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Commentary

Iran Sanctions Won’t Work
Effectiveness of economic restrictions always erodes over time


     
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As the United States and its allies ratchet up economic sanctions against Iran in an effort to get the regime to abandon its nuclear program, it’s important to remember that such sanctions rarely work. It is doubtful that increased sanctions against Iran will work any better.

The United States already prohibits most transactions between U.S. and Iranian financial institutions, imposes penalties on companies that provide assistance to the Iranian petroleum industry and prohibits most trade with Iran, including the import of Iranian products, such as rugs, caviar and pistachio nuts.

Fearing that Iran is getting ever closer to producing a nuclear weapon, many U.S. and European policymakers want to tighten the sanctions—by cutting off Iranian oil exports, for example—even if this leads to higher oil prices.

For the United States, which already imports no petroleum from Iran, the new sanctions are intended to impair the ability of other countries to buy Iranian oil. This would be accomplished by imposing sanctions on entities from those nations that complete transactions with Iran’s central bank, which provides the payment mechanism for oil purchases.

While supporters of the tightened sanctions see the measure putting additional economic pressure on the Iranian government, Iran’s long-term revenue losses from oil exports probably would be minimal. For example, despite the existing sanctions on Iran’s petroleum sector, the country exported some $71.6 billion worth of petroleum products in 2010, according to the Organization of Petroleum Exporting Countries (OPEC). The Iranian government reports that 2011 was even better—calling it a record year of oil sales.

The problem with all sanctions is that they erode over time as the target nation redirects its products to countries that aren’t participating in the sanctions or finds ways to trade illegally with entities in the sanctioning countries. With such market “reordering” and outright evasion, the target country is rarely starved of export revenues.

Sanctions on Iranian oil, for example, are bound to fail because rapidly growing countries in the developing world, such as China and India, care less about Iran’s nuclear program than about getting cheap oil. Iran probably will oblige them by selling its oil at a discount, thus allowing it to recoup otherwise lost sales. More important than the likely economic effects of the sanctions are the likely political effects. Yet sanctions are fundamentally an economic tool for achieving political ends.

The purpose of sanctions is not just to ratchet up economic pressure for its own sake but to achieve some stated political objective. Yet the history of sanctions shows they not only typically fail to achieve their economic objectives but also rarely achieve their political goals, such as getting a country to abandon its nuclear program or causing a regime to fall.

Consider North Korea and Iraq. Despite harsh international economic sanctions, North Korea probably has created several nuclear weapons. In Iraq, the most universal and biting economic sanctions in world history could not induce Saddam Hussein to withdraw his invasion forces from Kuwait in the early 1990s.

The Iranian nuclear program appears to have widespread public support across the Iranian political spectrum because it is seen as an issue of national prestige. Also, Iran has hostile neighbors such as Israel, which likely has hundreds of nuclear weapons, and Saudi Arabia, which may have a secret nuclear program. So the Iranian government is not likely to abandon its nuclear program.

In fact, the Iranian government—weakened by the fraudulent elections of 2009—is using the specter of economic hardship resulting from externally imposed sanctions to rally public support.

Thus, the harsher sanctions, even in the improbable event that they could put significant long-term economic pressure on Iran’s economic linchpin and main source of external revenue—oil exports—are unlikely to achieve the ambitious political goals of ending Iran’s nuclear program or bringing about “regime change.”

If anything, the sanctions are likely to increase support for the regime as Iranians, like other people in similar circumstances of external pressure, rally around their flag.


Ivan Eland is Senior Fellow and Director of the Center on Peace & Liberty at The Independent Institute. Dr. Eland is a graduate of Iowa State University and received an M.B.A. in applied economics and Ph.D. in national security policy from George Washington University. He has been Director of Defense Policy Studies at the Cato Institute, and he spent 15 years working for Congress on national security issues, including stints as an investigator for the House Foreign Affairs Committee and Principal Defense Analyst at the Congressional Budget Office. He is author of the books Partitioning for Peace: An Exit Strategy for Iraq, and Recarving Rushmore.


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