Megan Egan Political Science 14U Glenn Palmer Will the United States sanctions against Iran be effective?

In the week before October 3rd 2012, the Iranian currency, the rial, lost forty percent of its value against the dollar. This collapse led to riots in Tehran, the capital of Iran, and the order of President Ahmadinejad to use police force against those in the streets, mostly exchangers and speculators. The sudden collapse led to backlash against the government, particularly the President. It also led to the closing of markets because merchants could not keep accurate prices on their goods. According to Reuters, one computer dealer said the same product can change price within an hour. Police made many arrests during the riots and even resorted to using tear gas in hopes of subduing the protestors. Most scholars will attribute this sharp decline in the value of the rial to tougher American and global sanctions on Iran. Without having the income from oil exports, the Iranian central bank has been unable to support the currency. Though these particular harsher sanctions have been in place since July, the United States, the United Nations, and the member states of the United Nations have had other sanctions in place for quite some time. Economic sanctions have long been considered an effective way to coerce other states into actions that benefit the state implementing the sanctions. They are often the go-to strategy when states wish to refrain from using force against another state, which is the desire of most. The goals behind sanctions may range from encouraging the target nation to make minor

policy changes all the way to the desire for political instability in the target nation that eventually leads to a revolution and regime change. Business Insider quotes the Banque National de Pariss Bartosz Pawlowski as having said Spiking food prices were one of the reasons which led to the so called Arab spring last year. With the current rates of hyperinflation and a seemingly increasingly dissatisfied population, will Iran feel the might of the United States economic sanctions? Will the government give in and give up their nuclear program? Will the people incite a revolution that will lead to too much political instability, a regime change, and the installation of a new government? According to the theory proposed by Kimberly Ann Elliot about the effectiveness of sanctions, the answer across the board, for the situation as it stands right now, is no.

History of United States Sanctions on Iran The United State first put sanctions on Iran in a very warranted situation after a group of Iranian protestors took 52 American citizens and the US embassy in Tehran hostage for 444 days. These sanctions started off by eliminating imports of Iranian oil to the United States but eventually rose to the point where the Carter Administration blocked all $12 million in Iranian government assets in the United States and an embargo on all trade and travel with Iran. All of these sanctions were revoked in 1981 in the negotiation, which eventually achieved freedom of the hostages. Though these sanctions were lifted, more were put in place during the Reagan Administration after the bombing of U.S. Peacekeepers in Iran and during

the Iran-Iraq war. Since then, sanctions against Iran have continued to broaden, expanding to different industries and different targets. These range from pressing foreign companies not to invest in Iranian oil and gas to freezing the assets of many Iranian officials, especially those associated with the Revolutionary Guard. President Obama signed the most recent major set into law in June 2010. The Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) expanded sanctions by directly targeting the supply of refined petroleum products sent to Iran by non-U.S. firms. This may seem insignificant: a restriction on imports of oil when placed on the worlds fourth largest crude oil producer. The sad truth is that Irans oil refineries are in such a poor state that they need to import 30% of their refined gasoline. The CISADA provisions have proven effective within the international business community. One such example is that of BP, who refuses to sell Iran Air fuel while their planes are at European airports. The current wave of economic sanctions, as we saw before, has so far been effective in creating turmoil within Iranian economics. This would not have been possible, however, without a multilateral influence. Sanctions put in place solely by the United States achieved very little or even nothing before international companies, allies of the United States, and the United Nations joined in to support these sanctions against Iran, particularly targeted at their oil and gas production.

Goals of the United States Before discussing whether or not the sanctions placed on Iran by the United States will be successful, it is crucial to determine what would define success in this

