Iran today may be the most sanctioned country on earth. After the International Atomic Energy Agency's 2005 finding that Tehran was not in compliance with its Nuclear Non-Proliferation Treaty safeguards obligations, the United Nations Security Council has slapped four sets of sanctions on the Islamic Republic, the most recent round in June. However, in order to hide its activities and protect its resources, the Iranian regime has mastered a version of Three-card Monte: For every Islamic Revolutionary Guard Corps front company or bank that the international community sanctions, the Iranian government simply creates another. The fact is that the quest for international consensus has diluted the U.N.'s efforts, which are hardly the "crippling sanctions" that Secretary of State Hillary Clinton promised.
Far more effective than multilateral sanctions are those imposed unilaterally. Whereas the White House and State Department may believe that sanctions require a U.N. imprimatur for international legitimacy, it is Congress that has traditionally led the charge against rogue states. For example, it was Congress that passed the Iran and Libya Sanctions Act in 1996, despite presidential concerns that such sanctions could hamper diplomacy. Congressional sanctions are powerful because they exploit the real vulnerabilities of such regimes. The Comprehensive Iran Sanctions, Accountability and Divestment Act of 2009 that Congress passed in June, for example, targets the imported gasoline that the Iranian economy needs to function fully.
Iranian leadership says that the sanctions are meaningless. "The sanctions will make the Iranian economy blossom," said President Mahmoud Ahmadinejad. Supreme Leader Ali Khamenei has similarly argued that sanctions will only strengthen the resolve of the Iranian people, but domestic critics see it differently. One political science professor at the University of Tehran told the daily Aftab that the regime's bluster is "all entertainment and propaganda."
Gasoline sanctions seem to be especially potent (Japan's Nomura Group estimated that sanctions might reduce Iranian oil exports by 25 percent), and now that Japan and South Korea have added their own unilateral sanctions to those of the United States and Europe, an Iranian economy that was already in shambles after decades of mismanagement is starting to feel the sting. As the head of Iran's Supreme National Security Council, Hassan Rowhani, said after the International Atomic Energy Agency passed its first resolution condemning Iran for its nuclear cheating in 2005: "Our country's economy was greatly affected. . . . Almost all of Iran's economic activities were locked. A decline in business activities pervaded the entire market."
One Iranian labor leader estimates that unemployment is at 25 percent, or nearly three times higher than the government's official figures, and not even the Iranian parliament believes Ahmadinejad's claims to have reduced inflation to single-digits. The Iranian president's political adversaries understand that the sanctions have further eroded the regime's credibility. An aide to former president Mohammad Khatami, Abdollah Ramezanzadeh, criticized his boss's successor when he lamented the cost of sanctions imposed on Ahmadinejad's watch. "We should have negotiated for so long and benefited from the atmosphere of negotiations to the extent that we could import all the technology needed," said Ramezanzadeh, comparing the traditional Iranian approach with the current president's confrontational style. In September, former president Ali Akbar Hashemi Rafsanjani told the Islamic Republic's highest clerical body, the Assembly of Experts, "We have never been faced with so many sanctions." He urged the regime "to take the sanctions seriously and not as a joke."
Indeed, for the regime they are no laughing matter. Between September 27 and October 11, Iran's currency crashed, sliding more than 20 percent against the dollar. While the director of Iran's Central Bank claimed it was simply a hiccup, the Iranian newspapers blamed the drop on the fact that the United Arab Emirates, which had historically profited from helping Iran evade sanctions, was now enforcing them. In Tehran and other Iranian cities, importers shut their doors amidst financial uncertainty. There are other signs that sanctions have begun to bite: Train fares have increased 30 to 40 percent over the past month, air fares are on the rise, and international travel has become more difficult as European airports and even Kuwait have refused to refuel Iranian airliners. Sanctions might even affect the pace of the nuclear program. "They may slow down the work," said Ali Akbar Salehi, the head of Iran's Atomic Energy Organization.
Sanctions are proving effective, and there's no reason to relieve the pressure right now by rushing out to engage the regime. Certainly, a diplomatic solution to Iran's nuclear ambitions is ideal, but under the wrong circumstances engagement could hasten conflict. Against the backdrop of the Islamic Republic's faltering economy, the worst move for the Obama administration to make is to offer incentives that mitigate pressure on Tehran. To slow Iran's nuclear progress, delegitimize the Iranian regime in the eyes of the Iranian people, and avoid conflict, the best way forward is to augment, rather than alleviate sanctions.
Michael Rubin is a resident scholar at AEI.