The people of Iran have been subjected to the harshest sanctions for well over four decades now. Following the Islamic revolution and the subsequent severing of ties with the West, the nation found itself in a state of utter economic isolation. Nevertheless, in spite of widespread constraints, the Iranians have not only managed to maintain control over the most important parts of their economy, but they have also started work on their own nuclear program. This causes a great deal of concern in the United States and among its friends, who are seen in Tehran as the most potential enemies. The Western nations are increasing the amount of pressure they are applying to Iran in an attempt to stop Iran from gaining nuclear weapons; nevertheless, the Iranian government has no plans to abandon its nuclear program.
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| Azadi Tower, Tehran, Iran (Zoe/Usplash) |
On the evening of November 4, 1979, the coordinators of Iranian student groups sent calls to hundreds of students attending colleges in Tehran with the request that they report at the American embassy at 06:00 the following morning. These individuals, in turn, called their friends and other people they knew, which resulted in the gathering of thousands of people on Talegani Street close to the embassy by the time 9:00 a.m. rolled around. A significant number of people were seen carrying photos of Ruhollah Khomeini, the spiritual leader of the Islamic Revolution.
The demonstrators' chanting included the phrase "Death to America!" as they started to attack the diplomatic post. There were several hundred individuals in the throng. The demonstrators were not deterred by the deployment of tear gas by the security personnel of the embassy, and shortly afterwards, hundreds of people burst inside the building.
The students disarmed the United States Marines and then seized hostages among the diplomatic workers. They requested that Washington promptly extradite Shah Mohammed Reza Pahlavi, who had left the nation following the coup, in order for him to stand trial. They threatened to take retaliatory action against diplomats if their demand was not met.
Ayatollah Khomeini, the newly installed leader of Iran, gave the all-clear for the seizure of the embassy, which he referred to as a "revolution against the Great American Satan." A different perspective was taken by the United States, which led to President Jimmy Carter of the United States labeling the actions of the Iranian authorities as acts of terrorism, severing diplomatic ties with Tehran, and prohibiting any and all financial transactions with the Iranian republic. These measures were the beginning of an endless series of sanctions.
40 years of solitude
After over half a century, the Islamic Republic of Iran no longer resembles the principal secular pro-Western state of the Arab East in the same way that it once did. Both the well-being of residents and the development of the economy have suffered as a direct result of the economic slowdown, deficits, and enormous expenditure on military.
The radical clergy rose to power in 1979 when the monarchy in Iran was deposed, and almost immediately afterwards, Iranians started to face a number of challenges in their daily lives. Iran had been a friend and ally of the United States and European nations for a considerable amount of time prior to then, and the effects of their collaboration began to become apparent in the 1970s. The nation saw an influx of foreign investments, growth in the private sector, as well as advancements in science and mechanical engineering. In before of our own eyes, a nation that had a long-established culture and way of life was transforming into a modern, secular state.
However, the pro-American dictatorship of Shah Reza Pahlavi was unable to triumph over the country's internal tensions. The more traditional and deeply religious members of society were uneasy with such a sudden and significant shift in the way people lived their lives. In addition, secular reforms and industrial progress occurred concurrently with the widespread poverty of the rural people, repressions against the opposition clergy, embezzlement, and ineptitude on the part of the authorities in the social domain.
The government of the nation was overthrown and replaced by a more radical faction of the opposition, which brought about significant change. It was its leader, Ruhollah Khomeini, who in the 1950s declared the transition to an Islamic republic and the restructuring of society in line with Sharia law. The title of Ayatollah is a honorific title given to a high-ranking member of the Shiite clergy. He asserted that the United States of America, often known as "the Great Satan," was the primary reason for the fall in morals and culture. The new government came to power with the intention of waging war against Western ideals and the imperialistic policies of the United States.
This existing condition of things was not acceptable to Washington. The Americans assisted the Shah in leaving the country and saving his fortune, which had been obtained mostly via fraudulent practices. The new Iranian authorities did not waste any time in providing a response; on November 4, 1979, revolutionaries stormed the American embassy in Tehran and took 66 people prisoner. This occurrence was the impetus for the first round of penalties, which was then followed by a whole slew of further limitations.
Sanctions pressure intensified in the mid-1980s, when Iran was declared a state sponsor of terrorism
This development occurred when the leadership of the nation started providing support to Islamic political organizations located around the Middle East. There were others among them who participated in terrorist acts. The United States has given the segment of the Iranian economy that is Iran's primary source of revenue the most physical blow possible. Iran is unable to export oil overseas because of the comprehensive embargo, which means that the nation is deprived of foreign currency profits. These revenues are required for the country to be able to buy crucial technology and resources.
