The Utility of the Iran Sanctions

They might not provoke major changes. But that's not their only purpose.

Economic experts say the West’s sanctions on Iran are serving to “cripple” the Islamic Republic’s economy. Yet, as the recent P5+1 talks in Kazakhstan remind us, talks are only likely to serve as a stalling tactic for Iran. Sanctions may have set back Iran’s economy, but they have failed to alter its decision to pursue a nuclear program and are unlikely to do so.

On the other hand, while the central goal of the Iran sanctions is to end its nuclear program, this needn’t be the only goal. Another could be to erode Iran’s non-nuclear national-security capabilities. Press and policy makers often lose sight of Iran’s continually expanding, and now global, Qods Force network and its military’s ever improving anti-access/area-denial capabilities. These abilities to project power can be used to pressure neighbors. And sanctions can continue to blunt these lethal arms of Iran’s foreign policy while further isolating the regime.

Iran’s economic or societal tipping point, like many events in history, likely will hinge on unpredictable waves of momentum against the regime, over which U.S. policy makers can have little impact. History indicates that, until Iran reaches that point, it is unlikely to reverse its nuclear program. Thus, as the next round of talks in Kazakhstan comes and goes, U.S. policy makers should remain patient and place confidence in the other ways in which sanctions are working—namely, in thwarting Iran’s goal of regional hegemony while demonstrating to the world the costs of attempting to cross the nuclear threshold.

Consider just the economic impact of the sanctions. Since 2012 Iran’s inflation has exceeded 100 percent; food prices have soared, doubling in some cases; its foreign-exchange reserves are depleted; unemployment, reported officially at 15.5 percent, is much higher, probably reaching close to 35 percent in the industrial sectors. Iran’s occasional economic mismanagement hasn’t helped, but sanctions have largely contributed to its current situation. Since the EU’s oil sanctions went into affect in July 2012, Iranian oil exports have fallen 40 percent. Given 80 percent of Iran’s economy is based in petroleum exports, not surprisingly GDP growth dropped 8 percent, and its economy will likely remain flat in 2013.

As Iran’s GDP has contracted, so have the government’s revenues. In October, President Ahmadinejad acknowledged that Iran’s budget was under pressure and parts of it were being cut by 25 percent or even zeroed out. And such budget reductions inevitably undercut Iran’s overarching goal of projecting influence in the region.

Ahmadinejad’s October announcement was one of the few instances in which details of Iran’s budget cuts have been revealed. Fortunately, analysts tracking Iran can deduce budgetary effects from what Iran does not say—notably, the lack of boisterous military exercises or publicized progress of weapon systems. Large-scale military exercises such as Velayat and Noble Prophet were intentionally ostentatious until July 2012, but since their scale has tapered off. Velayat in 2011-2012 spanned ten days and involved more than twenty surface ships and at least eight submarines.This year’s Velayat lasted only six days and involved, according to press accounts, only a few submarines and a smaller complement of surface ships. Meanwhile, this year’s Noble Prophet, the Islamic Revolutionary Guard Corp’s (IRGC’s) premier deterrent exercise often involving multiple military services, was underwhelming by most measures. It involved only the IRGC’s least-advanced service, its ground forces, and there was no demonstration of any meaningful deterrent capabilities. In the past, such exercises have focused Iranian media attention for several days on Iran’s key deterrent capabilities, including large ballistic-missile salvos coordinated with air strikes on mock U.S. bases.

The lack of announcements on Iran’s military advancements also suggests major delays or cancellation of weapons programs. Iran’s Hoot torpedo, capable of traveling at speeds up to 200 knots, was last displayed operationally in April 2006, during a Noble Prophet naval exercise. The Ra’d anti-ship cruise missile, reportedly inaugurated into a production line in 2004, would have provided a significantly longer range than any existing Iranian cruise missile. But it has not been mentioned or displayed since, and it seems likely it was cut at least in part due to funding constraints.

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