Sanctions Will Turn Iran into Another Cuba

Sanctions Will Turn Iran into Another Cuba

REUTERS/Keith Bedford

The U.S. and European sanctions imposed on Iran earlier this year seem to be working with a vengeance. As if by remote control, the West has thousands of Iranians taking to the streets while the nation’s political elites are splitting into multiple directions. Despite the severe punishment, oil prices are holding steady, though there were modest jitters in the market last week. So we have effective sanctions without any apparent risk to the U.S. recovery.

It has to be a matter of time, the reasoning goes, before Iran gives way and abandons the nuclear program that has prompted the most stringent sanctions it has ever faced. Even so, Washington and its allies across the water are now preparing to impose yet another set of sanctions—banning natural gas purchases and tightening restrictions on transactions with the central bank. We will get a first look at these when EU foreign ministers meet on October 15.

There is a big economic risk involved in pressing Iran still further, and it is well to recognize it. Push the clerics too far into a corner, a lot of analysts say, and you could prompt them to carry through on threats earlier this year to blockade the Strait of Hormuz, through which a fifth of the world’s petroleum is shipped. Then you can forget about $80 dollar oil or a recovery in the U.S., while Europe would swiftly sink still lower into recession. Guarding the Persian Gulf costs the U.S. roughly $90 billion a year, which computes out to about $15 per barrel of oil shipped. These hostilities are far from cost free for the U.S. and its allies.

Last week was a horror if you happened to live in Tehran. The rial, Iran’s currency, fell by 40 percent against the dollar in a little more than ten days. It is believed to have lost 80 percent of its value in the past year. Inflation is now 70 percent, according to some foreign estimates; panic hoarding is becoming common. And Iran’s crude oil exports are put at 800,000 to 1 million barrels a day—a decline of 50 percent or so from last year.

All this prompted a revealing chain reaction, touched off by the currency drop. First, merchants in the great Tehran market went on strike. The bazaaris are an influential political bloc, key supporters of the clerical class, and this was the first time they opposed the regime since the 1979 revolution. With the bazaaris went the street-side currency traders, on whom almost everyone in Tehran depends for dollars when they need them. Then came the mass protests, followed by the riot police.

At this point, the clerical class has potentially prolonged street violence on its hands and a political split with some of its most powerful supporters. President Mahmoud Ahmadinejad, having drastically mismanaged the economy, has lost political credibility. There is talk now that he may be replaced before his terms ends next June—another piece of good news.

Iran, let there be no question, is suddenly in a partial state of collapse. But the West’s sanctions—Stage 1 or the coming Stage 2—are unlikely to lead to the desired result. Washington and its allies should try another tack, and there is one that is better for everybody.      

The sanctions are working in that they are causing considerable suffering and disruption among ordinary Iranians, but there is little sign they are dissuading Tehran’s ruling clerics from the nation’s nuclear plans. The result is that we are well on the way to creating a twenty-first century Cuba in the Middle East. Is this what we want? Only someone coarsely habituated to causing generations of deprivation without further result could be happy with this outcome.

Cuba? Yes, exactly. American sanctions against its neighboring island are now half a century old. Cuban people cannot dress well or eat well, their houses are crumbling, their cars are famously ancient—but Cuba goes on being Cuba. This will be the outcome in Iran: a lot of misery, a lot of national pride, maybe yet another Ahmadinejad, and a nuclear capability as a work in progress. And atop it all there will be the ever-present possibility of a mishap or a bad decision that buckles through the U.S. economy no less swiftly than American sanctions are ripping into Iran.

What is the alternative? Hawks on the Iran question have thoroughly discredited any thought of negotiations, but this is a mistake. The Obama administration’s plans were from the first two-pronged: sanctions and then talks as the sanctions took hold. This is precisely where things stand now. What are we waiting for? There’s a lot of bluff coming from Tehran these past couple of days, but it appears the Iranians are ready for the negotiating table.

At the U.N. General Assembly late last month, Iranian officials reportedly started drumming up support for a nine-step plan that would leave the Iranians short of the capacity to “weaponize” uranium. They want too many concessions, Washington officials say. Maybe they do, but isn’t that what negotiations are for? The Iranian plan, indeed, is close to one presented to European officials last summer. It is a place to start.

Ali Akbar Salehi, Iran’s foreign minister, made a remarkable appearance at the Council on Foreign Relations in New York last week. It was a long, public interview with Lawrence Wright, a writer for The New Yorker and a fellow at CFR. (Here is the video, if you prefer.) Salehi’s English needs a slight cleanup, but do not miss the message: There are people in Iran who want to talk and who are worth talking to. (Salehi, I should add, was formerly Iran's permanent representative to the International Atomic Energy Agency in Vienna and holds a Ph.D. from M.I.T.)

“Does any rational person will think to challenge the U.S., a country like Iran, nuclearwise?” Salehi asked. “Certainly not. Had Iran chosen to go nuclear in the sense of weaponization … it would attract more threats and invite more threats from the other side. This is just based on rational thinking.