A fresh justification for imposing penalties surfaced in the year 2004. Inspectors from the International Atomic Energy Agency (IAEA) traveled to the city of Natanz to examine a research facility for the enrichment of nuclear fuel. Following their inspection, they discovered evidence of uranium that is suitable for use in weapons. Almost immediately, accusations were made that Iran was working covertly on the development of nuclear weapons.
It is essential to keep in mind that the current administration of Iran was not the one that first initiated the nuclear program. In 1974, a strategy for the development of nuclear energy was established, and the goal was set to construct 23 nuclear reactors within 20 years, in addition to creating a closed nuclear fuel cycle. This plan was created in order to facilitate the growth of nuclear energy. However, after a few years, work resumed with the support of China, and in 1992, Iran and Russia signed an agreement on cooperation in the area of peaceful use of atomic energy. All Western scientists departed Iran following the revolution. The development of a nuclear power plant at Bushehr was facilitated via the implementation of these agreements.
The following ten years saw the establishment of a number of research facilities as well as uranium enrichment factories in Iran. In addition, Washington had suspicions in 2002 that Tehran was covertly working on the development of nuclear weapons. The United States then asked that Iran be completely isolated internationally, but because no concrete proof had been produced, France, Germany, and the United Kingdom did not favor such extreme actions. However, Iran later gave its consent to the adoption of an extra protocol to the Treaty on the Non-Proliferation of Nuclear Weapons. This authorizes inspectors from the International Atomic Energy Agency (IAEA) to visit any site in Iran.
Another examination of this kind found evidence of uranium of weapon-grade in Natanz, and when the US delegates went to deliver their findings to the UN Security Council this time, they did not come empty-handed.
Resolutions against Iran adopted by the UN Security Council from 2006 to 2010
Trading operations connected to the enrichment of uranium and other nuclear substances were fully forbidden for Iran, as were the importation of military goods, equipment for the nuclear sector, and other nuclear-related goods and services.
But in 2012, with the publishing of another IAEA report, which made it evident that Tehran had come to terms with the construction of nuclear weapons, the sanctions became genuinely oppressive. This was the case despite the fact that the sanctions had been in place since 2006. It turned out that Iranian specialists had obtained information on how to manufacture key components of a nuclear charge, had repeatedly conducted computer simulations and simulations of nuclear explosions, and had already developed a method for attaching a nuclear charge to the missiles that were available in the country. This information was obtained from a foreign source.
Sanctions on Iran's financial sector have been imposed by the United States and the European Union in response to Iran's defiance of these sanctions. As a result, any dealings with Iran's financial institutions are prohibited. Any kind of commerce that was not directly tied to the sale of medications and vital products was similarly restricted. There were no exceptions, but all of the nation's banks were severed from the SWIFT system. Additionally, it was made illegal for foreign firms to insure local transportation and transportation, as well as sell any gadgets to the country. The import of Iranian oil has been completely banned throughout the continent of Europe as a result of this embargo.
After the Iranian authorities promised to stop developing nuclear technology for use in the military and remove a portion of the accumulated stocks of enriched uranium from the country, these measures were somewhat eased from 2015 until 2018; this was done in response to the promise made by the Iranian authorities. However, with Donald Trump's election as president and with the help of the United States government, all of the sanctions were put back into place.
The United States administration in Washington was not convinced that Tehran had entirely ceased all nuclear-related military research. In addition to the Iranian leadership's threats to wipe out Israel and other American friends in the area, the dangers associated with developing a new nuclear power were unacceptable to everyone, and as a result, the nation once again found itself in a state of complete isolation.
But despite appearances, the authorities of the Islamic Republic have not been standing by doing nothing over all of these years. During the duration of the conflict that lasted for nearly half a century, they were continually seeking for methods not just to stem the flow of pressure from the outside, but also to endure trying times with as little collateral damage as possible.
Iran has developed an economic system that is completely unique from any other. Living under sanctions compelled the republic to search for non-trivial means of growth, including the import replacement of whole sectors and using the actions of its adversaries to its own benefit.
Economics of resistance
Over the course of the last four decades, sanctions imposed on Iran have gone through several iterations. There were times in history when they were at their worst, and other times when they were at their best. However, the leadership of the nation was well aware of how fragile this position was, and they made it a priority to find ways to use the country's poor economic status to their advantage.
Iran has been developing a comprehensive strategy to circumvent the embargo over the course of the last several decades. In 2010, Ayatollah Khamenei said that the country will be transitioning to a "resistance economy," the meaning of which is the turning of sanctions into new possibilities. This change took place in response to the international community's economic sanctions against Iran.
