NUMBER 16 March 2010
THE ECONOMICS OF INFLUENCING IRAN
Suzanne Maloney
EXECUTIVE SUMMARY Utilize sanctions as a component of a broader diplomatic strategy to deter Iranian nuclear In the wake of a year of fruitless efforts to engage the ambitions and to induce a long-term, gradual Islamic Republic of Iran, sanctions have emerged as the change in policies rather than an immediate new centerpiece of the Obama administration’s ap- transformation; proach to dealing with Tehran’s nuclear ambitions. Emphasize measures directed against the most While sanctions have had an uninspiring track record, repressive elements of the Iranian system; recent events have caused many to reexamine the possi- And work collaboratively with major powers bility that this time they may prove effective. Iran’s do- and other allies, avoiding actions that punish mestic turbulence has changed the context, raising hopes third countries for their relationship with Iran. that new international measures can impact the regime’s nuclear calculus as well as bolster Iran’s nascent opposi- INTRODUCTION tion movement. In addition, Iran’s internal upheaval and American diplomacy have also helped to create new trac- Influencing the Islamic Republic of Iran has proven to tion within the international community for tough penal- be a perennial conundrum for American presidents. ties on Tehran. However, despite what many see as an The complexity of Iranian politics and the intractability auspicious environment for sanctions, the diplomatic of the problems posed by Tehran’s revolutionary theoc- landscape will remain challenging and achieving broad racy may explain why, over the course of three decades, multilateral implementation of strenuous measures is each U.S. administration has been forced to revise its unlikely. Moreover, Tehran’s engrained aversion to initial approach to Iran in hopes of achieving better compromise suggests that even tough new economic outcomes. The overall result has been an American restrictions are unlikely to resolve or reverse its most tendency to oscillate between engagement and pressure, problematic policies. with frustratingly limited results.
The challenge for the Obama administration is that it And so it goes for the Obama administration. After an needs to demonstrate real progress on sanctioning Iran, initial, high-profile effort to draw Tehran into a serious if only to reassure anxious regional allies and forestall dialogue both to resolve the nuclear issue as well as pressure for military action, which would likely have transcend it, Washington now finds itself pivoting away devastating consequences. The most effective sanctions from diplomatic engagement to a more coercive policy strategy will be one that incorporates the following rec- centered around economic pressure. The shift comes ommendations: amidst a dramatic new context within the Islamic Re- public, characterized by historic turmoil on the streets Recognize the limitations that economic pres- and bitter divisions among the elites, and at a moment sure can have in altering the core security inter- when the international urgency surrounding Tehran’s ests of the Iranian regime or in intensifying the nuclear ambitions has never been greater. This context internal political tensions within the Islamic Re- raises the stakes and heightens the sensitivities of get- public;
Suzanne Maloney is a Senior Fellow at the Saban Center for Middle East Policy at the Brookings Institution. ting U.S. policy on Iran right after so many years of fail- well as lingering reverberations that continue to plague ure. the corridors of power. The reformist candidates in that election, former prime minister Mir Husayn Musavi and The turn toward sanctions is a predictable one. Sanc- former parliamentary speaker Mehdi Karrubi, have be- tions have proven to be an instrument of American pol- come identified as the leaders, at least symbolically, of icy toward Tehran for the past thirty years. American use the first grassroots opposition movement to gain any of economic pressure as a means of dissuading Iranian traction against the Islamic Republic since the regime’s malfeasance began with the freezing of Iranian assets inception. Along with Musavi and Karrubi, two other after Iranian students seized the U.S. Embassy in Tehran towering figures within the Islamic Republic appear in 1979 and culminated in the nearly comprehensive ban deeply alienated from the current leadership—former on trade and investment in Iran that has been in place presidents Akbar Hashemi Rafsanjani and Mohammad since the Clinton administration. But, despite the appeal Khatami. of sanctions, their protracted duration underlines their limitations—particularly when they are unilateral—as a While Iran’s revolutionary state has perennially engaged mechanism for categorically revising Iranian policy. Still, in fratricidal partisanship, until this past year the wran- many find sanctions attractive because the overall track gling among the elite had always remained contained, record of Iranian decision-making demonstrates that its escalatory tendencies held in check by a common Tehran often considers the costs and benefits of its pol- commitment to ensuring the survival of the Islamic icy options in determining its course. As Iran’s internal Republic. As such, contention among Iranian elites had strife exacerbates the regime’s vulnerabilities, the