Iran and sanctions
Analysis by Maxim Petrov

ANALYTICS  20 July 2022 - 14:00

It is often asked why Iran has come under such harsh US sanctions? Is it all about human rights? This is, of course, a dictatorship, but there are also dictatorships among US allies. There are two main reasons for the sanctions, and they have nothing to do with human rights or democracy.

First, Iran is building its empire in the Middle East, opposing the US-allied bloc - Israel and the Sunni Arab countries of the Persian Gulf - Saudi Arabia, the UAE and Bahrain. The stronger the Iranian-Shiite bloc (the Shiite arc from Tehran to Beirut), the stronger the Americans' discontent.

From the point of view of the Iranian elite, including the entourage of the spiritual leader and the IRGC (Islamic Revolutionary Guard Corps), the United States will inevitably try to undermine Iran's economy and political system. The reasons for this are geopolitical, not ideological or human rights. Iran is a huge country with a developing economy and military programs. The very existence of a powerful Iranian empire, too independent of America, violates the plans of US domination in the Middle East (the author of this article considers this view partly fair while admitting that the United States, whose main interests are outside the Middle East today and are connected with the confrontation with China and Russia, can leave Iran alone for many years without preventing it from increasing its economic and military non-nuclear power. For example, [former] US President Barack Obama adhered to this doctrine).

Secondly, the problem is the attempt to create an Iranian nuclear weapon (NW). According to the United States, only a few strong powers plus America's allies can own nuclear weapons, the rest cannot because the violation of the nuclear monopoly is a threat to American interests. India is an ally of the United States, and its nuclear weapons do not cause a serious reaction in Washington, the same is true for Israel. China is a competitor of India and the United States itself, but it is too powerful to deprive it of its nuclear potential. Iran is another matter. He competes with America while his army is many times weaker than the Chinese, and the GDP is 40 times smaller than the Chinese. It's quite dangerous for him.

In 2005, the government of Iranian President Mahmoud Ahmadinejad decided to reactivate the uranium enrichment program in Iran, which had been curtailed earlier. And that's where the real blows fell. Especially after the Iranian oppositionists from the Mujaheddin Khalq movement managed to reveal various aspects of the Iranian nuclear program and bring it to the attention of the United States and the European Union. Iran was simply destroyed by sanctions. This is a ban on oil exports, on the supply of a number of technologies, disabling the SWIFT system to the largest banks, etc. It is through this prism that the US policy towards Iran should be viewed.

So, thanks to the data obtained with the help of the opposition People's Mojahedin Organisation of Iran [Mujahedin-e Khalq, MEK, PMOI] and supplemented with intelligence data, the UN in 2006 banned the import to Iran and export from the country nuclear materials and equipment between 2007 and 2010. The UN has also imposed a ban on Iran's arms exports. In 2011, the United States imposed sanctions against the Central Bank of Iran, and in 2012, Iranian banks were disconnected from SWIFT. In 2012 the EU joined the US oil embargo. In addition, the Europeans froze the assets of the Iranian Central Bank in the EU.

The consequences of sanctions on the Iranian economy turned out to be so terrible that Iran's Supreme Leader (Rahbar) Ali Khamenei (he and his office make all the key decisions) started talking about concessions to the United States, about the nuclear deal.

In 2015, the deal was concluded with US President Barack Obama's administration. Iran has abandoned a uranium enrichment program above the 3.7 per cent level (i.e., the creation of nuclear weapons, which requires an enrichment level of 90 per cent) in exchange for the lifting of the most severe sanctions. In 2016, after the lifting of these sanctions, Iran's economy began to grow rapidly - by 11-12 per cent at once. However, the following year growth slowed down to 4 per cent and mass protests against the regime began in Iran, which do not stop to this day.

Nevertheless, Iran's economy continued to grow after the lifting of the most severe sanctions. Iranian officials openly talked about the fact that they need new foreign technologies, as well as investments of at least $500 billion to modernise the country. Only the necessary investments in Iran's oil sector were estimated at $200 billion. Due to outdated technologies, the cost of Iranian oil is about twice as high as in Russia, about $30 per barrel. Many multinational companies have lined up to be able to enter Iran. However, US President Donald Trump, whose family was friendly with the family of Israeli Prime Minister Benjamin Netanyahu decided to resume sanctions and withdraw the US from the nuclear deal.

