America / Foreign Policy / Iran

Crippling the Middle Class: Why Sanctions Against Iran Are Not Working

As we approach the 32-month mark of the worldwide sanctions imposed against Iran later this month, the effectiveness of the measures is debatable. The media touts the crippling effect on the Iranian economy, but these results may be more sensationalized than valid. The truth lies in the manner by which you assess the consequences. The country is indeed more frustrated than ever with the skyrocketing prices of commodities and the plummeting value of the Iranian currency, the rial; however, we are no closer to accomplishing the international superordinate goal of stopping a nuclear program, irrespective the intention for the program. In actuality, we are no closer today than we were in June 2010 when we began this quest.

While there is no singular determinant for the stagnation, the lack of an uprising signifies a fundamental flaw in our approach. In fact, the latest IMF report released last Tuesday forecasts a trade surplus for the next two years, a stabilization of its hyperinflation and a return to positive GDP growth (which saw an unprecedented negative growth last year). Indeed the economy is able to stay afloat because the sanctions do not target the lower class, historically the most volatile and revolutionary demographic. In fact, the government controls this stratum well because it sets subsidies on common goods consumed by this group. Thus the value of a rial against a dollar does not affect these individuals on a daily basis the same way it would with higher classes that often deal with unsubsidized and traded goods.

The Iranian regime’s currency control also plays a factor in the implementation of subsidies. Unlike the public, which sees staggering rates of exchange for the dollar, the regime still maintains control over the official exchange rate, which triples the value of the rial in governmental transactions. The government ergo is immune to the exchange imbalance, and is able to avoid any realizable consequences. Instead, the middle class, comprised of the most active and educated people in Iran, endures the brunt of the repercussions. The sanctions deprive this group of the resources necessary to survive, and further empowers the government as a result.

The true sanctions must thus aim to cripple the government per se. The most apparent first steps have already been taken: The assets of Ali Khamenei, Iran’s Supreme Leader, have already been frozen in allied nations. While this will not eradicate his monumental domestic wealth, it denies access to all foreign controlled money. The U.S. must further pressure countries that uphold his fortune, namely China who controls several billion of his assets. Furthermore, it must disallow countries to enable his accumulation of wealth through trade with state-run industries.

If the world truly seeks a change in nuclear policy or even a change in the authoritarian society, we must take a lesson from history. No matter the political spectrum, every revolution in modern history relied on the lower class: from the Russian Revolution of 1917 to the Islamic Revolution of 1979. We must attack the government at its peak source of wealth, and disallow them from buying out the lower stratum with easy money policies. While there are some signs of progress, such as the government’s need to octuple the money supply over the past fourteen years to remain stable, there needs to be a change from the ground up. Moreover, our history of sanctions demonstrates the long-term ineffectiveness of the tactic on governmental change. The sanctions neither work in resource rich nor resource deficient nations, espoused in Iraq and Cuba in decades past. Moreover, blanket sanctions produce more harm than good, such as depriving the sick of necessary medicine.

Unfortunately, today’s media is plagued with fear mongering and false hope for the sanctions. It is Iran’s biggest adversary, Benyamin Netanyahu who spells it out best in saying, “the sanctions are taking a bite out of Iran’s economy… unfortunately they have not stopped the Iranian [nuclear] programme.” After over two years of sanctions, we are admittedly no closer to achieving the goal; nevertheless, his solution is to toughen these same ineffective sanctions, and garner support for a preemptive attack. World leaders must instead show due diligence in this process because any Machiavellian perspective deteriorates chance at world peace. A change must be made, but it must start from the ground up because there is truth in the power of numbers.