pros- paradoxically served as a force of stability within the pects for international consensus around new economic country, providing an outlet for elite competition and restrictions appear more realistic than ever before. dissent without seriously threatening the system. That balance was shattered by the election and subsequent To examine the options and implications for using sanc- clashes, and the invective directed at Rafsanjani, tions to address the multi-faceted challenges of Iran, the Musavi, and Karrubi from the allies of President Mah- Saban Center for Middle East Policy at the Brookings moud Ahmadinejad has been shrill to the point of hys- Institution held a half-day symposium in late October teria. Today, the explicit animosities among Iran’s pow- 2009. The workshop featured off-the-record panel dis- erbrokers roil the regime’s policymaking apparatus and cussions led by experts on Iranian internal politics and undercut its legitimacy even among the bedrock of the the key actors shaping the diplomatic landscape. The republic—the clergy. Tentative efforts by both conser- conclusions from that session are presented below. vative clerics and moderate reformists to negotiate a sustainable truce among the regime’s elder statesmen IRAN’S INTERNAL CONTEXT have produced little thus far. For a state that has relied upon a supple system of elite consensus, the breach at Iran currently offers a complicated and contradictory the top is especially unsettling and raises the specter of landscape for those seeking to employ economic pres- the paralysis of decision-making or even regime col- sure on the regime. On the one hand, the Islamic Re- lapse. public is confronting multiple challenges today that would appear to make it more vulnerable than ever be- LEADERSHIP RESPONSES TO ECONOMIC fore to any new coercive measures implemented by the PRESSURE international community. Yet, on the other hand, Iran’s domestic political turmoil has created uncertainty over Economic sanctions are typically intended to influence how the two distinct Iranian constituencies that are rele- both the cost-benefit analysis of decision-makers and vant to U.S. policy—the leadership of the Islamic Re- the ability of their government agencies to implement public and the Iranian electorate, in particular the nas- problematic policies. It seems self-evident that thirty cent opposition known as the Green Movement that has years of American economic restrictions and broad ex- emerged from the unrest that followed the June 2009 port controls on military materiel have imposed func- election—would respond to new sanctions. This murki- tional constraints on Iran’s capacity to cause trouble in ness has made it difficult for the policymaking commu- the region. But on the arguably more important plane nity to assess whether sanctions would achieve the de- of leadership choices, sanctions have thus far failed to sired results. dissuade Tehran from pursuing its most objectionable policies, particularly its efforts to develop a vast nuclear Since the June 2009 election, the regime has faced dra- infrastructure. matic protests on the streets of Iran’s major cities, as
THE ECONOMICS OF INFLUENCING IRAN| MEMO NUMBER 16 | 2 However, despite the failure of sanctions up until now to arrangement that would have significantly reduced its change the regime’s approach to the world, some ob- stockpile of low-enriched uranium (LEU). While Iran servers have argued that the internal developments over later backed away from that proposed deal—which the course of the past year and, in particular, the rup- would have sent 1200kg of Iranian LEU out of the tures within the political elite have created a conducive country to be enriched at higher levels for medical environment for sanctions. Of course, while the regime use—its tentative agreement represented the first mean- may be more vulnerable to pressure, as discussed below, ingful result of several years of international efforts to it is hardly certain that greater economic strictures as a negotiate with Tehran. The process that generated the result of more effective sanctions will alter Iran’s most accord implied newfound Iranian willingness to com- problematic policies. promise on the nuclear issue in the wake of the sum- mer’s violence and subsequent revelations about a se- Proponents of sanctions argue that even modest new cret nuclear facility near Qom. measures would create additional hardships on the re- gime because of the economy that is already reeling from Still, it is also clear that the current leadership assesses domestic turmoil and the international economic slow- the risks and rewards associated with its various policy down. Having utilized the revolution’s relentless popu- options through the lens of a unique and deeply para- lism to cultivate mass support, Ahmadinejad is particu- noid worldview, a product of both ideology and histori- larly vulnerable, both in terms of public opinion as well cal experience. The eventual collapse of the October as elite cohesion, because of the lit- 2009 deal points to the potential for any of economic grievances that have pressure to have a counterproduc- dominated Iranian debates in recent The current leadership assesses the tive influence on Iranian policy, par- years. Given their manifest trepida- risks and rewards associated with ticularly because the current constel- tions