The Russian authorities, and after them propagandists, often talk about the benefits of sanctions – supposedly they will become a powerful stimulus for the economy, import substitution will increase in the country. But the experience of Iran, which has been living under sanctions for more than 40 years, shows that external restrictions only hinder development.
The Islamic State, largely due to external isolation, has remained a poor country, where the relative order is based on religious ideology. It was possible not to slide into total poverty – as in Venezuela – only thanks to resourcefulness and the sale of oil.
Why is Iran being punished?
The first package of sanctions against the country was introduced 43 years ago. On April 1, 1979, Iran was declared an Islamic Republic – power passed to religious leaders, the state became clerical. In practice, this meant that while maintaining the entire infrastructure – the post of president, government, parliament – absolute power is concentrated in the hands of the Grand Ayatollah.
Religious figures immediately began to establish their own order, ridding the country of the “corrupting” Western influence. The reaction of foreign countries to these events was at first rather sluggish. Everything changed after a radical mob led by the Muslim Students Organization, with the full connivance of the authorities, seized the US embassy in Tehran.
A harsh response followed from the United States. A special operation was carried out to free the diplomats, which, however, completely failed. Washington froze Iran’s assets in banks, imposed a trade embargo, and oil purchases were stopped. Partial sanctions were lifted only in 1981 after the release of the hostages.
The detente did not last long – in 1983, after Iran began to actively support terrorist organizations, the sanctions returned. In 2003, relations between Iran and the West began to decline again. The concern was Iran’s desire to develop nuclear weapons. More and more restrictions were introduced. There is no way to list everything – until recently, the country was the leader in terms of the amount of sanctions imposed against it, but now it has lost the championship to Russia.
“Iran is very successful in preparing an atomic bomb – and at the same time supporting a huge number of terrorist organizations. It is the combination of these two things that causes fear in the international community … The list of sanctions against Iran is impossible to read – it is endless, ” tells Tamara Eidelman.
Those interested can see the full list here.
The latest round of US sanctions introduced in 2018, became the toughest in all 43 years. Almost any interaction with Iran for citizens or companies from the United States was banned. This included the transfer of cash dollars, transactions with public debt and the central bank, exports from the country of energy resources, cars and carpets (traditionally an important industry for the country).
40 years of sanctions: what is happening to the economy
If for the Russian authorities the model of the “besieged fortress”, which the West seeks to destroy, has become fundamental, then Iran has chosen a slightly different approach.
The ideology of Iran is based on the religious Muslim doctrine. However, the methods of radical Muslims are similar to those of Russia. This is the restriction of civil liberties, the elimination of independent media, isolation from the outside world. Social networks are banned in the country. The result is a high level of corruption and disregard for civil liberties.
According to the “index of happiness” (measures the happiness of the population, the study is conducted by the Earth Institute and the Center for Sustainable Development operating at Columbia University under the auspices of the UN) – Iran occupied 110th line out of 142 possible (Russia was 30 positions higher – 80th place).
People are tired of sanctions, difficulties, high prices, lack of work and prospects. From dull discontent, the Iranians from time to time move on to active performances. During the large-scale protests of 2017-2018, the main slogan was “the mullahs must return to the mosques.”
They have something to dislike the government for: immediately after the imposition of sanctions, in 1980-1982, Iran’s GDP fell by almost 30%, according to IMF data. Average annual inflation for the same period was about 20%.
If you look at just two graphs – GDP and inflation – you can deduce a pattern. Iran’s economy grew during the easing of sanctions and fell during the period of their tightening. The last economic recovery came in 2016 and 2017, when Barack Obama eased the pressure. During this period the economy increased by 13.4% and 3.8% respectively. Inflation, on the contrary, finally fell to single digits – 9.1% and 9.6%. After Donald Trump came to power and tightened restrictions, the situation worsened: in 2018 and 2019, GDP fell by 6% and 6.8%. Prices rose by 30.2% and 34.6% respectively.
Sanctions put a barrier, although they do not completely block the possibility of the receipt of necessary goods, including high-tech products that are needed for the development of production. And they deprive the economy of the funds that the country can receive from the sale of its products – for Iran, as well as for Russia, this is primarily oil and gas.