Netanyahu said that according to Israeli intelligence, Iran continues to develop nuclear weapons and violates the terms of the deal. Not a single intelligence agency in the world, including the American one, as well as the IAEA, has found serious facts of violations. But Netanyahu significantly helped Trump in his idea of withdrawing from the nuclear deal.

For Israel, for which Iran has become the main opponent in the Middle East, Iran's economic, scientific and technological growth under the conditions of lifting sanctions is unacceptable, as is nuclear Iran. Strictly speaking, Israel would like a regime change in Iran or simply the disappearance of Iran, which collapsed as a result of an internal crisis, or the maximum weakening of Iran.

But it was, of course, not only and not so much in Trump's communication with Netanyahu. It's just that the US president saw that the Iranian empire continues to strengthen its external influence (Yemen, Iraq, Syria, Lebanon), even despite the absence of nuclear weapons. The Iranian presence in these states was constantly growing. Let's recall that the main problem in the US-Iran confrontation is not human rights and democracy (Trump was frankly not interested in all this, he even praised the leader of the PRC for being the absolute ruler for life), but geopolitics, the struggle for influence in the Middle East.

In 2018, Trump unilaterally withdraws the United States from the nuclear deal and imposes the heaviest sanctions on Iran in history. Sanctions are imposed not only on oil and banks but on all sectors of the economy - from the agricultural sector to the steel industry. Moreover, secondary sanctions also work: if a company or a state buys something from Iran or sells it to it, they themselves fall under sanctions.

In total, approximately 2,000 sanctions were imposed. As a result, Iran faced an economic catastrophe. It has natural resources, including not only a huge oil potential but also being the second country in the world in terms of gas reserves. Iran also has wealth associated with cheap skilled labour: in a country with a population of 90 million, there are 6 million university students, a developed large-scale industry, including heavy and military, millions of skilled workers and specialists willing to work for a small fee. Almost 60 per cent of the country's residents have higher professional education, as follows to UNESCO data for 2020 – against 50 per cent in 2011 and 73 per cent in 2015 (after this year, the share of Iranians with higher education began to decline).

A country with a colossal potential for skilled labour, rich natural resources and refined culture has reached terrible poverty. Up to 65 per cent of the population lives near or below the poverty line. There are 7 million child workers in the country, despite the prohibition of child labour. The official inflation rate in Iran has recently reached new highs: the annual average is 39.4 per cent, and it is expected to reach 50 per cent by the end of the Iranian year, or by April 1, 2023. The rapid rise in food prices is especially difficult for the impoverished population.

Iran has tried to solve the problem with the help of import-substituting industrialisation and the development of its own agricultural sector. Perhaps by such methods, the country managed to stop the growth of unemployment (although according to some estimates, unemployment reaches 11-15 per cent, and among young people it is much higher). In 2021, GDP even showed a slight increase. However, this caused a new set of problems.

Iran has always suffered from water problems. As a result of import-substituting industrialisation and the development of farms with moisture-intensive crops, a water crisis has begun - the country is turning into a desert. About 30 million people suffer from a lack of water.

Trump wanted a new nuclear deal with Iran. He offered Iran new conditions, which included not only the rejection of nuclear weapons but also the refusal to finance Shiite militias allied to Iran, like Hezbollah - militias that help establish the dominance of the Iranian regime in countries such as Lebanon and Iraq. In addition, he demanded the elimination of Iran's missile program.

Iran refused to implement these decisions. It was clear that the United States would not stop - they were not abiding by their own agreements and were blackmailing Iran. Having succumbed to blackmail once and having made a deal with a blackmailer, you, theoretically, can count on something if the partner is faithful to the promises. This is a difficult and bad decision, but it may be that you have no way out. However, if the partner starts blackmailing you again and puts forward new bonded conditions, it means that he will never stop.

Indeed, some Trump administration officials, most notably National Security Adviser John Bolton, were supporters of the regime change in Iran. They dreamed of using the growing sanctions (maximum pressure campaign) to cause an uprising in Iran. This did not happen, but we need to understand that the regime in Tehran is sitting on a volcano.