about internal volatility, Iran’s its various policy options through lation of power in Tehran may leaders have a vital interest in avert- the lens of a unique and deeply maintain other decision-making ing any further deterioration of the paranoid worldview. frameworks. Iranian leaders tend to economy, which could exacerbate believe that the best defense is a popular unrest and buoy the opposi- good offense, and under strain are tion movement. prone to lash out rather than to moderate their policies or yield to external demands. For Supreme Leader Ali In addition, the ascendance of the Revolutionary Guard Khamenei, and even more so for the younger genera- paradoxically may enable sanctions to have greater im- tion hardliners who surround Ahmadinejad, there is no pact on Iranian decision-making. The Guard’s expanding middle ground in dealing with Washington or the West. economic role makes it a convenient target for focused In their view, any act of compromise would merely ini- measures, in hopes that pressures directed at its eco- tiate a perilous process of intensifying pressure in- nomic affiliates and business networks that are intimately tended to eliminate the Islamic Republic. “If you sup- intertwined with the government could provide new im- plicate and show flexibility,” Khamenei has warned, petus for the regime to moderate. Furthermore, irrespec- “arrogant powers will make their threat more serious.”1 tive of the actual costs to the regime of any new meas- ures, international cohesion in applying sanctions may Interestingly, similar logic is deployed by the supreme cause some elements of the regime to question their own leader to reject any conciliation with the reformists and sense of invulnerability. street protestors since the June election. In fact, Iran’s hardliners tend to view both the post-election unrest This argument for the increasing efficacy of sanctions in and the international objections to their nuclear pro- compelling Iranian cooperation is grounded in the his- gram as part of a continuum, arguing that the domestic torical evidence that Iranian policy is often shaped by a turmoil was instigated by the West as part of a broader rational assessment of costs and benefits. Indeed, in plot to force the Islamic Republic to the negotiating voicing their opposition to Ahmadinejad’s approach to table in a fatally weakened position.2 the world, a number of centrist Iranian politicians have emphasized the price that Tehran has paid, in terms of In this respect, sanctioning Iran at a time when the re- potential investment and general economic stability, as a gime is confronting an epic internal challenge may only result of his belligerent rhetoric and the United Nations’ result in greater obstinacy from the revolutionary state. Security Council censure of Iran’s nuclear program. As long as Iranian leaders perceive themselves to be It is precisely this awareness of the potential price of under siege from a domestic insurrection orchestrated continuing defiance that appears to have spurred Te- by their longstanding enemies, they may be less capable hran’s preliminary acceptance in October 2009 of an and less willing to negotiate in a serious and sustained
THE ECONOMICS OF INFLUENCING IRAN| MEMO NUMBER 16 | 3 fashion with the international community, particularly on and identifying alternative suppliers. Through trade and the nuclear program—an issue that they have identified mercantilist diplomacy, Iran has deliberately sought to as critical to the security of the regime and the state. expand its network of trade partners and reorient its Even if the sanctions succeed on a purely economic ba- trade and investment patterns to privilege countries sis—that is, in imposing meaningful costs on the regime with international influence and minimalist interest in and exacerbating public frustration over economic hard- political interventions. Iranian leaders are experienced ships—they may backfire by further entrenching Iranian at replacing prohibited suppliers, finding alternative intransigence. financiers, and absorbing additional costs in order to mitigate the impact of sanctions. Historically, Iranian leaders have tended to reject the significance of sanctions, at least rhetorically, and they A final element in understanding the prospective re- have celebrated the country’s capacity to withstand ex- sponse of the Iranian leadership to new sanctions is the ternal economic pressure, particularly the measures im- historical track record. The Islamic Republic has ex- posed on Iran by Washington. In the immediate after- perienced a number of episodes of severe economic math of the revolution, this ethos was philosophically pressure, as a result of volatile oil prices and the severe consistent with the revolutionary political crises that ensued after the leadership’s quest for independence revolution and during the war with and its ambivalence about capitalism Iranian leaders are experienced at Iraq. None of these episodes of and international entanglements. The replacing prohibited suppliers, economic pressure generated signifi- rupture of Iran’s financial relation- finding alternative financiers, and cant moderation of Iranian foreign ship with the United States and the absorbing additional costs in order policy; instead, when purse strings American ban on exporting military to mitigate the impact of sanctions. tightened