Dead-end diplomacy: America’s failed sanctions on Iran

[Editor’s Note] Under President Barack Obama, the US has imposed the most comprehensive unilateral sanctions regime in history against Iran, despite Washington’s insistence that it is also pursuing diplomatic efforts to resolve differences over Iran’s nuclear program. While the sanctions are having a devastating impact on Iran’s economy, there are no signs that the US rejection of engagement is having the desired effect, argues Trita Parsi.

June 17, 2013, Iranian President-elect Hasan Rouhani, places his hand on his heart as a sign of respect, after speaking at a news conference, in Tehran, Iran. Rouhani on Monday leveled his first criticism of the outgoing administration since June’s election, saying it has mismanaged the country’s economy. (Photo : AP Photo/NEWSis/Ebrahim Noroozi)

The administration of US President Barack Obama continued the two-track policy of President George W. Bush regarding Iran’s nuclear program, a combination of diplomacy and ever escalating sanctions. But today, several former Obama administration officials admit that, in essence, there was always only one track: pressure. Once the initial effort at diplomacy failed in 2009, the policy was about nothing more than sanctions.

Obama has been more successful than any other US president in isolating and sanctioning Iran. The administration is passing extraterritorial laws with regard to Iran — that is, laws by which other countries have to abide — with hardly an objection from friends and foes alike. Gone are the days of former Presidents Bill Clinton and Bush, when even a hint of extraterritorial laws would generate threats of a trade war or other reactions from Europe and Asia.

Indeed, the United States has used its leverage over the international financial system to create the most comprehensive unilateral sanctions regime in history. And to be sure, the sanctions on Iran have had an impact. Most politicians and pundits agree that 2012 was the most tumultuous period for the Iranian economy since 1994, when an external debt crisis triggered a major recession. In one calendar year, gross domestic product (GPD) per capita contracted by nearly 8 percent; inflation increased by over 10 percentage points; and unemployment inched close to 20 percent. In a rare admission, the minister of petroleum, Rostam Qassemi, conceded that Iran’s crude oil export revenues fell by about 40 per cent.

Perhaps the most notable example of how Iran’s economy is suffering can be seen in the plunge taken by the country’s currency. The unofficial value of the rial has gone from 20,000 to the US dollar in January 2012 to 33,000 in January 2013. The rial began to fall immediately after sanctions against the Central Bank of Iran (CBI) were adopted in late December 2011, and fell further after EU oil sanctions took effect in July 2012. In October 2012, the government tried to manage the market by introducing a new rate via a currency exchange mechanism, which was initially successful but failed to provide a sustainable flow to the various economic sectors that needed hard currency for transactions.

But the sanctions have not achieved their stated objective of shifting Iran’s nuclear stance. Sanctions rarely work unless elements from within the targeted state turn against its policies. As long as the state manages to retain internal unity, its ability to sustain its policies remains intact — even if it is under enormous economic pressure.

A key reason why sanctions have failed to produce a shift in Tehran’s nuclear stance is precisely because the Iranian elites have not turned against the current nuclear program. There are obvious reasons why the elite remains largely unified around the current policy. First, a narrative must emerge from within the elite that might counter the dominant view of Iran’s supreme leader, Ali Khamenei, which portrays the West as brutal, immoral and out to “get” Iran and keep it dependent on foreign powers. This idea is unchallenged in internal debates and is further bolstered by continued external antagonism. And while deep divisions plague the Iranian elite, little evidence has emerged to suggest that political infighting has undermined the government’s nuclear ambitions.

Currently, critics of Khamenei’s nuclear policy have nothing to hang their hat on to form a counter-narrative. Any attempt to claim that Tehran has found itself in this precarious situation because of its own inflexibility and aggressive posturing — rather than because of the West’s desire to destroy Iran — is easily shot down due to the many times Washington has rejected Tehran’s offers of compromise.