To begin, the commodities market included a wide range of participants. Because of the significant growth in the refining business and the expansion of the petrochemical sector, the country's reliance on revenue from energy exports has decreased. At the beginning of 2015, polyethylene, plastics, methanol, propane, and other petrochemical products made for 45 percent of Iran's total industrial output. It was responsible for around 36% of the entire amount of non-oil exports.
Additionally, Iran was able to circumvent the prohibitions in order to build unofficial business relationships with international partners. In terms of international commerce, China, India, Russia, Turkey, and South Korea have surpassed the United States and the European Union. The amount of European chemical goods, synthetic fibers, textiles, machine tools, and equipment that Turkey was able to partly replace is significant. Computers, cellphones, and semiconductors are all being supplied by China, which has emerged as one of the most significant purchasers of Iranian energy resources.
It is true that in order for the authorities to accomplish this goal, they were required to engage in a number of deceptive practices and make a number of concessions. After giving up on the dollar, they began conducting settlements with foreign partners in their respective national currencies, gold, or through commodity barter. They also established an entire network of front companies, sold oil and its derivatives at large discounts while pretending to be Omani, Malaysian, Venezuelan, or Iraqi. Finally, they falsified patents and trade
The government was able to partly revive output in the building and engineering industries as well as in automobile manufacturing thanks to gray imports. The local automobile industry started to be dominated by national enterprises such as Saipa and Iran Khodro. This particular company is the biggest automobile manufacturer across the whole of the Middle East and Near East. Azerbaijan, China, the United Arab Emirates, and Egypt are the primary importers. The Peugeot 405, which had been redesigned by Iranian manufacturers and marketed as the Iran Khodro Samand, was also marketed and sold in Russia for a period of time. Iranian automobiles are, without a doubt, not as good as those made by international rivals; Iranian businesses make models that are decades old, yet these automobiles satisfy the majority of Iran's local demand.
The imposition of technological sanctions, in addition to the shutting down of several services inside the borders of the republic, has made room for the development of locally based software. In recent years, local Iranian versions of a great deal of well-known Western services have emerged. Instead of YouTube, you should use Aparat; instead of Facebook, you should use Cloob; and instead of eBay, you should use Esam. In spite of this, Telegram continues to be one of the most widely used instant messaging apps, just as it is in Russia. The Iranian government attempted to obstruct the application, but their efforts were fruitless since residents were unwilling to give up their right to anonymity due to political and religious repression.
On the other hand, Nikolai Kozhanov, a senior researcher at IMEMO RAS, argues that sanctions, regardless of the circumstances, disrupt the natural order of how economies grow. He emphasized that all positive changes and replacements were accomplished at the expense of significant costs, which, in the absence of restrictions, could be used to improve socio-economic indicators. All of these positive changes and replacements were accomplished at the expense of significant costs.
Cryptocurrency, on the other hand, has emerged as the primary ace in the Iranian government's deck in recent years. Its circulation was made legal in 2019, and the government really has a system in place to trade oil for products imported from other countries, so avoiding the use of the dollar and the constraints connected with its use.
The way it works is as follows: Iran produces oil, which is then converted into energy at oil-fired power plants. This enables the Iranian government to offer mining farms a significant reduction in the cost of the electricity they purchase. The Central Bank of Iran rents bitcoins and other cryptocurrencies from these businesses, and the businesses retain a portion of the funds as payment for themselves. In return, the bank transfers bitcoins to grey markets in order to purchase rare goods in other countries.
Although these and other initiatives to adjust to changing circumstances did not make the nation a regional leader in economic development (during the last ten years, the average annual increase in GDP was only 0.6 percent), they did contribute to the stability of the Iranian economy.
In the shadow of success
The leadership of Iran is unable to totally mitigate the negative effects of sanctions, regardless of how well the nation has fought against the "economic grip" in the past. Since 1979, one of the most significant issues that has persisted in Iran is the low average income of the country's inhabitants.
There were comparable challenges under the previous administration (particularly in rural regions), but today, under circumstances of restricted exports, the poor supply of residents diminishes domestic demand. This, in turn, is reflected in the rate of growth of small and medium-sized enterprises. The only way out of this situation is for the state to provide financial assistance for initiatives that assist the population in meeting their requirements. For instance, the government helps residents pay for the cost of water, fuel, and vegetables by providing subsidies.
Another urgent issue is that there are not enough medications in Iran that can save lives as a direct result of the sanctions. The most severely affected are Iranians in need of specialist medical care who suffer from uncommon ailments.
And despite the fact that the United States provided an exemption for humanitarian imports, allowing for the unrestricted entry of medical supplies, Western corporations have steadfastly refused to supply Iran with any goods, even those intended for humanitarian purposes.