the Iranian regime coa- equipment to Iran spurred Tehran to lesced and rallied the public. The invest in its domestic capacity, par- current political context is, of ticularly the security sector. Over time, sanctions have course, unique, but a review of Iranian history dispels been integrated within the regime’s ideological narrative. any illusion that Tehran will automatically buckle when Like the war with Iraq in the 1980s, economic pressure its budget becomes too tight. represents another component of the international con- spiracy to undermine the Islamic Revolution, a plot that SANCTIONS AND THE STATE OF IRAN’S has been foiled by Iran’s wise and righteous leaders, who OPPOSITION have used sanctions to the country’s benefit by strength- ening its indigenous capabilities and sovereignty. Beyond the reaction of the regime, the other critical uncertainty with respect to sanctions is the response of In this respect, the hardliners may perceive merely sur- the Iranian people. Prior to June 2009, the potential viving new sanctions—even at a significant price—as popular reaction to additional economic restrictions victory, and will portray it as such to their base. “These would have constituted only a minor consideration for [past] sanctions didn’t work to our detriment,” Khame- U.S. and international policymakers because of the rec- nei said in 2008. “We were able to create an opportunity ognition that public opinion played a limited role in out of this threat. It’s the same today. We are not afraid shaping the regime’s nuclear policies. Indeed, in the of Western sanctions. With the blessing of God, the Ira- past, the debate in Washington over Iran sanctions nian nation, in the face of any sanction or economic em- mainly focused on efficacy, rather than on the question bargo, will demonstrate an effort which will double or of public opinion or humanitarian impact. However, 3 increase its progress by many folds.” This “blessing” the explosion of public outrage in the aftermath of the has persuaded Tehran to take a number of steps over the June election and the persistence of street demonstra- years to mitigate its vulnerability to external economic tions and civil disobedience have profoundly altered the leverage. Most recently, Tehran instituted a range of context for U.S. policymakers, and made Iranian public measures to minimize gasoline consumption and ramp opinion directly relevant to Washington’s calculations. up refinery capacity in a bid to reduce the country’s reli- ance on imported petroleum products. Ultimately, it is impossible to predict with any certainty how the Iranian population would respond to new re- These steps have been a clearly articulated priority for strictions on their economic interactions with the wider Tehran for at least several years, specifically intended to world. Just as analysts have contending views about the undercut the prospect of international restrictions on prospective response of the Iranian leadership to more 4 gasoline imports. The regime is resourceful, adaptable, rigorous sanctions, so too do they have contending and well-versed in insulating its preferred constituencies
THE ECONOMICS OF INFLUENCING IRAN| MEMO NUMBER 16 | 4 views on the likely reaction of the Green Movement. new sanctions may have on Iranians’ overall dissatisfac- But what does seem clear is that although the events of tion with the regime, economic restrictions will not the past year point to the dangers of predictions and themselves supply the Green Movement with the requi- presumptions with respect to Iranian political activism, site vision and strategy for undermining a regime that expectations that new economic pressure will help gal- retains the capability and will to repress its citizenry. As vanize the opposition are overly optimistic. a result, sanctions in and of themselves are unlikely to alter the fundamental balance of power. There is evidence to indicate that the Green Movement opposes sanctions. Several leading Iranian politicians THE DIPLOMATIC LANDSCAPE associated with the opposition have publicly rejected economic sanctions, arguing it is not a productive way Beyond the uncertainties associated with Iran’s internal for the United States or the international community to responses to additional sanctions, the primary factor induce a shift in the regime’s approach, either to the nu- that will determine the success or failure of sanctions is clear issue or toward its own population. Musavi himself the level of international cooperation. Mountains of has argued that the regime can evade the impact of sanc- academic studies have confirmed what anecdotal evi- tions while any new economic meas- dence from the real-world examples ures “will create great pain to many Sanctions have rarely been wel- of Cuba, South Africa, Libya, and people for whom the plight of being comed by the populations of af- Iraq suggest—broad multilateral ruled by paranoid statesmen is sanctions tend to be more effective enough.”5 Like Musavi, other Iranian fected countries, even in cases where in altering a target government’s intellectuals and scholars have argued the sanctions targeted unpopular policies than those imposed by a that the regime would exploit any political elites. single actor, even if that single actor new sanctions to rally the nations is a superpower such as the United around anti-American and anti- States. If