The Iran sanctions fallacy


International sanctions have exacerbated the pain of the middle class struggling with high levels of unemployment.

Iranians’ displeasure with their government is palpable and transcends demographics. Before the contested 2009 presidential election, few were satisfied with the government’s performance. Since then, this displeasure has only increased – but not for the reasons that many assume. More than politics, the state of Iran’s economy is the greatest source of discontent. Despite record profits from high oil prices, many Iranians are forced to navigate an economy plagued with unemployment, inflation and corruption. However, the assumption in the West that sanctions will aggravate Iranian government mismanagement to the point of popular revolt is largely misguided.

This presents an arduous task for American policymakers. Publicly, they justify broad-based sanctions as punishment for the Iranian government’s refusal to yield to pressure over its nuclear programme. That is a hard sell to even the most liberal 30-something in urban Tehran – and the majority of Iranians residing outside the capital are far less progressive and politicised. They embrace neither sanctions nor their own governments’ malfeasance. From Ahvaz to Mashhad, Iranians outside Tehran are undoubtedly dissatisfied with the status quo, but their political discussions focus more on skyrocketing prices and dwindling employment rather than the lack of political and social freedoms.

During my experience living and traveling throughout Iran, I spoke regularly with global business executives, entrepreneurs, bazaaris, intellectuals and students. I witnessed first-hand their struggles managing day-to-day and future planning of business affairs in a damaged economic climate. Conversation about the impact of mismanagement and sanctions on their businesses and families was a frequent topic of conversation at meetings and social gatherings. When I speak with those same friends and associates today, they are vexed by an environment in which mismanagement persists and sanctions increasingly bite. Many Iranians are unclear about how to manage the present and plan for the future, as this toxic combination limits their ability to make business, career and investment decisions.

Potential unreached

To be clear, politicised economic decision-making has long caused the Iranian economy to underperform. Despite this, the Islamic Republic has important building blocks in place that are critical to fulfilling its vast economic potential: a young, dynamic society; a vibrant private sector culture; material wealth; and diversity of economic sectors.

It is this vast potential that makes the Iranian government’s self-induced shortcomings all the more tragic: imbalanced distribution of wealth; financial and administrative corruption; and an overall lack of economic doctrine, efficiency and structure – a recipe for economic disaster in any country that does not possess massive energy resources.

And therein lies the rub: with buoyed oil prices, economic reform discipline drops and political survival is prioritised. The root cause of Iran’s economic malaise is government induced, but broad-based sanctions worsen this languor and the costs are passed down from the government to the people.


I have seen first-hand how indiscriminate sanctions kill hope in Iran, rather than fuel it in the way that economic opportunity can. Iranian history demonstrates how hope fuels change, while economic misery kills the development of democratic institutions and principles. Iranians who can afford it will continue buying imported iPhones and luxury cars, but the lower and middle classes will have steadily decreasing chances to compete. It is worth repeating that sanctions alone are not to blame for Iran’s economic maladies, but we should not neglect the fact that they are increasingly hurting the people that America says it seeks to help. As a new generation of Iranians assumes positions of power in the coming years, they will increasingly hold their current leaders accountable for the damage caused by poor economic management. However, they are just as likely to begrudge, rather than trust, an American government responsible for economic damage inflicted by broad-based sanctions that inhibit their ability to build a better future.

Reza Marashi is Director of Research at the National Iranian American Council and a former Iran desk officer at the US Department of State.

Categories: Asia, Economics, Iran, United States

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