It all comes down to the concerns of international businesses about being subject to secondary sanctions and legal action. As a result of the economic war that has been fought by the Trump administration against the government of Iran, annual pharmaceutical exports from the United States have dropped from $26 million to $8 million. There has also been a reduction in the availability of medications throughout Europe.
As a result of this, Iranian importers were compelled to shop in other nations for more reasonably priced alternatives. But then, as part of a policy of drug self-sufficiency, Iran became the world leader in the production of generic drugs, which made it possible to cover the shortage and significantly reduce the cost of medical care. This was accomplished by Iran becoming the world's leader in the production of generic drugs.
According to Akbar Barandeghi, the Director General of the Iranian Food and Drug Administration (FDA), about 97 percent of the necessary pharmaceutical components are manufactured by one hundred different private Iranian enterprises. Only three percent of pharmaceuticals, the majority of which are essential for life, are provided by companies based in other countries.
However, substantial expenditure on social programs has the effect of retarding economic development and accelerating inflation. In order to stay one step ahead of potential protest movements, the authorities are occasionally required to activate the printing press.
And most Western nations are fully aware of the correlation between the two factors. In Western politics, "containment" of a geopolitical rival has traditionally been understood to mean "maintaining internal instability" as a strategy that is regarded to be successful. Despite this, however, it was not successful in bringing about substantial changes in Iran's foreign policy.
Iran has not only continued to work on the development of nuclear weapons after the United States withdrew from the nuclear agreement, but it has also publicly announced that it is ready to use such weapons in the event of any infringement on the sovereignty of the Islamic Republic. Is it possible to see such a conclusion as a successful outcome? Hardly. After all, with each passing year, the warnings that "imperialists" and "Zionists" will be reduced to radioactive ash are spoken more often and grow more plausible.
To find a compromise
Iran, though, is eager in reaching a settlement, in spite of the bellicose language that both sides have been using. In spite of the fact that the authorities of the nation do not acknowledge this fact publicly, it is abundantly evident that they are aware of the fact that they will not be able to fix all of the country's economic difficulties under the current limits. The nuclear agreement serves as an excellent illustration of this understanding, and during the last several years, Tehran has shown a circumspect readiness to engage.
According to Nikolai Kozhanov's explanation, the current leadership of Iran is very capable of addressing differences with Western leaders in an effort to find solutions that are acceptable to both sides. According to the comment made by the economist, "The Iranians truly hate to acknowledge it, but the sanctions have nevertheless wrecked their life." They were not entirely successful in achieving their objectives, as the political system maintained its positions and the economy of the nation continued to function. It is true that in recent years it has focused more on surviving than it has on growing.
However, one should not be under the impression that Tehran is willing to accept any terms. As a result of the United States government's strategic error in the development of sanctions, Iran is now in a strong position. The United States has long held the belief that the primary objective of the Iranian regime is the expansion and strengthening of influence in the area. However, the Iranian regime's objective has always been to survive and preserve its positions. The fact that he has been so successful over the last four decades demonstrates that he is not hindered by the restrictions imposed on him.
In addition, since the populace is preoccupied with finding solutions to urgent issues, it is less eager to participate in political activity. The obstruction really helps the police out by playing into their hands in some little way.
At the same time, Professor Vladimir Sazhin, a senior researcher at the Institute of Oriental Studies of the Russian Academy of Sciences, draws attention to the fact that Ibrahim Raisi, a man with very conservative and radical views, was recently elected as the president of Iran. Professor Sazhin notes that this is a recent development. Within the most influential circles, the left and liberal movements are almost nonexistent. This very conservative elite is comprised of the Majlis, the judiciary, the cabinet of ministers, and the supreme leader himself. It is impossible to anticipate a wave of liberalism and any curtsy towards the West when situations are such as those described above.
At the same time, the professor draws attention to recent happenings around the world and expresses his belief that in the midst of a standoff with Russia, the authorities in the United States may compromise their principles and offer Iran to conclude a new nuclear deal. He does this while pointing to recent global events. Because if they are successful, this will fill the market with inexpensive oil rather than Russian oil, making it worth the candle for the Americans to play this game.
Despite the fact that economic sanctions are the primary cause of the suffering of Iran's populace, the United States has not been successful in persuading Iranians to alter their government in the last four decades. On the other hand, the sanctions provided the leadership of Iran with a cause to consider the possibility of negotiation. And even if the first nuclear agreement was unsuccessful, who is to say that the second one wouldn't be more successful if the Islamic Republic's posture in foreign policy were less extreme? However, there are currently no conditions that would make a change in direction possible, and it is not hard to speculate as to how the fresh discussions would conclude.