the Obama administra- Western sentiment as a means of maintaining the status tion’s turn toward economic pressure is to achieve quo and justifying further state control over economy more than its fruitless first-year approach of engage- and civil society. ment did, then Washington must generate a deep and resilient commitment from each of the essential players However, other prominent opposition supporters— in the international community to utilizing vigorous and particularly those who are based outside of Iran—have potentially costly economic instruments against Tehran indicated greater flexibility on this point, suggesting that as a means of altering the Islamic regime’s behavior. the opposition movement would welcome, and exploit, international measures directed at the repressive ele- Such a multilateral commitment is, of course, the pre- ments of the regime, such as the Revolutionary Guard, cise deficiency that has mitigated and even undermined and its economic assets. “If you explain to the Iranian thirty years of American economic sanctions against the people that you are sanctioning their enemies, they will Islamic Republic. Since the 1979 revolution, sanction- support you,” filmmaker and opposition spokesperson ing Iran has largely been the lonely work of the U.S. Mohsen Makhmalbaf has urged.6 In a similar vein, government, and even at the height of the hostage cri- others have suggested that sanctions may be a necessary sis, America’s closest European allies rebuffed U.S. en- evil, mandated by the urgency of the threat from the treaties to join in multilateral sanctions against Iran’s regime. As long as the costs are bearable, these people revolutionary regime, and eventually enacted only lim- argue, intensifying general economic hardship would ited restrictions on trade. Over the years, Washington strengthen the ranks and resolve of the opposition.7 In has sought to broaden multilateral cooperation through this view, sanctions can be used in a tactical fashion to persistent diplomatic entreaties, moral suasion, and exacerbate public dissatisfaction with the regime and even the application of indirect pressure on allies help mobilize further challenges to the regime’s stability. through the threat of imposing third-party sanctions on countries that continue to do business with Tehran. In Still, sanctions have rarely been welcomed by the popu- the past, none of these mechanisms proved particularly lations of affected countries, even in cases where the successful in generating significant international buy-in. sanctions targeted unpopular political elites. In the case of Iran, unilateral American economic restrictions have Underpinning the international community’s historical generated little, if any, domestic mobilization against the reluctance to embrace sanctions is a divergence in views regime. Iranians attribute blame for their economic pre- on Iran itself and on the efficacy of economic pres- dicament to both the international community and their sures. Few countries beyond the United States have own leadership. In addition, whatever amplifying effect consistently treated the Islamic Republic as a pariah
THE ECONOMICS OF INFLUENCING IRAN| MEMO NUMBER 16 | 5 state; on the contrary, important international actors consuming, saying, “We need immediate resolution such as China and Russia have invested significantly in rather than gradual resolution.”8 developing a deep relationship with a country viewed by many as the region’s natural powerhouse. And while The poor track record of achieving comprehensive energy interests and other economic enticements, includ- sanctions combined with Beijing and Moscow’s vocal ing Iran’s role as a market for Russian arms, have proven opposition to sanctions create a final deterrent to to- a powerfully binding force, dismissing international resis- day’s efforts at achieving multilateral sanctions. In any tance to sanctions as purely mercenary is overly simplis- negotiations involving multiple parties and interests, a tic. In Moscow, Beijing, and other capitals, Iran remains single, influential hedger can dissuade other fence- a strategic ally in a critical region of the world, and they sitters from signing on to an agreement. Such self- are loath to jeopardize their relationship with this impor- reinforcing mistrust within the international community tant asset. persistently undercuts efforts to achieve a comprehen- sive sanctions regime. Today, European companies Achieving international consensus on tough sanctions is grumble about pressure to forfeit opportunities where further complicated by divergent perspectives on the their Chinese competitors offer quick substitution with likely consequences. Traditionally, impunity. Tehran has exploited Washington has argued that increas- Moscow and Beijing have repeatedly this dynamic, seeking to expand its ing the costs of Iranian malfeasance economic ties in ways that com- can alter the regime’s policy calculus invoked concerns that rather than plicate any prospects for Western and dissuade problematic policies. inducing moderation, sanctions leverage. This view of sanctions as an instru- would provoke further Iranian radi- ment that can affect a recalcitrant calization and retaliation. Despite all these challenges and regime is not widely shared within disincentives to achieving multi- the international community. In par- lateral