Once upon a time, Iran was allied with Western countries. After the Islamic Revolution however, it became a target of the West. Western countries not only lost an important ally but also had to face a new Iran trying to export its regime to its neighboring countries. Furthermore, the policies Tehran pursues with non-state actors like Hezbollah that endanger the stability of the region helped shape this perception.
Iran’s continuation of its nuclear program while facing constant isolation after the Islamic Revolution deepened the crisis between the West and Tehran. As a result, both unilateral U.S. sanctions and the sanctions by the UNSC against Tehran became harsher. The latest of the sanctions was Executive Order 13490 which was signed by Obama on November 21, 2011. This new attitude raises old questions again; how will Iran counter this move?
The decision to initiate sanctions is not a policy that Washington can apply solitarily. Having difficulty in persuading Russia and China in the UNSC, the U.S. began to seek the support of its allies by using its influence on them. In this context, we should note that the U.S. received the support of the EU, Japan and South Korea. Recently, Turkey also has changed its position and decreased the amount of oil exported from Iran by 20%.
In the beginning, against these sanctions, Iran both raised its voice and gave the signal that it will adopt a more aggressive manner. According to Mahmoud Ahmadinejad, these sanctions have been the harshest economic attack against a country in history. In addition, Spokesman of the Iranian Foreign Ministry Ramin Mehmanparast criticized the decisions taken at the summit of EU foreign ministers, on January 23, as being unfair.
Iran targeted the traffic in the Strait of Hormuz in a countermove that will threaten the countries in the region. At first, high-level political actors remained silent on this move, but then member of the Majles National Security and Foreign Policy Committee Parviz Sorouri began to talk about threats against the Strait of Hormuz. According to Sorouri, if the Strait of Hormuz is not safe for Iran, it cannot be safe for any state. After this comment, the Foreign Ministry explained that the Strait of Hormuz is open to every state, and that these types of comments can be made but the people who make these declarations do not have any role or official powers. However, Iran did not refrain from making an appearance in the Strait of Hormuz by performing a military exercise with developed missile systems after this explanation.
After the military exercises, during the celebrations of the Iranian Islamic Revolution’s anniversary, spiritual leader Ayatollah Ali Khamenei said that there will be some leverages Iran will use against the oil embargo and war threats when the chips are down. Then he made a point of adding that these types of sanctions could not weaken Iran, on the contrary, they helped it become a self-sufficient country. Indeed, this stance has recently found voice in the West too. The main question is: How much does the isolation policy affect the current regime and hinder the nuclear program?
Are the sanctions enough to stop Iran?
The history of U.S. embargos against Iran dates back to President Reagan. The U.S. imposed a limitation for products and services which came from Iran in 1987, because of the support of Iran for international terrorism and its aggressive attitude against non-military maritime traffic in the Persian Gulf. Throughout the 1990s, the “Iran has a desire to obtain weapons of mass destruction” discourse led to new sanctions by Washington. The sanctions of the Clinton administration prohibited American citizens from making any kind of transactions with Iran-based entities. The most significant isolation mechanism in this period may have been the Iran and Libya Sanctions Act (ILSA).
Throughout the 2000s, the Bush administration was accused of acting unilaterally, however the UNSC decisions targeting Iran’s nuclear program were realized during its period. The U.S. leaned toward acting unilaterally after the efficiency of U.N. decisions began to be questioned because of the bargains with China and Russia. Washington imposed new sanctions after UNSC Resolution 1929, most recently Executive Order 13590 which was signed on November 21, 2011. As well as implementing the old sanctions, some of these recent ones directly target the economic and financial sectors of Iran.
The impact of sanctions on Iran was limited up until 2012. The volume of foreign direct investment was limited, but still not totally eliminated. Moreover, Iran maneuvered successfully in reducing the effects of the isolation by making structural reforms in its economy under the Ahmadinejad administration. As a result of these developments, until the 2008 crisis, Iran benefited from an era of economic expansion although to a lesser extent than Turkey and Russia. Between 2002 and 2006, by expanding more than 6%, Iran’s economy performed above the world average.
The Impact of New Sanctions
Kenneth Katzman noticed in his report he prepared for the U.S. Congress that the Obama administration is different from the Bush administration in terms of policies imposing sanctions on Iran. In contrast with Bush’s policies which only carried out sanctions, Obama tries to initiate sanctions with negotiations. In other words, Obama uses the carrot and stick method although we cannot say that the parties managed an effective negotiation process.
On the other hand, in terms of efficiency we see that the moves by the Obama administration are much more extensive. Until today, Iranian society was not directly influenced by sanctions. However the probability of Executive Order 13590 of influencing society is really high because the oil industry is very significant for the Iranian economy and equals 20% of Iran’s GDP, 80% of its exports and 60-70% of its budget revenue.
If the new policy becomes successful, Iran will lose some of its oil revenue at least in the short term, which may weigh heavily on both the Iranian government and society financially. One of the first effects of the sanctions is seen as the decreasing value of the Iranian rial since December. The rial has depreciated more than 50% against the dollar since then in the free market. Having problems in terms of oil trade, Iran has shown some negative symptoms and prepared a list of import limitations that bans 600 different commodities.
Yet it is still too early to reach a conclusion regarding the real impacts of the sanctions on the Iranian economy. However, it seems that the recent policy of the West succeeded in bringing Iran to the negotiating table. The recent meeting in Istanbul was perceived positively by the international media. For Iranian officials, the summit was even more important. Iranian Foreign Minister Ali Akbar Salehi said that the meeting was a “turning point.” For now, the outcome of the meeting is not that groundbreaking, but still satisfactory considering the previous experiences. Both sides agreed on the right to have nuclear technology for peaceful aims, but the international community looks for further transparency from Iran. The next round of meetings will be held in Baghdad on May 23. The results of this meeting will be more crucial in discovering the intentions of both parties. At the end of the day, the price of oil has skyrocketed due to the tension with Iran as well as the arms race in the region. Thus, progress for the solution of the problem will not only have regional, but global repercussions as well. On the other hand, experts following the issue have some concerns regarding the attitude of Iran and suspect Iran of playing for time with the euphoria over its recent willingness to negotiate.
Note: This piece is a revised and expanded version of the article titled “Iran’ýn Hürmüz Hamlesi ve Petropolitik” (Iran’s Hormuz Move and Petropolitics), which was published at Analist No: 13, 2012.
Hasan Selim Ozertem
Center for Energy Security Studies