Leaning on Economic Sanctions: Do They Hurt More Than They Help?

Economic sanctions have historically been used as an emergency action, or a policy of last resort. They were used in war time to stop invading forces from overtaking economies as well as governments, to promote racial justice around the world, and expose humanitarian crises. When an issue couldn’t be resolved through diplomacy, an action to be taken could be economic sanctions. But has the United States’ constant use of economic sanctions in recent years hurt their credibility and legitimacy? Are they really solving the intended problem? This article will expose the rationale for such sanction, examine the effects of the United States’ recent sanctions on Iran, and uncover who and what is truly affected. 

The Specially Designated Nationals (SDNs) list has grown exponentially over the last three presidential administrations and is seemingly being upheld and supported by the current Biden administration. As economic sanctions can be unilaterally decided on by the President, it can be difficult to reveal the true reason for the freezes, whether it be out of actual criminal financial action, fear and intimidation, or to grasp and hold more power on the world stage. This uncertainty was extremely visible under former President Donald Trump, who openly spoke and tweeted about the downfall of rival governments, without mentioning the proper reason for the sanctions. An example of this was seen in 2018, at the height of tensions between the United States and Iran, when then President Trump tweeted, “To Iranian President Rouhani, NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE.” This statement came in tandem to the United States withdraw from the 2015 Iran nuclear accord and the reimposition economic sanctions, adding more pressure to Iranian economy as other allied countries fell in line. Statements like this call to question the reasoning for the sanctions: are they because of dangerous practices by Iranian businesses, or are they because of the challenging of world order? 

Following an investigative report by the NYCFPA, it was revealed that the Iranian response to these economic sanctions was not to bend and renegotiate the nuclear deal, but to find other partners to facilitate their international business activities. One of those partners being the Central Bank of the United Arab Emirates, who is currently under investigation by the US Treasury Department’s Financial Crimes Enforcement Network for sanction violations. Many Iranian entities have been able to run business through the UAE’s financial institutions. 

A question that has yet to be addressed is who in Iran is genuinely being affected by these sanctions. As we’ve reported, many entities have been able to find alternative methods for doing business, while the overall GDP growth of the country diminished to the negatives in 2019, as reported by the BBC. The citizens of Iran are being hurt the most, as evidenced in an approximately 3% increase in the unemployment rate in 2019 (only exasperated by the COVID-19 pandemic in 2020-21) and a parallel increase living costs, as the inflation rate of the Iranian rial continues to grow. There has also been a substantial decrease of essential imports, causing shortages of goods across the country. The sanctions are impacting the everyday life of the average Iranian citizen, without deterring the international businesses from expanding their business abroad.  

Economic sanctions have a very specific role in modern society, to motivate and create cause for societal change. This reasoning has become hazy though in the United States, as power to invoke those sanctions is completely within the authority of one person, the President. Economic sanctions exist, in their most successful form, to uplift, not to punish. This is the situation in Iran, where families struggle to purchase nappies for their children, while businesses are finding other portals for their ongoing activities. Economic sanctions have not stopped commerce in the country, but they have made it much more difficult to survive. 

https://nycfpa.org/reports/americas-blind-eye-uaes-sanctions-violations-set-dangerous-precedent/ https://www.bbc.com/news/world-middle-east-48119109  https://www.wsj.com/articles/trump-threatens-iran-in-late-night-tweet-1532321498 https://share.america.gov/world-hears-voice-of-iranian-people/ 


  • Isabella Gabriele

    Isabella is a graduate student at George Washington University's Elliott School of International Affairs, where she is studying International Economic Policy with a focus on development. She is an associate editor at the student publication, the International Affair Review, and has extensive background in international finance and economics.

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