sanctions, the current envi- ticular, Moscow and Beijing have repeatedly invoked ronment may offer a rare opportunity to achieve con- concerns that rather than inducing moderation, sanc- sensus around tough penalties on Tehran. Perhaps tions would provoke further Iranian radicalization and most importantly, the Obama administration has de- retaliation, either via direct actions against governments voted considerable energies to enhancing the bilateral that adhere to any boycott or by accelerating their nu- relationship with Russia, which has outsize influence on clear activities and withdrawing from the Nuclear Non- the international debate on sanctions because of its Proliferation Treaty. Moscow and Beijing’s reluctance is longstanding strategic and economic ties with Tehran. also informed by their long memories of their own And just as the bandwagoning effect of individual re- countries’ experiences with sanctions and other forms of luctance has impeded sanctions in the past, new coop- Western economic pressures. eration between Washington and Moscow on Iran could coax Beijing to acquiescence. Moreover, official In recent years, Russia and China have drawn the lion’s and unofficial campaigns emphasizing the potential share of attention and recriminations for hindering pro- political and commercial repercussions of business links gress on sanctions, and yet ambivalence runs deep to Tehran have persuaded a number of major interna- throughout much of the rest of the international com- tional corporations to reduce their business ties with munity. Even within many European polities, the legacy Iran. Though largely informal, this reduction in trade of three decades of “constructive engagement”—an ap- could have an important impact on Iranian decision- proach that endeavored to moderate Iranian policies by making, particularly when it affects key industries where drawing the regime into a more mutually beneficial rela- adequate replacements for departing investors and trade tionship—has left a residue of discomfort among some partners are not available. leaders with sanctions as the primary policy instrument. In addition, Iran’s neighbors in the Persian Gulf region, Additionally, the domestic developments within Iran who revile the Shi’ah theocracy and would prefer almost have caused a variety of influential international con- any outcome to a nuclear-capable Iran, remain deeply stituencies to support measures against the regime. The skittish about playing a direct role in intensifying pres- vocal sympathy that European publics have shown for sure on Iran. Their trepidations are based on fears of the Green Movement has put pressure on their gov- Iranian retaliation and concerns about preserving their ernments to support sanctions. At the same time, the own economy stability in the midst of a global economic shift in the Iranian balance of power in favor of the crunch. In addition, Saudi Foreign Minister Saud Al hard-line Revolutionary Guard has unsettled states are Faisal recently dismissed sanctions as too time- less concerned with democratic pretenses, such as Rus- sia and China. Finally, Tehran’s deliberately provocative
THE ECONOMICS OF INFLUENCING IRAN| MEMO NUMBER 16 | 6 rhetoric on the nuclear program combined with the in- sifying economic pressure on the regime is tensifying concerns of the International Atomic Energy unlikely to alter that equation in the short-term, Agency have created a shared multilateral appreciation of and offers at most an uncertain prospect of the urgency of the need to address Iran’s nuclear quest. helping to consolidate support for the opposi- tion. Policymakers should not mistake sanc- Although the prospects for generating broader interna- tions for effective tools of promoting regime tional consensus around sanctions may be brighter than change in Iran, and should be cognizant of the at any time in recent years, the diplomatic challenge fac- potential for popular backlash to be directed ing Washington remains daunting. Despite the tendency against the international community instead of to indulge in hyperbolic rhetoric—for example, Secretary or in addition to the regime itself. of State Hillary Clinton has repeatedly said Washington would deploy “crippling sanctions” against the Iranian Sanctions are most effective if they are de- regime—the Obama administration’s multi-tiered pur- ployed as protracted measures against specific suit of prospective new sanctions tacitly acknowledges targets. Since history suggests sanctions will the hurdles on the road ahead. The United Nations Se- not reverse the commitment of a leadership de- curity Council remains the starting point and the pre- termined to acquire nuclear capacity, sanctions ferred arena for influencing Iran, but recognizing the should be aimed primarily at deferring that ac- perennial frustrations of achieving quick, decisive action quisition and eroding the political, financial, at the UNSC, Washington is pursuing alternative ar- and functional domination of hard-line ele- rangements just as assiduously. By identifying additional ments of the regime. Financial restrictions on unilateral measures and pressing like-minded countries Iranian banks have already raised the costs and to embrace sanctions that exceed whatever lowest com- complications of doing business, and their im- mon denominator emerges from the UN process, U.S. pact is felt