With American sanctions re-imposed, a national currency in freefall, and protesters voicing their grievances across the country, Iran could possibly be headed towards a crisis. When the US decided to lift sanctions on Iran as a part of the Joint Comprehensive Plan of Action (JCPOA), Tehran looked to get its economy going. But now, President Trump has re-imposed those sanctions by withdrawing from the multilateral agreement. Iran was already struggling before the JCPOA was ratified by the global community and since April, the Rial has lost around half of its value. The primary round of sanctions will target everything from airplanes to automobiles and carpets. Also prohibited is the trading of Iranian gold and the purchase of US dollars by the Iranian Government.
The second round of sanctions will target Iran’s oil sector which is the country’s lifeblood for trade and economic stability. Not only will Iran’s oil sector be suffering from sanctions, but so will its agriculture and rug-weaving industries. In addition, it is said that around a million Iranians could be without jobs. Iranian President Hassan Rouhani has reiterated that Iran will not negotiate with Washington while sanctions are already in place. President Trump took to twitter to warn other countries not to do business with Iran or suffer the consequences causing large European firms like Total, Maersk, and Siemens to pull out from the country. With no signs of the United States lifting the sanctions in the near future, Iran will have to either face US economic, diplomatic, and possible military pressure or resist and persist at home.
When President Rouhani was first elected in 2013, sanctions were in place, but under those conditions, he did manage to bring the Iranian economy back by bringing down inflation and controlling unemployment. But now, these are incredibly sad times for Iran due to a combination of factors ranging from environmental challenges like drought and lack of access to clean water, as well as legitimate economic/political grievances like better wages, standards of living, and a lack of political freedoms at home. It is important to keep in mind that Iran is very experienced with handling American unilateral sanctions, and they have done so for four decades. As a result, Iran has developed a lot of resilience within the sanctions regime, but there is no doubt that the sanctions re-imposed by Trump will be very painful for ordinary Iranians.
Compared to the previous round of sanctions under the Obama Administration, it might not be as difficult for Iran to survive the sanctions under Trump because the other signatories to the JCPOA (Russia, China, UK, Germany, France, and EU) are not on board with Trump’s agenda towards destroying the JCPOA. On the contrary, the P5+1 remains committed to multilateralism in order to maintain a non-proliferation agreement that is functioning and trying to bring stability to the world. Under Trump, the US is alone on the sanctions while trying to impose maximum pressure on the Iranian economy.
Despite all of the major challenges Iran is facing in light of American sanctions, the economy is not collapsing. It is true that Iranians are facing unprecedented economic conditions like the plummeting value of the Rial and rising unemployment amongst youth, but the reality is that the Iranian economy is very localized and self-contained. On a macro-level, there is a lot of resilience being built inside Iran because of previous sanctions and past mismanagement from the government on direct issues affecting ordinary Iranians like high food prices and low wages. The protests that took place earlier this year were legitimate given the dire economic situation inside the country. What may happen inside Iran is not the idea of a regime collapse, but the hardliners will be strengthened and more centrists will be sidelined in Iranian society. Rouhani is not necessarily a reformer that many analysts make him out to be, but he is a centrist. Now that the political winds are favoring the hardliners, Rouhani is moving towards the right as well. So far, Rouhani’s economic team looks pretty incompetent and out of touch with his voters by giving ministers astronomical salaries instead of giving those salaries to the people who own small businesses and markets. In addition, the Rouhani Administration has not proven itself to deal with the turbulence inside the political system where the parliament has no confidence with the government’s economic mismanagement nor do some Iranians.
The psychological warfare Trump has waged on Iran will have an effect on the region, but not on Iran as a country.
President Trump pulled out of the JCPOA for three reasons; 1) to undo a deal made by his predecessor Barak Obama, 2) Curb Iran’s ballistic missile program, and 3) contain Iran’s regional influence. The crucial point to be made here is that Trump’s rhetoric will not impact the way in which Iran carries out its policies, but the ballistic missile program is a central focal point of Iran’s deterrence in terms of its national security doctrine. Given Tehran’s weak military conventional forces, it needs ballistic missiles to ensure a degree of deterrence. Also, in terms of Iran’s regional posture, it is very complicated to judge this from an external perspective because it also effects American, Israeli, and Saudi behavior in the region as well. If American partners in the region can’t change their activities in the region, why should Iran change theirs?
What policymakers and analysts should work towards is avoiding another conflict in the Middle East. But Trump is doing the complete opposite by portraying every conflict from Syria to Yemen as Iran being the main source of destabilization without recognizing the different factors in play. Iran is not the main problem in the region, nor did it create any chaos. The chaos came after the United States invaded Iraq in 2003 and the vacuum was open for Iran to exert its influence in Iraq, Syria, and to a lesser extent into Yemen.
The psychological warfare Trump has waged on Iran will have an effect on the region, but not on Iran as a country. Internally, the situation inside Iran will get worse, but it will not be to the extent of a regime change which the Trump Administration wants to pursue. However, a worse-case scenario could be for a military government under the IRGC take over and this would be bad news for the political culture of Iran. The best-case scenario could be for Iran to wait out the Trump Administration until 2020 and manage the economic situation on this basis given their past experiences of dealing with sanctions to resist and persist in these tough times.
Cover photo: Iranians shop in the Grand Bazaar in southern Tehran’s Molavi neighbourhood on May 11, 2017 / AFP PHOTO / Atta Kenare
