Why Economic Sanctions Against Iran Are Backfiring

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27-03-2025

How Sanctions Work: Iran and the Impact of Economic Warfare, by Narges Bajoghli, Vali Nasr, Djavad Salehi-Isfahani, and Ali Vaez, Stanford University Press, 212 pages, $24
If there's one part of foreign policy where President Donald Trump has been consistent, it's economic sanctions on Iran. During his first presidency, Trump imposed what the State Department called a "super-maximum economic pressure campaign." Throughout the Biden administration, Trump and his supporters complained that Iran had been on the verge of bankruptcy but lax sanctions enforcement was allowing the Iranian economy to rebound. In his third week in office, Trump signed an order calling for renewed sanctions pressure on Iran, although he also expressed willingness to negotiate.
Sanctions have undoubtedly made Iran squirm. Iranian oil exports fell to nearly nothing in 2019, leading Iran to harass oil shipping and allegedly attack oil production in neighboring countries. The government couldn't even access its own money abroad, and it had to make complex deals to buy food and medicine. At home, Iran saw increasingly widespread uprisings and crackdowns in 2018, 2019, and 2022. Figures in Trump's orbit have flirted with the idea of full-on regime change.
The way sanctions deal out damage—the chain of causation from the president's pen to turmoil in Iran—is less well understood. Even if the issue weren't muddled by heavy propaganda, the process is complicated. How Sanctions Work: Iran and the Impact of Economic Warfare presents an easily digestible set of data on sanctions. It's written by anthropologist Narges Bajoghli, economist and former Central Bank of Iran researcher Djavad Salehi-Isfahani, and political scientists Vali Nasr and Ali Vaez, both of whom have advised the U.S. government on negotiations.
The past few decades in Iran have been a natural experiment in the effect of economic sanctions. Iran has more of a market economy than other targets of U.S. sanctions, such as Cuba and North Korea. It also had normal trade relations with much of the world, which have been cut since the 1990s by waves of Washington's sanctions.
Although the United States has the power to seriously disrupt economic life in other countries, the book argues, the consequences don't always serve American interests. Sanctions hurt the prosperity and political standing of Iran's pro-American middle class the most. They also make the government more paranoid and remove important incentives to play nice. Everyone seems worse off.
The U.S. has tried to wash its hands of the policy's consequences for ordinary Iranians, blaming their poverty on domestic "corruption and economic mismanagement" rather than on sanctions. But the data are clear. The Iranian economy was booming from 1988, the end of the country's war with Iraq, to 2011, the beginning of former President Barack Obama's intensified sanctions campaign.
Obama's innovation was secondary sanctions. As the flow of direct American-Iranian trade shrunk, the U.S. Treasury's Office of Foreign Assets Control punished companies in other countries that dealt with Iran. The Iranian economy became more or less radioactive, as any bank in the world that handled Iranian money and any shipping company that handled Iranian oil risked the wrath of the U.S. government.
Then Obama made a deal, lifting the sanctions in 2015 in exchange for restrictions on Iran's nuclear program. Trade resumed and foreign investment flowed back in—until Trump reimposed sanctions in 2018. (Despite Trump's claims to the contrary, former President Joe Biden continued to enforce the same sanctions.) Iran has since come closer to building a nuclear bomb, and it has had more confrontations with the U.S. military.
While it hasn't collapsed, Iran has gone through a nationwide belt-tightening that makes life more miserable. Cutting oil exports has meant there is less capital for new investments, so growth has stagnated. Cutting off access to foreign banks has made importing anything more complicated and expensive, leading to heavy inflation.
Employment has stayed steady, and the non-oil economy has actually grown: The loss of foreign imports led to a growth in domestic Iranian industry. For this reason, some hawkish Iranian nationalists argue Iran's political isolation is a good thing. But the tradeoff hasn't been worth it for ordinary citizens: By every statistic the authors review, from consumer spending indexes to the number of calories eaten per day, Iranians have lower living standards.