case. This is without a doubt the most challenging part of this analysis because the overarching goal of these sanctions is largely unclear. The most commonly accepted reason for the implementation of these sanctions, especially ones so harsh, is the desire of the United States and most United Nations member states to instruct Iran to comply with the international protocol set forth by the Treaty on the NonProliferation of Nuclear Weapons. However, many scholars suggest that the severity of the sanctions currently in place is too high for the goal of a modest policy change by the Iranian government. There is often speculation that the United States has higher aspirations than simply requiring Iran to follow the Treaty on the NonProliferation of Nuclear Weapons. There are three general approaches to what the true goals of the United States could be in this situation. The minimalist goal for the United States sanctions is what the government claims as their objective. This approach would say that the sanctions are intended solely to compel Iran to surrender its nuclear ambitions. It would also desire that the state fully submit to international monitoring, primarily by the International Atomic Energy Association. The next approach regarding the goals of the sanctions would say that they are intended to moderate obnoxious behavior by Iran. This obnoxious behavior would include the well-supported speculations that the Iranian government is related to state sponsored terrorists like those who attempted to kill the Saudi Ambassador to Washington in September 2011. The last determination of the goals set forth by the implementation of sanctions by the United States is the maximalist approach. This is the most extreme

set of goals that the United States could possibly have in regards to what they expect to result from their sanctions. These goals include applying enough economic pressure on Iran to incite a domestic revolution. The United States would then desire the creation of enough political instability for this revolution to become successful and the end result to be a collapse of the current Iranian regime and the installation of a newer, and hopefully friendlier, government.

Theory of the Effectiveness of Sanctions Determining whether the sanctions against Iran will be effective or not requires looking at a theory proposed by Kimberly Ann Elliot, a senior fellow at the Center for Global Development and a partner of the Peterson Institute for International Economics. Through analyzing many historical situations of the implementation of sanctions, Elliot has developed a theory on what will make the sanctions one country places on another effective or ineffective. This research has also led to propositions about how to make sanctions more effective under various circumstances. The theory of the effectiveness of sanctions states simply that for sanctions to succeed, the cost of defiance must be greater than the cost of compliance. When this theory is applied to whole states and governments, it is clear as to why a state may submit to sanctions and make modest policy changes. Likewise, if the cost of compliance is greater than the cost of defiance, then modest policy changes are unlikely to occur. If sanctions are applied in a situation where the target nation and the sanctioning nation have friendly relations, the cost of defiance would be raised

because for the target country resisting the desires of the sanctioning country could result in the breaking of the friendly ties and a potential loss of a military ally or trading partner. The relations with sender or third party is one of four factors that Elliot notes as important to consider when looking at the cost of defiance. The others include the political response in the target, the escalation of threat and the direct cost of sanctions. These can also be clearly demonstrated as having a large effect on whether or not a state will choose to comply with the goals of sanctions, which will be demonstrated later in the case of Iran and the United States. Elliots theory has been proven when looking at the sanctions placed on South Africa in order to help end the apartheid. The sanctions placed on South Africa by the United Nations caused a depression in the industrial sector of their economy, causing a larger gap in the relative deprivation of the lower class. This led to immense pressure on the government to look inward at their true domestic issues and pull their focus away from their nuclear weapons. Under this enormous pressure stemming from their citizens and the international community, the government went through a democratic reform and held the first elections in South African history. This is an example of where the cost of compliance or the cost of forming a democracy were less than that the costs of defiance, in this case the direct cost of the sanctions and the pressure and tensions with the international community. Similarly, by reversing the equation and its inverse, this theory can be applied to the citizens of a state and whether or not sanctions have the ability to incite a revolution and eventual regime change by increasing the peoples cost of

compliance with their government. The factors that Elliot deems important to consider when looking at the cost of compliance are external stability (something that applies more when the scenario uses whole countries), internal security and stability (a more important piece to consider when this theory is applied to individuals or groups of citizens), and political and personal well-being. This is particularly applicable to upper class individuals in target countries. Those living in dismal conditions may be experiencing the effects of relative deprivation and the frustration that comes from getting the short end of the stick and would thus be more likely to revolt against their government. However, wealthier citizens living in higher economic classes have far more to lose should they choose to revolt against their government potentially in both political well being, for they could lose their perceived or actual power within the government, and personal well being, for they could lose their wealth and ability to live comfortably or lavishly.

The Compliance of the Iranian Government For the Iranian government, the cost of compliance is lower than the cost of defiance, signaling that the sanctions of the United States will not be effective in persuading the Iranian government to undergo a modest policy change regarding their nuclear program. Through the eyes of the government, their right and ability to enrich uranium is essentially non-negotiable. This issue is engrained into their idea of national sovereignty. President Mahmoud Ahmadinejad refuses to comply with the demands of the United States because he feels as though his country is being treated with a double standard that other countries do not have to face.

