Sanctions imposed by the U.S. and the EU from 2010 to 2015 had mixed results. These comprehensive measures – described by then-U.S. Vice President Joe Biden as "the most crippling sanctions in the history of sanctions" – shrank oil exports by two-thirds, to below one million barrels a day.
The resulting stagflation heaped misery on ordinary Iranians, with GDP contracting almost 6% in 2012 and inflation averaging 35% the following year. Widespread private-sector failures and growing unemployment followed.
Contrary to the sanctionsʹ principal objectives, however, the economic and political hold of the public sector and parastatal organisations strengthened. Meanwhile, Iran insisted on its sovereign right to pursue a peaceful nuclear programme. The scope for compromise seemed absent until the reformist administration of President Hassan Rouhani took over in 2013.
So whatʹs different this time? Though promising to be even more biting, the U.S. sanctions regime is not backed by UN Security Council resolutions and hence lacks international legitimacy. This means Iranʹs isolation will be far less complete, with key trading partners such as China and Turkey already announcing that they will abide by "legal" sanctions only.
The inevitable reach of U.S. economic influence
But the sanctionsʹ de facto, not de jure, status will determine their effectiveness. This is especially true of European firms, which will ultimately decide the outcome of the battle for secondary sanctions in cognizance of their shareholdersʹ interests, rather than the political machinations of their governments.
This explains the significant stream of exits from Iranʹs markets already announced by large firms. In an interconnected world where U.S. economic influence extends far and wide, it is hard even for European firms – auto manufacturers, airlines, energy companies, banks and the like – to risk the ire of the U.S. Treasury. This means that the ultimate success of sanctions is likely to depend on what others make of them as much as on what Iran does.
But domestic conditions in Iran also play a key role and it is here that the U.S. seems to be basing its confidence that sanctions will "succeed". For months, Iranian cities have been rocked by widespread protests, ostensibly against worsening economic conditions. These outbursts have weakened Iranʹs reformers by undermining their monopoly on hope.
Hardliners, it seems, have been offered a new lease of life and can now claim their dismissal of the JCPOA was justified from the start. The economic impact has already been felt, with the Iranian currency going into freefall after speculation about a U.S. withdrawal from the deal began. The spectre of inflation is back.
Ultimately, for sanctions to succeed from the U.S. perspective, they must bring about either regime change or behavioural change. Historically, sanctions have a less-than-convincing track record (think Cuba, Myanmar and Zimbabwe) on achieving the former and whether they can pave the way for the latter, in the form of a negotiated settlement, remains to be seen. But one thing is clear: applied to Iran, the "Trump doctrine" of pushing oneʹs foes to the brink, in the hope that they will blink first, has entered uncharted terrain.
© Project Syndicate 2018
Hassan Hakimian, Director of the London Middle East Institute and Reader in Economics at SOAS, University of London, is a co-editor of Iran and the Global Economy: Petro Populism, Islam and Economic Sanctions.