During the economic boom times of the 1990s and the early 2000s, the Iranian middle class grew from 20 percent of the population to more than 50 percent, almost entirely due to the poor getting richer. The millions of Iranians newly exposed to higher education and foreign culture became a base for reformist political blocs such as the Green Movement, which called for liberal domestic policy and diplomacy with the outside world.
Under sanctions, the trend has reversed, with millions of middle-class Iranians falling back into poverty. The authors interview many liberal Iranians who, despite waves of protests, are not optimistic about changing their country's government. With their own lives getting worse, they have shrunken from public life. "The problems seem so much bigger than what we can solve. Everything seems absurd. So one day I just said, I'm done. I'm done with all of it," says Ali, a middle-aged chemist who has joined a hippie back-to-nature group.
The Iranian government has also become more paranoid and less eager to compromise, whether internally or externally. The power of sanctions, the authors argue, "ultimately lies in lifting them." Tehran agreed to the nuclear deal in 2015 because it believed that compromise on its part would lead to compromise from the other side. Years of maximum pressure have convinced many of the Islamic Republic's support base there's no point in trying to negotiate.
Reza, a university professor close to the government, tells the authors that "as long as Iran is a state that believes in national sovereignty and will not kowtow to outside forces, we will continue to be on the brunt end of destructive U.S. policy. If it's not the nuclear issue, it's our ballistic missiles. If it's not our ballistic missiles, it'll be human rights. If it's not human rights, they'll find another reason."
To some degree, he's right. Beyond presidential sanctions orders, U.S. trade law has essentially been rewritten around isolating Iran. (The Iran Nonproliferation Act of 2000 even banned NASA from making payments on the International Space Station unless the president certified that Russia was not cooperating with Iran on missile production.) The sanctions machine is on autopilot, and turning it off is a heavy political lift.
Look at what happened to Obama's deal. Although sanctions relief was a passive concession—the U.S. simply stopped preventing Iran from trading with third parties—opponents of diplomacy successfully cast it as a taxpayer giveaway to the Iranian government. The 2015 deal took a lot of political capital to push through Congress, and it was easily undone by Obama's successor. Without massive legislative changes, the next deal will be just as vulnerable.
Maybe the architects of sanctions just weren't honest about their intentions. If the goal is to avoid war and make Iran a freer country, sanctions policy has obviously failed. But if the goal is to prolong conflict and weaken Iranian society, the sanctions are working just fine. The chaos and suffering may be features, not bugs. U.S. officials know what's happening. They have access to the same information that the authors of How Sanctions Work have.
In 2018, frustrated Iranian father Nader Shokoufi fired off an angry tweet at Richard Nephew, a former Obama administration official who wrote The Art of Sanctions. "My son was 1yo. He had fever. I went through 16 pharmacies to find the paracetamol suitable for his age. I hope you experience it once and then tell me how 'moral' that feels," Shokoufi wrote. Rather than ignoring the message, Nephew wrote back, "I am sorry that happened." He can plead remorse, but not ignorance.
Others are less shy. Mark Dubowitz, head of the neoconservative Foundation for Defense of Democracies, complained when Iran elected a "more soft-spoken, cosmopolitan, and diplomatic president" in 2013. During the Trump administration, when the Foundation for Defense of Democracies was a key architect of the maximum pressure campaign, Dubowitz openly stated that the Islamic Republic "will turn their guns on their own people" under pressure.
In December 2024, shortly after How Sanctions Work was published, the government of Syria—another sanctions target—collapsed. The Syrian sanctions failed on their own stated terms. They did not empower what the Obama administration called the "moderate opposition." They did not push the Syrian government to reform. In fact, the opposite happened; the Syrian government grew more corrupt and repressive, then fell to rebels whom the United States considers terrorists.
But that seemed to suit officials just fine. Then-President Joe Biden bragged about the "historic opportunity" that came with the fall of a U.S. enemy. If the new regime turns out to be hostile, after all, it can be sanctioned, just as the old one was.
Sanctions "work" by making the world a poorer, less connected, and more dangerous place. They strangle the human spirit. Peaceful exchange between nations is a win-win proposition. When those things are cut off, everyone is worse off.
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