Such a reaction can be predicted by Elliots theory and her research, especially when looking at the type of government Iran has. According to the Polity IV Project, Iran is currently classified as an autocracy, sitting at a negative six on the Polity scale. After studying hundreds of cases in which sanctions were used in an attempt to coerce the target state, Elliot and her colleagues found that the failure rates were much higher among autocratic states. This was not dependent on the policy goal of the sanctions, though remains the same when the goal is identified specifically as being a modest change in policy. Autocratic regimes only succumbed to sanctions with the goal of a modest policy change thirty-nine percent of the time. This is relatively low when compared with the sixty-nine percent of the time that democratic governments comply with sanctions. It is hard to bully a bully with economic measures, says Elliot in her book. This is hold true in another aspect of Elliots research as well, which states that the friendliness of the states before the sanctions has an effect on the effectiveness of the sanctions. It is quite clear that Iran and the United States have not been in a cordial relationship since before the Revolution of 1979 because the United States supports the Shah that was overthrown in the revolution. Because of this antagonistic relationship, the likelihood of sanctions having their desired effect is substantially lower. A bad prior relation between the two countries means that for the target country, the cost of defiance is lower. There is no risk for the target country to ruin friendly relations between the two states if the target country should choose to defy the sanctioning countrys demands. Elliot demonstrates this with her findings that the success rate of sanctions intended for modest policy

changes is only thirteen percent between countries with an antagonistic prior relation. When the relationship is considered cordial before the sanctions are implemented, the success rate shoots to fifty percent. Even the breaking of relations between the target nation and a third party state can help to persuade the target country to comply, however, this is not a huge factor for Iran either. The multilateral sanctions have turned many important countries against Iran. Not only does the entire United Nations have sanctions targeting Iran, but countries like India, Japan South Korea, and the European Union as a whole have stronger and more severe sanctions against Iran that go beyond what the United Nations has done. These reasons prove Elliots theory holds true. Where her theory says that modest policy changes can arise when the cost of compliance is lower than the cost of defiance, the current situation between Iran and the United States shows the presented inverse, how modest policy change cannot arise when the cost of compliance is greater than the cost of defiance. All of the factors that Elliot says contribute to these costs is seen when looking at the sanctions the United States has placed on Iran, particularly that of the regime type of the targeted country and the prior relations between the sanctioning and the target countries.

The Effect on the Iranian People Applying Elliots theory to the Iranian people means applying the maximalist approach to the goals desired by the United States in regards to their implementation of the sanctions. By simply switching the equation presented in Elliots theory to successful sanctions resulting from the cost of defiance being less

than the cost of compliance, the United States sanctions could be used in such a way that they would hurt the Iranian people so much that a rebellion would be started and a regime change enters the realm of possibility. With the current situation in Iran, it is important again to realize that the inverse of Elliots original theory is true: that regime change will not occur when the cost of defiance is not less than the cost of compliance. Currently the cost of compliance is factored into by the ideas of internal security and stability and political and personal well-being. Though the citizens of Iran may have incentives in regards political well-being having a more democratic democracy, their internal security and personal well-being outweigh this, tipping the scales to have a low cost of compliance. It may seem shocking to present the personal well-being of Iranians as a reason they choose not to revolt against their government. However, when considering all the factors, it can be seen than personal well-being lowers the cost of compliance. The Iranian government has worked hard to ensure this is the case. The most basic demonstration of this that if a revolution, or even a civil war in an extreme case, broke out, it would be more detrimental to the personal well-being of the Iranians than the sanctions currently are. This has to do with the potential for a loss of power, a loss of wealth, or even a loss of life. Furthermore, the Iranian government has created programs like the federal subsidies that help to lower the cost of compliance. When the general population is suffering dramatically from the high toll the multilateral sanctions placed on Iran, the people have a choice. They can blame their government for not complying with the sanctions or they can blame