According to OPEC, Iran’s revenues from hydrocarbon exports from 2017 to 2020 decreased by 80%. Imports of goods decreased during the same period by 65%.
How do people survive
It cannot be said that the Iranian economy has suffered a catastrophe, as it did in Venezuela. The country has managed to adapt to life and provide itself with everything necessary.
“Certain structural changes have taken place in the Iranian economy. The volume of collected taxes has grown, there has been a certain diversification of industry. But this diversification was largely forced, first of all. And secondly, based on ersatz technologies. Iran’s access to modern technologies is very limited, and as a result, low-quality equipment and devices are imported into the country, bypassing sanctions, illegally,” He speaks political scientist, orientalist and Iranist Nikolai Kozhanov.
How do ordinary people live in Iran now? We spoke with a resident of a large industrial city who married an Iranian, moved to her husband’s homeland and now works as a translator from Iranian into Russian. Svetlana gave an interview on condition of anonymity – according to her, comments about the country are monitored by local intelligence agencies.
There is a clear pattern – as soon as a new stage of tension sets in, after a while there are more beggars on the street, she says. People ask to buy them bread and medicines. It is clear why this happens: prices “jump”, and salaries do not keep up with them, the woman says.
“I had a case when I went to the store and bought a dozen eggs for 36,000 rials (at today’s exchange rate about $0.85). The next day, in the same store, the eggs cost 56,000 rials (about $1.32). Naturally, in one day no one raised the salaries of people by one and a half times.”
The average salary in the country is $150. But since the work is predominantly men, and the families are very large, this money is barely enough just for food. At the same time, you can’t call them low prices. A liter of milk is about $1, a dozen eggs are about $1.5, a kilogram of bananas is about $1.5, Svetlana shares.
Iran has adapted to live separately from the rest of the world and has learned to produce many goods, but rich Iranians prefer to buy everything imported. All the “ban” is easy to find in Tehran and other major cities.
“For ordinary people, sanctions mean one thing: everything becomes more expensive, and wages hardly change. And you need to contrive to feed the family, ”says Svetlana.
The country is disconnected from the international SWIFT transfer system, Visa and Mastercard cards do not work. But the Iranians have adapted to this as well.
Cryptocurrency mining is legal in the country. According to the analytical center under the President of Iran, this was done to replenish the budget and circumvent sanctions. Miners pay taxes and create jobs. But cryptocurrencies are mostly used by young people.
For international transfers, older people use the hawala system, invented over a thousand years ago by Iranian merchants. It is based on absolute trust between the parties to the transaction. When one person needs to send funds abroad, he comes to the hawala point, gives the money to the broker and names the password. Using this password abroad, the addressee receives funds at the same hawala point – they are in many countries of the world. Between themselves, brokers resolve the issues of transferring the currency themselves: for this, they can use stewards or pilots of Iranian airliners and the same cryptocurrency.
In a totalitarian system, the issue of civil liberties is put by the authorities in one of the last places. Protests are brutally suppressed, the opposition is crushed. During the next unrest, when people took to the streets due to a sharp increase in gasoline prices, three men set fire to a garbage can, Svetlana says. Realizing what awaits them, the violators of the order fled to Turkey. They were forcibly returned to the country, tried and hanged.
In December 2020, the Iranian authorities hanged an opposition journalist who was accused of using the Telegram app to “stir up dissent” by circulating videos of protests and publishing exposés about Iranian officials.
“There is no law in the country that would protect women. Domestic violence is actually allowed, although it is “deprecated” by the authorities,” says Svetlana.
This is confirmed by UN experts. In Iran, women and girls are treated as second class people. One of the most egregious violations of their rights is early marriage, informed Special Rapporteur on Human Rights in Iran Javaid Rehman.
As in Russia, in Iran the strictness of the laws is compensated by the non-obligation of their implementation. The country has a dry law, but young people have parties with alcohol. All social networks are blocked in the country, but the official account even the president has one.
“Many people want to travel, get money, have prospects. But nothing happens. We froze in place, ”Svetlana sums up.
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