Search this site powered by FreeFind

Quick Link

for your convenience!

Human Rights, Youth Voices etc.

click here


For Information Concerning the Crisis in Darfur

click here


Northern Uganda Crisis

click here


 Whistleblowers Need Protection


Most recent sanctions on Iran

Dr. Emadi

With the most recent round of UN-approved sanctions, and the seemingly more restrictive additional sanctions introduced by the European Union, Canada, Japan and Australia; there appears to be renewed interest in the effectiveness of sanctions in altering the behaviour of the Islamic Republic of Iran concerning the atomic energy programme of the regime and its real purpose. In this note, I aim to explore some of the less often discussed, but I hope not less appreciated, possible effects of the sanctions.

One stated anticipated effect is that these sanctions will raise the cost of developing industrial capacity vis-à-vis the growth of the energy sector in Iran. Given that 80% of the government’s budget, along with 70% of investment monies for industrial projects, comes from oil revenues which are under the monopoly of the government, and because management of the budget has been transferred to the Islamic Guards (Sepah); the sanctions will result in a significant fall in the revenue available to the government. This will clearly serve to reduce its financial capability to pursue and complete its nuclear energy programme which we suspect has the capacity to develop military potential for weaponization. This line of analysis advocates that in light of a very ambitious long range missile programme which already has the assumed capability of delivering a load, be it very small in weight, to most of southern Europe; the world community, in the interest of collective security, should indeed use sanctions to cause a substantial reduction in the income earning of the present leaders and their security force. In fact, in recent years Sepah has expanded its presence in the oil and gas sector, and in almost all layers of the economy. The targeting of four industries, namely the energy, banking, transport and insurance industries; is designed to weaken the four pincers which Sepah designed to hone the nuclear programme to its asserted militarized phase.

At first glance, it may appear that Sepah is employing the sanctions as an opportunity to use the veil of foreign threat and national security. Their broader agenda is to tighten their grip on the economy, thus increasing their revenues from their "rent-seeking" activities. This would help Sepah to displace their private sector competitors. In reality, sanctions may be used to expand Sepah’s economic empire and its share of the economy.

However, simultaneously, if these sanctions are effectively policed; we will very quickly see a fall in the growth rate of the economy. In combination with the poor management skills of Sepah, sanctions could push the Iranian economy into negative growth rate within 12-18 months. Industrial production is estimated to decline by 15% while unemployment may rise by as much as another 5-7% on top of the existing official 15%, which would result in an unofficial predicted employment rate of 20-22%. In a young society, with a populace of approximately 70% being less than 30 years of age; this could potentially translate to an unemployment rate of 35% for those entering the job market for the first time.

Sanctions are certain to increase the cost of conducting trade to the economy; in this case the increase may be as much as 50% in some sectors. In Iran's economy, where imports use 88% of oil revenues; a rise in the cost of trade will be transferred to higher domestic prices. Those Iranians on a fixed income, i.e. salaried and waged households, will be the most affected since their income will remain stable. Therefore, the value of their labour will decrease accordingly. An accelerating inflation rate is almost certain to deplete the dwindling nuggets of savings of the middle classes, and it will push a large segment into the low income category.

Sanctions are known to affect health care spending and education; these services will likely be the first cut by the government budget. Simultaneously, we will likely observe an increase in the resources allocated by the government for security and intelligent services. Low and middle income families are most dependent on the public sector provision of health and education services in Iran. It is probable that access and availability of these two basic services will be affected negatively. Entitlement to basic health and education are crucial to the development of a healthy and stable economy of any country.

So, why are sanctions being employed in the case of Iran?

Sanctions are the preferred option as they are aimed to deal with the rising influence of Sepah, and the command of a regime which has secured control and ownership of massive segments of the economy. This activity of Sepah has cultivated the mushrooming of corruption and systemic implementation of rent-seeking behaviour in foreign trade vis-à-vis energy and banking sectors. We clearly recognize that the rising financial power of Sepah will have significant implications for the military and nuclear programmes approved by the leadership. Those in power wish to gain complete control of the economy, as well as tight rein of the political arena. Returning to "business-as-usual" will make a mockery of the human rights of the citizens inside Iran. More critically, it may also have serious consequences with respect to dealing with future risks under a new power structure in the Islamic Republic of Iran.

Sanctions will always have a negative effect on the wellbeing of the citizens of the targeted country. But, sometimes, sanctions can accelerate positive change and bring about transition to increased participatory policy making within the framework of governance. Sanctions are the softest of the hard power tools; they can serve as the most potent diplomatic language. In this case, sanctions can potentially displace military action against Iran. Those who speak of positive engagement may wish to pause a moment to consider the behaviour of the leadership throughout the last 12 months, and even through the last 13 years during which the Supreme Leader arbitrarily blocked any attempts at meaningful and lasting reform. To accept the designed agenda-driven policies pursued by the current leadership in Iran is a futile endeavour. This dead end option is neither the wish of the West, nor the desire of the citizens of Iran who wish to pursue a fruitful life and live in peace.

Home Books Photo Gallery About David Survey Results Useful Links Submit Feedback