US maximum pressure unable to turn economic costs into political change
By Delaram Ahmadi
Staff writer
Following a ceasefire that brought an end to the 40-day US-Israeli war against Iran, hostilities flared up again with a US attack on positions in southern Iran and Iranian retaliatory strikes. The US, however, later halted its attacks and has for some time been discussing unprecedented economic pressure and the economic isolation of Iran as an alternative to military operations. This comes as Iran has already been under some of the toughest US sanctions for years, while the maritime blockade that had ended with the ceasefire is now being enforced again. Iran Daily spoke to international affairs expert Abed Akbari to analyze the policy. He said sanctions can impose costs, but the main problem with the US maximum pressure policy is that Washington often assumes that raising the costs will directly lead to changes in political behavior, while historical experience has shown that prolonged sanctions do not necessarily produce the political outcomes sought by the country imposing them.
IRAN DAILY: How much further can the US ramp up economic pressure on Iran? Are there any new tools left at Washington’s disposal that could significantly increase the pressure?
AKBARI: The United States still has considerable capacity to increase economic pressure on Iran, but that capacity is not unlimited. Washington has deployed a significant portion of its sanctions tools over the past four decades, particularly since withdrawing from the 2015 nuclear deal, ranging from oil and banking sanctions to pressure on third-party companies and restrictions on Iran’s access to the international financial system.
However, the tools that remain are focused more on increasing costs, tightening oversight of trade networks and putting pressure on Iran’s economic partners than on bringing about a fundamental transformation in Iran’s economic situation. Experience has shown that after a certain point, broad sanctions face diminishing returns, as the targeted economy gradually develops alternative channels, informal mechanisms and new networks of cooperation.
In fact, the main problem with the US maximum pressure policy is that Washington often assumes a direct link between “increasing costs” and “changing political behavior,” whereas historical experience has shown that prolonged sanctions do not necessarily produce the political outcomes sought by the sanctioning country.
What tools does Iran have to push back against growing US economic pressure and limit its impact on the economy?
Iran has a range of domestic and external capacities at its disposal to cope with external economic pressure. Domestically, the most important factors include reforming economic structures, reducing the budget’s dependence on oil revenues, strengthening domestic production, developing a knowledge-based economy and managing foreign-exchange resources more effectively.
Externally, Iran also has tools such as diversifying its trading partners, using bilateral currency agreements, conducting trade in national currencies, developing regional corridors and tapping into the economic potential of neighboring countries.
It should be noted, however, that successfully pushing back against sanctions is not simply a matter of “circumventing the pressure.” It also requires improving economic productivity, reducing structural vulnerabilities and building confidence in the domestic economic environment.
To what extent can countries such as China, Russia and Iran’s neighbors help maintain their trade and economic ties with Iran amid heightened US pressure?
China, Russia and neighboring countries can play an important role in reducing the impact of US pressure, but the extent of their support depends on their own interests.
China, as one of the world’s largest economies, has significant capacity to continue energy, trade and investment ties with Iran, although Beijing’s policy has always been based on maintaining a balance between its relations with Iran and its broader ties with the global economy.
Russia is also an important partner for Iran in energy, transportation, food security and regional cooperation. However, the Russian economy itself is under pressure from Western sanctions and has a limited capacity to fully replace Western markets.
Neighboring countries, due to geographical ties, mutual economic needs and the realities of regional markets, represent a major obstacle to efforts to completely isolate Iran. However, to make sustainable use of these capacities, Iran needs to move beyond political exchanges and build up its economic relations into institutional and long-term cooperation.
How well has Iran’s economy adapted to sanctions and external pressure, and can it maintain this resilience in the face of a new wave of US pressure?
Iran’s economy has shown considerable capacity to adapt to external pressure over the past several years. The emergence of alternative trade networks, the development of economic ties with Asia, experience in managing the economy under foreign-exchange constraints and the preservation of some production capacities point to a degree of “sanctions resilience.”
However, this adaptation should not be mistaken for complete immunity. Sanctions have imposed real costs, from reduced foreign investment and difficulties in technology transfers to higher trade costs and pressure on economic growth.
Therefore, continued success in withstanding new pressure will depend on Iran moving past “crisis management” and moving toward deep economic reforms. A sanctions-resilient economy is one that can both withstand pressure and take advantage of global opportunities.
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