For instance, in May 2010, as a result of the mediation of Turkey and Brazil, Iran agreed to a variation of the fuel-swap deal first proposed by the US to Iran in October 2009. While Iran, Turkey and Brazil lauded the breakthrough and hoped it would pave the way for a final settlement of the nuclear issue, Washington quickly rejected the deal and moved to impose both unilateral and multilateral sanctions on Iran — even though Obama, in a letter to the president of Brazil and the prime minister of Turkey dated April 20, 2010, had instructed them to secure the fuel swap. For Tehran and Khamenei, this proves that Washington is not interested in resolving the issue because its ultimate objective is to weaken and destroy Iran.

To make matters worse, during the 2012 negotiations, US government officials publicly took sanctions relief off the table, which just played into Khamenei’s position. If sanctions have caused the economic malaise, and nuclear concessions won’t elicit sanctions relief, then why make any concessions, decision-makers in Tehran asked themselves.

Sanctions became particularly problematic when the pain reached levels that prompted Iran’s business community to start lobbying the government to take action. This could have been the kind of “elite-turning-against-the-policy” moment that has sometimes rendered sanctions successful elsewhere. But precisely because the belief among the elite was that nuclear concessions wouldn’t result in the lifting of the sanctions, private lobbying by the business community has tended to focus on securing domestic economic concessions for itself rather than pushing for nuclear concessions to the West.

More sanctions won’t change this dynamic, nor will additional time for the sanctions to sink in. Rather, Tehran will likely continue to expand its nuclear program to counter the sanctions, bringing the parties closer to a military standoff.

A smarter approach, however, could be effective — one that, on the one hand, makes it abundantly clear that the sanctions will be traded for Iranian nuclear concessions, and on the other hand, deliberately works to break Khamenei’s narrative about innate Western hostility toward Iran. As the country’s domestic dynamics indicate, it is possible to produce narratives that compete or even clash with Ayatollah Khamenei’s.

For example, senior politician Habibollah Asgaroladi’s support for releasing opposition leaders Mir Hussein Moussavi and Mehdi Karroubi from house arrest is an alternative approach on domestic affairs. But the fact that Iranian stakeholders have not produced an alternative approach on nuclear policy is a direct consequence of the fact that meaningful, proportionate sanctions relief is not on the table.

Unless sanctions are used as bargaining chips, it is unlikely that the regime will succumb to greater pressure. Tehran’s official view remains unchallenged, key figures are not visibly lobbying for policy shifts and capitulation is seen as a threat to the regime’s survival — an even greater one than a military confrontation with the US.

In the meantime, while the US has focused on sanctions alone, Iran has moved further away from Washington’s desired goals. According to the Worldwide Threat Assessment report presented by Director of National Intelligence James Clapper to the US Senate in March:

Iran is growing more autocratic at home and more assertive abroad … Supreme Leader Khamenei’s power and authority are now virtually unchecked, and security institutions, particularly the Islamic Revolutionary Guard Corps (IRGC), have greater influence at the expense of popularly elected and clerical institutions … Meanwhile, the regime is adopting more oppressive social policies to increase its control over the population, such as further limiting educational and career choices for women.

Clapper lists three factors that are responsible for this regrettable development: elite and popular grievances, a deteriorating economy and an uncertain regional dynamic.

The first factor is the regime’s doing. It stole the votes of the population in 2009, and its intensified repression since then has only deepened the government’s unpopularity. The third factor — the uncertain regional dynamic — is beyond the control of the Iranian regime and the US government. But the second factor contributing to Tehran’s intensified repression at home and assertiveness abroad is due to a combination of domestic economic mismanagement and the blind, indiscriminate sanctions imposed by the US and its allies.

Clapper notes in his report how “Iran’s financial outlook has worsened since the 2012 implementation of sanctions on its oil exports and Central Bank.” Yet, he points out, “growing public frustration with the government’s socioeconomic policies has not led to widespread political unrest.” Instead, regular Iranians have seen greater repression at home.

Sadly, the Obama administration’s sanctions-only policy is both failing to achieve its objective on the nuclear front and adding to the regime’s repression and the Iranian public’s misery. And worst of all, the policy does not offer a credible exit either for Iran or the United States.