as unjust and indicative of international duplicity. They argue that other countries with more sophisticated nuclear programmes and actual nuclear weapons states have never been subject to such a draconian sanctions regime.

    There is also a concern amongst domestic opposition circles in Tehran that the tough sanctions regime may be strengthening the Government at the expense of civil society and the private sector. There is also a fear that sanctions may further stunt the progress of Iran’s democracy movement. This view was best articulated in Iranian opposition leader Mehdi Karrubi’s interview to the Guardian on 12 August.

    For its part Iran’s hard-line Government has made it repeatedly clear that it will not bow in the face of Western pressure. The Government of Mahmoud Ahmadinejad – backed by supreme leader Ayatollah Seyed Ali Khamenei – view Iran’s nuclear programme as an expression of the country’s independence and more importantly its drive to assume a more assertive role in the region and beyond. It is difficult to see how sanctions – no matter how debilitating – will alter their strategic calculus.

    In the light of these factors it is more than likely that the new UNSC sanctions will ultimately fail. This will put the international community in a very tricky position, not least because of the difficulties involved in imposing a new round of sanctions. Given the already harsh and extensive nature of existing sanctions, an escalatory step might include targeting Iran’s energy sector directly. This would involve prohibiting the export of oil and gas by Iran. Doubtless this would cripple the Iranian economy, but it would also have a highly adverse impact on the global economy, a consideration that is likely to rule out crippling sanctions on Iran’s energy sector.

    China and Russia would certainly oppose such a drastic move. Moreover, all the major Western European powers are likely to oppose it as well, since a sudden loss of Iranian oil and gas imports will increase European dependence on Russia, which in the past has shown a proclivity to use the export of natural gas as a political and strategic weapon.

    By using the sanctions regime as the primary tool to contain Iran’s nuclear ambition – and to modify Iran’s behaviour on other contentious issues such as the country’s support for non-state actors in the Middle East – the Western powers led by the United Stated may have committed a strategic mistake. For, if the current round of sanctions fails to produce the desired outcome, the United States is left with two choices; either to accept the rise of Iran as a nuclear power or to resort to military force to destroy the visible dimension of Iran’s nuclear infrastructure. Neither option is likely to be particularly appealing to American policy makers.

    In order to prevent this scenario, American officials and policy makers should consider entering into direct negotiations with the Iranians. The Iranian Government has repeatedly stated that it is willing to engage in serious bilateral talks provided the United States drops its preconditions. It appears that this is the only way the international community can influence and possibly alter the strategic calculus of Iran’s rulers.

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