Some Iranians benefit from international sanctions

Some Iranians benefit from international sanctions
Kourosh Ziabari explains that sanctions imposed on Iran have not only been used as a beating stick by the US, but have also been profitable to those Iranians who have benefited from a corrupt industry of smuggling that developed as a consequence.
6 min read
02 Sep, 2022
Sanctions busting has filled the coffers of high-powered people with close links to the Iranian government, writes Kourosh Ziabari. [GETTY]

Many Iranians, especially younger ones who have travelled internationally, wonder why Iran remains hobbled by onerous economic sanctions, and why their government, more than two decades since the start of the nuclear controversy, has been unable to reach an accommodation with the rest of world to wriggle out of this situation.

Whilst before Iranians were instructed to chant “nuclear energy is our inalienable right” in the rallies featuring the demagogic President Mahmoud Ahmadinejad, now they are openly questioning everything. It feels to them like a bottomless pit that is devouring the nation’s resources, yielding virtually no benefits that are worth the hardships endured. Speculative costs of the Islamic Republic’s nuclear quest, inclusive of the revenues lost to sanctions, add up to a whopping $500 billion.

The official narrative continues to be that nuclear energy is necessary for Iran to scale up its electricity production capacity and be used for medical purposes. The authorities don’t even acknowledge that this reckless pursuit, over which they have allowed the destruction of the nation’s economy as well as foreign relations, is destined to increase strategic deterrence and avert military threats.

''The Iran-based “sanctions industry” thrives on the country’s isolation, absence of competition in the national economic landscape and corrupt workarounds to bypass the coercive measures.''

But nearly two decades since the first UN Security Council sanctions were imposed on Iran over its refusal to cease uranium enrichment, the nuclear project is not even good for lighting up Iranian homes. Indeed, the nation reels from periodic power outages induced by an obsolete power grid and derelict infrastructure, which the government hasn’t been able to upgrade due to sanctions.

Sanctions on Iran have mushroomed over time into a monstrous legal regime that even for the enforcing parties, is too thorny to unravel today. These punitive measures target every aspect of business with Iran and directly impact the lives of Iranians living or traveling overseas, even those with the slightest trace of Iranian lineage.

It is not only about constraining trade with the Iranian government anymore, tapering off its US dollar reserves, grinding its oil and gas industry to a halt, neutralising its regional footprint and choking its military prowess. The embargoes are haunting ordinary Iranians wherever they are due racial profiling, subjecting them to denial of services and immigration privileges, and stripping of them of educational and business opportunities.

The lack of medicine, adequate transportation and housing infrastructure, safe aviation and regular banking access are some of the most urgent problems that 85 million Iranians have faced for years.

The unbearable measures were put in place to inhibit the Islamic Republic’s nuclear advances and prevent an arms race in the Middle East. The US and its allies expected that the Islamic Republic would be strong-armed into forgoing its plans.

But instead, the sanctions have been piled up over time and compounded so hastily that they practically lost the initial purpose. First, they led to a torrent of human rights abuses, and instead of correcting the perceived malignance of the Iranian government’s behaviour, sped up its nuclear theatrics and encouraged it to become an irresponsible actor.

That these sanctions have lingered for so long and little propensity can be sensed for repealing them should not be entirely chalked up to the rigidity of the US and the West not being prepared to give up their potent leverage over Iran. Though it is true that consecutive US administrations used sanctions as the only conduit of engaging Iran and crafting policies on the oil-rich Persian Gulf nation.

Yet, there is an imperative Iranian element ensuring the perpetuation of the sanctions and the continuity of the political hostilities that undergird them. The Iran-based “sanctions industry” thrives on the country’s isolation, absence of competition in the national economic landscape and corrupt workarounds to bypass the coercive measures.

Sequestered from the global financial sector, the Iranian economy has adapted to operating underground to import goods. The smuggling of auto spare parts, home appliances and cigarettes into the country is worth $7 billion annually. The total value of smuggling in Iran is estimated to amount to $12 billion per year.

The Iranian parliament reported in 2020 that 95% of smuggling into the country is carried out via the legal ports of entry involving 31 different techniques, accentuating the sophistication of an entire line of business.

Sanctions busting has filled the coffers of high-powered people with close links to the government. For example, Babak Zanjani, a billionaire tycoon with assets worth around $13.5 billion, helped the Iranian government circumvent sanctions to sell millions of barrels of oil through a web of companies in Malaysia, Turkey and the United Arab Emirates.

Zanjani is believed to have cultivated intimate links with the Islamic Revolutionary Guard Corps and provided facility for Iran to import several aircrafts on the black market and sell $24 billion worth of petroleum in violation of the US and EU restrictions. The business magnate was arrested in 2013 for withholding $2.7 billion of oil revenues belonging to Iran’s Ministry of Petroleum and sentenced to death. His execution pends the liquidation of the staggering debt.

A constellation of start-ups, fledgling tech firms and small and medium-sized enterprises are routinely awarded generous grants by the government to innovate sanctions evasion solutions. Domestic auto manufacturers, producers of home appliances, pharmaceutical companies, IT and telecommunication providers, industrial equipment makers and apparel retailers despise the prospects of the diversification of the economy and the induction of foreign competitors that can dislodge their market supremacy if the sanctions are lifted and the nation’s trade ties with the world are normalised.

These major stakeholders lobby for the omission of international firms and advocate the “revolutionary,” autarkic policies that galvanise the preservation of the sanctions. No matter the expense the Iranian citizens pay under the government scheme of “resistance economy,” the monopoly afforded to local trademarks is a prerogative they won’t be surrendering overnight. So why not, however immorally, push for chaos in foreign relations and the maintenance of the economic restrictions?

Iran’s sanctions industry bears the hallmarks of the US gun lobby. Every year, hundreds of innocent citizens, including tens of schoolchildren, are slayed because the National Rifle Association rakes in substantial profits from selling guns in droves. This means any congressional effort to legislate gun ownership is invariably blocked.

In the Islamic Republic, many in the ruling elite recognise that sanctions are hollowing out the economy and decaying the nation’s chances of being reintegrated with the international community.

Kourosh Ziabari is an award-winning Iranian journalist and reporter. He is the Iran correspondent of Fair Observer and Asia Times. He is the recipient of a Chevening Award from the UK's Foreign and Commonwealth Office and an American Middle Eastern Network for Dialogue at Stanford Fellowship.

Follow him on Twitter @KZiabari

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Opinions expressed here are the author's own, and do not necessarily reflect those of her employer, or of The New Arab and its editorial board or staff.