Iran: a golden age of sanctions?

The Iran nuclear deal is significant because, despite its many flaws, it is the best recent case of sanctions causing a government to change course. It was the result of new ways of shutting a country out of the global financial system that became possible after 9/11, when banks and companies became keen to avoid dealing with terrorists. When layers of sanctions from the US, United Nations and European Union overlapped, leaders of the regime and Iranian companies were frozen out of financial markets.

Before the past decade and a half, sanctions had a poor record of success—as academics have chronicled, and as Cuba shows. The US embargo that began in 1960, in response to the nationalisation of US-owned oil refineries without compensation, enabled Fidel Castro’s regime to play the brave victim against the superpower bully and act as a focus for anti-US feeling in Latin America. President Obama’s decision last year to lift the embargo was an admission of the futility of the instruments as well as a desire to repair relations. But the obstacles he still faces from a Republican-controlled Congress illustrate another lesson: in the US’s case, it’s often a mistake to embed sanctions in law, which deprive the President of full freedom to lift them if the target government actually responds.

Some argue that sanctions did not work as well in the case of Iran as it might seem. The fall in the oil price, the result of the US’s new ability in fracking, and Saudi Arabia’s decision to maintain supplies to world markets, hurt worse, they say. That is true of Russia, where the oil price fall has done more damage than Western sanctions in the wake of the Crimea invasion. And those who say that “smart sanctions” don’t hurt the people as much as the crude trade embargoes of old are deluding themselves; ordinary Iranians clearly suffered from the weakness of GDP and the lack of imports.

This may, too, be the high point of sanctions’ success. Russia and China have been prompted by Iran’s case to look at ways of getting around Western sanctions when they are deployed again.