A year after the US withdrawal from the deal, Iran began to enrich uranium again, that is, it returned to the project of creating nuclear weapons. According to some experts, it is several months or weeks away from creating a filling for a nuclear warhead. In parallel, the missile program is developing and, according to analysts, Iran, after creating the filling, will need about a year to integrate a nuclear device with a missile. Then it will get a full-fledged nuclear weapon.

At the same time, large social protests take place in Iran every few months, the participants of which chant anti-government slogans, and sometimes clash with regime forces. The majority of the country's population is tired of the regime and the disasters associated with it. Realising the danger of what is happening, Iran's leaders entered into new nuclear negotiations, indicating how desperate the situation inside the country is, both economically and in terms of the regime's prospects.

Only about a third of Iranians came to the last presidential elections in 2021, except for forcibly driven state employees, and the candidate "against all" took second place after incumbent President Ebrahim Raisi. This, along with mass protests and strikes, says something about the situation. According to available sociological data, the most densely populated areas of the country and young people are protesting.

In addition, areas inhabited by ethnic minorities - Azerbaijanis, Kurds, Arabs and Baluchis - are seething. Minorities make up a total of about 40-50 per cent of the country's population and complain of discrimination.

Economic, political, socio-ecological and ethnic problems in Iran are woven into one knot, becoming a constant cause of internal tension. It is impossible to get out of this situation without intensive economic growth. And the regime, which sees that the next wave of protest may be so high that it will overwhelm it, understands this perfectly well. Economic growth is needed to stabilise the system, and it cannot be achieved without the lifting of sanctions. So, in principle, the Iranian leaders are interested in a new nuclear deal.

The Biden administration, for its part, wants to return to the nuclear deal - it is preoccupied with the conflict with China and the Russian Federation, and it is no longer up to Iran. Americans would like to avoid conflicts and rising tensions with Iran. They do not want to confront Iran, China and the Russian Federation at the same time. In addition, rising oil prices due to the conflict in Ukraine and anti-Russian sanctions are pushing the United States to lift sanctions on Iranian oil, allowing Iran to throw 3 million barrels of oil on the market per day (today it sells about 700,000 barrels). This will help bring down oil prices.

However, the nuclear negotiations have reached an impasse. There are two key reasons for this.

Firstly, the current US administration cannot guarantee that the next administration will not abandon the deal by repeating Trump's act. Moreover, the Republicans seem to have a good chance of winning, because Biden, who failed the socio-economic reforms he promised, has become extremely unpopular in the United States. Republican politicians, meanwhile, do not hide their negative attitude toward the nuclear agreement with Iran.

However, there is a second obstacle to the deal. Biden, proposing a nuclear agreement, does not want to lift one of the sanctions imposed by Trump - the IRGC's inclusion in the list of organisations officially recognised as terrorists in the United States. Meanwhile, the IRGC is becoming or has already become the core of Iran's political and economic system. This country's leading politicians and military, most of its large companies and government departments are somehow controlled by the IRGC or people close to it - usually relatives of members of this organisation. The ageing supreme leader of Iran entrusted the group with taking care of the regime's security and at the same time, in fact, handed over the country's economy to it.

Therefore, Trump's inclusion of the IRGC in the list of terrorists closes or significantly restricts opportunities for international investors. How will they be able to enter Iran? How will you do this if the United States can simply arrest you at any time for this, not even impose sanctions, but simply arrest you for sponsoring terrorism?

The Biden administration does not want to remove the IRGC from the terrorist list, because the leaders of Iran and this organisation swear to take revenge on the United States for the murder in 2020 of the head of the elite IRGC forces, Qasem Soleymani. If Biden goes to meet Iran halfway, he may be badly exposed in the elections, because Republicans will accuse him of assisting terrorists or something similar.

The US-Iran nuclear talks are now resuming, then stopping. By the way, this is not a direct negotiation, because the Iranians refuse to talk directly with the Americans. The participants in the debate pass notes to each other through third parties; they are already dead tired of all this. The gap is not visible. The latest statements by the US leadership about the possible supply of Iranian strike and reconnaissance drones to Moscow should be considered as a new round of bargaining. Iran is looking for new arguments. In this way, it is trying to push through the deal, using the possibility of supplies as a lever of pressure on the United States.

Caliber.Az