most immediately by privileged policymakers hope to amplify the pressure on Tehran. merchants and industrialists with close connec- tions to the regime. These measures should be RECOMMENDATIONS FOR U.S. POLICY expanded and augmented. Conversely, broader measures that impact the population at large, Challenges no doubt exist to implementing comprehen- such as the legislation to obstruct Iranian im- sive, multilateral sanctions. But given the United States’ ports of refined petroleum products (which has desire to influence Iranian behavior on a host of trou- wide support in the U.S. Congress), will enact bling issues, particularly regarding the regime’s nuclear large costs on international cohesion and on program, sanctions remain a mechanism for altering Iranian popular opinion of the United States. Iran’s decision-making calculus that warrants further exploration. The following steps can assist the Obama To generate sufficient international support for administration in constructing a sanctions policy that has sustaining meaningful economic pressure on the highest likelihood of gaining international support, Iran, Washington will have to make a credible and ultimately of achieving even modest objectives: case to skeptical allies that any new measures can positively impact the nuclear calculus of The international community should be under Iran’s current leadership. Efficacy matters for no illusion that sanctions can offer a silver bullet gaining the cooperation of the most valuable to solving the problems of Iran’s nuclear pro- U.S. partners, and the relevant metric is not the gram or its behavior in the region. U.S. policy- overall cost to the Iranian economy but the makers should underscore that reality in their prospect of influencing decision-making. rhetoric and in their forward planning; even if they “succeed,” sanctions are at best a facilitat- To steel the resolve of fence-sitters on sanc- ing mechanism for future diplomatic negotia- tions, the United States should have plans in tions with Iran or at worst a prelude to more place for limiting or responding to possible Ira- coercive measures. nian backlashes, such as retaliation against sanctions supporters or further disregard of In addition, sanctions will not resolve Iran’s in- global nonproliferation norms. U.S. strategy ternal tensions. The struggle for democracy in for mounting effective pressure on Tehran Iran dates back more than a century, and the Is- should also incorporate efforts to undercut lamic Republic’s capacity and willingness to re- Iran’s perennial tactic of dangling new business press its opponents remain considerable. Inten- opportunities and/or new negotiating ploys at
THE ECONOMICS OF INFLUENCING IRAN| MEMO NUMBER 16 | 7 critical junctures as a means of undercutting in- profoundly chilling effect on Iran’s relation- ternational cooperation. ships with those trade partners. But penalizing third countries would entail real costs to the Creative bargaining with international partners prospects of generating a durable multilateral represents an inevitable dimension of any proc- coalition against Iran, as well as to other inter- ess of generating a truly multilateral sanctions ests, and both the Clinton and Bush admini- regime, but horse-trading cannot overcome strations declined to implement the provisions well-established strategic interests. Russia’s cul- of the Iran (Libya) Sanctions Act for that very tivation of a special relationship with Tehran has reason. The Obama administration should re- deep roots and continuing relevance for its lead- sist mounting domestic pressure for more ag- ership’s strategic ambitions, as does China’s in- gressive steps against partner countries in favor terest in achieving multiple sources of energy of measures that have broad international sup- supplies and acquiring a preferential position in port. a country with vast petroleum reserves. U.S. co- operation with Russia and China on Iran will be Sanctions must be narrowly construed, in order enhanced by a recognition of the durability of to offer any real prospect for obtaining Iranian these interests. In the multilateral negotiations compliance and for attracting sufficient inter- on sanctions, Washington will achieve more and national support. However, Washington’s in- do so more expeditiously by appreciating the terests in Iran transcend the nuclear issue, par- enduring value that other major powers have ticularly at a moment when Iranian internal dy- invested in their relationships with Tehran. namics are more fluid than in recent history. For this reason, the Obama administration Washington should be aware of the trap of ex- should make a concerted effort to couple the traterritoriality. Washington has considerable in- new efforts at using economic pressure to ternational reach and weight by virtue of the thwart Iran’s nuclear ambitions with an intensi- United States’ centrality to the global financial fication of rhetoric and measures that call at- system. Therefore restrictions that Washington tention to Tehran’s human rights abuses. imposes on Iran’s trade partners could have a
1 Karim Sadjadpour, “Reading Khamenei: The World View of Iran’s Most Powerful Leader,” Carnegie Endowment Report (March 2008): 16. 2 Mohammad Imani, “The Intersection of Two Parallel Lines,” Kayhan, August 29, 2009, available at
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