The Sanctions Fallacy: Iran and Japan

The strategy of imposing increasingly punitive economic sanctions has long been the cornerstone of U.S. policy towards Iran and other rogue nations, ranging from Iraq and Libya to North Korea. However, the fundamental question of whether this policy will tend towards a favorable outcome remains too often unexamined. Beyond the inherent challenges of collective action in constructing a comprehensive sanctions regime, it is unclear whether Iran would, in fact, accede to U.S. demands even if economic measures were maximally effective. Although sanctions have compromised Iran’s ability to pursue technology and materials for its nuclear program, these measures, having been used against countries from Syria to South Africa, have had highly variable effects. At this moment, international consensus continues to build around sanctions, and harsher measures have been progressively imposed. For instance, the decision by Swift to comply with the European Union’s ban of transactions with blacklisted Iranian firms has all but cut Iran off from international financial markets. The embargo of Iranian oil exports by the United States and European Union is also in progress. Although President Ahmadinejad has claimed that Iran could “manage easily,” for up to two or three years under conditions of total embargo, the costs to Iran’s faltering economy will only rise, and the Iranian people will continue to bear the brunt of these measures. A few relevant case studies provide a deeper perspective on this critical question.
Sanctions: An Ineffective Tool
Despite decades of sanctions, Iran has persisted in its efforts to develop nuclear capabilities. Whether attempting to preserve domestic legitimacy through a longstanding narrative of tensions with Israel, seeking a guarantee of security from perceived foreign threats, or desiring the capacity to exert regional hegemony, Iran has been driven by powerful incentives and imperatives. Ongoing efforts, largely unilateral, often degenerate into cycles of increasingly stringent sanctions without corresponding concessions from Iran. Breaking this unproductive cycle to move towards a sustainable settlement requires an understanding of the flaws of this strategy, in theory and in practice.
Sanctions can be manipulated by elites on both sides for political benefits, and they tend to further polarize already tense situations. Indeed, sanctions establish perverse incentives for leaders to manipulate public sentiment and seek domestic support for aggressive policies. Ultimately, sanctions often bolster the popularity of political figures by creating the perception of a proactive and hardline approach. Imposing stringent sanctions in today’s political climate carries benefits for President Obama, whereas reversing the current trend in favor of a more flexible approach would leave him vulnerable to accusations of naiveté. After facing political scorn after offering to negotiate with Iran “without preconditions” early in his presidency, Obama has taken a progressively stronger stance.

Directly counter to the aim of weakening the current regime through sanctions, these measures instead seem to have strengthened the regime at the expense of civil society and potential opposition forces. The Iranian government’s ability to withstand the challenge of the 2009 popular protests could perhaps be attributed in part to sanctions’ role in perpetuating a preexisting imbalance of resources between state and society. Oil exports, the dominant sector of Iran’s economy and source of half of its government revenues, are exclusively controlled by state-owned companies like the National Iranian Oil Company, which is in turn supervised directly by the Ministry of Petroleum. Such absolute control of economic resources allows political elites to withstand the economic impact of sanctions, leaving ordinary citizens to suffer the brunt of punitive measures. These inadvertent effects often create structural challenges, inhibiting the development of education and the emergence of a stronger civil society. As such, sanctions intended to change regime behavior may only strengthen the position of those elites responsible for current policy choices, enabling them to push ahead in their nuclear quest.
Remembering History
The sanctions imposed on Japan prior to World War II provide a useful analogy with which to view our current situation. U.S. policymakers thought, at the time, that it would be entirely irrational for Japan to attack the United States, and Pearl Harbor was entirely unanticipated. Today, conventional explanations for this sequence of events tend to focus on ideological factors, such as considerations of pride and honor on the part of Japan. However, from an economic perspective, this strategy can be considered wholly rational. As an island nation, Japan’s economy was entirely dependent on the import of natural resources, particularly for its energy needs. The U.S. embargo on oil represented an existential threat to Japanese power, in terms of both economic and military capacity. With oil supplies cut off, Japan would have had to surrender completely, seek oil elsewhere through war, or act quickly and decisively to end the economic stranglehold before its options were further limited.
Now too, sanctions on Iran might create perverse incentives for further aggressive behavior, seen as a last resort in the face of overwhelming international pressure. Completely cut off from the international economy and with pressure increasing, policymakers in Iran may seek short-term aggressive action as a last resort. As such, sanctions could ultimately become more an instrument of war than of peace. With the upcoming negotiations in Turkey, Iran seems to have expressed a tentative willingness to compromise. Although these talks hardly seem promising, this could be the last opportunity for leaders on both sides to reevaluate their policies and the paths ahead.