the West (or any sanctioning country, though the West is more often than not the main response). To prevent Iranians from blaming their own government, the Iranian government has implemented many safeguards against economic collapse. They currently have a multiple-exchange-rate system in place: the governments response to the loss of access to foreign currency reserves, frozen across the world as a direct result of the United States and various countries sanctions. In September the government also created the Foreign Exchange Center where importers and exporters can bid for foreign currency. This has also helped producers so they do not have as much competition with the speculators. Furthermore, the Foreign Exchange Center has increased the power of the government within the private sector. This links the government and the people even more, once again raising the cost of defiance. The Iranian government also has a large subsidies program in place to help relieve the economic stress of the sanctions. This currently serves to redistribute the pain felt because of the sanctions between essentially the whole population of Iran. Where the poor would typically be the ones being hit the hardest by the multilateral sanctions in place, the government created the subsidies program to attempt to control where the sanctions hit and who they affect the most. By taking some of the pain from the sanctions off of the poor and increasing the effects felt by some upper class families, the cost of defiance continues to be larger than that of the cost compliance. These upper class families, as previously explained, are less likely to revolt even with the extra cost of the sanctions.

The personal well-being of the people in Iran and the effects of it on the cost of defiance causes Elliots theory to act in such a way that is says a country is not likely to experience a regime change when the cost of defiance is larger than the cost of compliance. Though the United States maximalists may hope for another revolution in Iran, it seems as though they have once again made excessive expectations about the effectiveness of sanctions by the United States.

Sanctions in the Future The speculation for whether or not sanctions may work in the future is currently wide open due to one major factor: 2013 is an election year in Iran and because of the two term limit placed on Presidents in the Iranian Constitution, the current President Ahmadinejad is ineligible to run again. This leaves June 14th with the potential to be a major turning point in how the sanctions affect Iran. The way the new President interacts within the international community, the way he views Irans nuclear program, and the lengths to which he is willing to go to ensure the happiness and personal well-being of the citizens could all major affect the effectiveness of the U.S.s sanctions in Iran. With the subsidies program becoming too costly to manage effectively, the personal well-being of the people of Iran may decrease, lowering the cost of defiance and providing more flexibility for the potential revolution. Additionally, if the new president cannot quickly assert his more authoritarian style of control, the cost of defiance will drop for the citizens. They will be less afraid of the president being tempted to use military force against them, which clearly makes defiance a more

viable option. Additionally, a polity shift in Iran making them go from their current autocratic state to a democratic state would have major implications as well. This many lead to a larger delay in the effects of the sanctions because the people would want to wait to see how the new President will respond, but if he proves unable to deal effectively with the sanctions, the cost of defiance may very well drop below the cost of compliance.

Conclusion While there have been protests and riots in Iran regarding the effects of the sanctions, according to Elliots theory, there will be nothing strong enough to inspire a total revolution or change in regime. There is no reasoning to demonstrate that the cost of defiance has currently dropped below the cost of compliance for the population of Iran, which is what Elliot says would lead to a revolution. In a piece written for the Brookings Institute, Djavad Salehi-Isfahani, a professor of Economics and a researcher of Middle Eastern Economics at Virginia Tech, states clearly that History shows that, when threatened by sanctions, Iranians are unlikely to rise up against their own government. Until a new President comes into power in 2013, it is highly unlikely any change in the behavior of Iranians will take place. Their personal well-being is too far at risk should they attempt to make a difference in their governments policies or how their government works. This high cost of defiance works in favor of the Iranian authoritarian government to deter their citizens from inciting a revolution.

Furthermore, the government of Iran is unlikely to succumb to the sanctions and make a modest policy change. Having previously terse relations with the United States gives them far less incentive to comply and has been show by Elliot to raise the cost of compliance. Though the direct cost of sanctions on the country are already high and continue to rise, these effects will not outweigh the sense of entitlement the Iranian government feels towards its nuclear program. These feelings translate into an extremely high cost of compliance, something that Iran sees as perfectly fine. Their cost of compliance grossly overcompensates for the cost of defiance. This imbalance in the equation leads to the conclusion that, according to Elliots theory, they will be unwilling to submit to sanctions and make a modest policy change.

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