New Unilateral Sanctions against Iran: What Do They Mean?

The new set of unilateral sanctions against Iran target the Islamic Revolution Guards Corps (IRGC), several of its affiliates involved in construction and economic activities, the Ministry of Defense and Armed Forces Logistics (MODAFL), three individuals affiliated with Iran’s Aerospace Industries Organization (AIO), and two state-owned Melli and Mellat banks for proliferation activities. In addition, they target the IRGC Qods Force for providing material support to terrorist organizations (Taliban is the only identified) and state-owned Saderat Bank as a terrorist financier (Saderat was already under sanctions).

Putin has likened the move to an act of a "madman" running around "with a razor blade, waving it around." But the move shies away from designating either the IRGC or the smaller Qods force as terrorist organization and as such significantly falls short of the US Senate vote which designated the larger IRGC as a terrorist organization. It seems to be a compromise intended not to freak out the Europeans who had balked at the idea of placing the military force of another country on the terrorist list.

Still some see it as a move towards war. But Anthony Cordesman sees the opposite: “[A] warning shot across the bow, not that the U.S. is going to invade Iran, but that Iran has pushed the level of escalation, particularly inside Iraq, to unacceptable levels. In many ways, this kind of warning is more a demonstration of restraint than a signal that we’re going to war.”

It is conceivable that the immediate backdrop to this move was Washington's unhappiness with Iran’s increased activities in Iraq. But, if so (setting aside the unconvincing public case regarding Iran’s nefarious activities in Iraq), it is not entirely clear how this move will reduce and not increase Iran’s activities unless a clear warning has been given to Tehran about the possibility of war.

I tend to see the move as more of a general political maneuver; on the one hand, to show the Iranian leadership the American resolve to continue the sanctions process and, on the other hand, to placate the war hawks in the Bush administration at least for a while.

The need to keep tightening the sanctions noose arises from the ineffective nature of the sanctions regime. To counter the stated U.S. attempt to isolate it, but more importantly to assure its own security, Iran has pursued a very active strategy vis-à-vis its neighbors, with many which it has long and porous borders. The northern border in particular, shared with former Soviet states of Armenia, Azerbaijan and Turkmenistan—not to mention the vast Caspian Sea— is particularly open. Pakistan and Afghanistan borders to the west—both with new land routes into Central Asia and China–are also uncontrolled by the West. Dubai and other Persian Gulf free ports, as well as newly developed facilities on the Sea of Oman guarantee that needed goods will flow into the country if severe trade sanctions are enacted. Dubai is also the place to get around the financial restrictions imposed on Iran. Even the present chaos in Iraq guarantees free flow of goods across Iran’s border (Iraq is reportedly now the second destination for Iran’s non-oil exports).

Those who are pushing for more sanctions know this. They know that so long as neighbors such as the UAE and Turkey are unwilling to give up their lucrative business with Iran, the sanctions regime will not harm Iran enough to abandon its stance. They also know that given Iran’s long borders, the sanctions in place will be adjusted to in a short period of time. So for Iran to feel any kind of political heat the sanctions noose has to be tightened periodically.

This does not mean that sanctions do not harm Iran economically; they just don’t harm it enough. High oil prices and Iran’s relationship with neighbors give Iran sufficiently versatile tools in the cat and mouse game that is being played between the US and Iran. There is no doubt that the US is the physically more powerful cat in this game but the mouse, so to speak, simply has too many holes to hide in and is difficult to catch precisely because of the versatility of tools at its disposal.

The State and Treasury folks keep hoping that by doing something they will place pressure on Iran’s contested political environment, ultimately convincing those sectors of Iranian elite who are worried about Iran’s deteriorating economic conditions to step up to the plate and force a change in Iran’s policies regarding nuclear enrichment. This is nothing short of wishful thinking so long as the US offer of diplomatic engagement is based on the precondition of changed Iranian behavior and policies before talks begin.

Out of necessity or choice, the current Iranian leadership has decided to hobble along in the energy sector (through attempted cooperative activities with a few European companies and some Asian companies from China, Malaysia, and even India), subvert sanctions through its vast open borders, forego a more coherent economic vision delineated in Iran’s Third and more so Fourth economic plan for the integration of the country in the global economy, and hope for the best on the basis of a genuine belief that time is on the Iranian side.

The argument is that Iran’s massive energy resource (quite a bit of it yet untapped) will ultimately bring the US around and the Iranian economic versatility is sufficiently robust in these days of high oil prices and American troubles in Iraq and Afghanistan to buy Iran’s enough time until that moment arrives.

Yes, they argue, the Iranian economy will continue to be hobbling and inefficient but standing firm against the US will assure that the Islamic will remain an Islamic republic for years to come. If and when the US decides to engage with Iran, they say, it will do so on the basis of what Iran is (i.e., a country in which its hardliners cannot be purged and will continue to play a significant role in its contested politics and economic decision making) and not what the United States thinks Iran should be domestically and in the region.

This is a dangerous strategy that as we all know risks military confrontation but is a strategy that those currently in power in Iran have chosen and this last round of sanctions will not dissuade them otherwise.