There is good reason to believe that Iran was prepared to reach a deal over its nuclear program because it was tired of dealing with U.S. sanctions. In President Obama’s words, “We put sanctions in place to get a diplomatic solution, and that is what we have done.” This is a remarkable victory for U.S. economic diplomacy, given how difficult it is to create and maintain an effective sanctions regime. How did it happen?
It’s hard to make sanctions work
Policymakers–especially U.S. policymakers–are fond of applying sanctions. Academics who study sanctions rigorously are often very skeptical that they can get states to change what they are doing. As our Washington Post colleague Daniel Drezner noted in a highly influential research article, it’s especially hard to maintain big multilateral sanctions programs, which rely on the cooperation of many states. International organizations like the UN can help by making sure that all the sanctioning states are on the same page, but they are not a panacea.
As Nick Miller argues in new research, there is evidence that sanctions can deter states from starting up nuclear weapons programs in the first place. But this is likely much easier than getting a state to abandon a nuclear program that it has already started.
U.S. financial power makes it easier
The sanctions program against Iran was supported by the United Nations. The U.S. engaged in an extended diplomatic effort to get the UN Security Council to sign up to extensive sanctions against Iran. It also succeeded in getting the European Union to impose tougher sanctions against Iran, to the chagrin of European energy companies.
However, the willingness of the U.S. to impose “secondary sanctions” against non-U.S. firms that did business with Iran was arguably just as important. In a series of actions, the U.S. has imposed hundreds of millions of dollars in fines on financial institutions dealing with Iran. The European Union also required SWIFT–a key intermediary in all financial transactions–to cut Iranian financial institutions out of its system.
Together, these steps effectively froze the Iranian economy out of the world financial system. This has had drastic consequences for the Iranian economy. It made even basic international financial transactions overwhelmingly difficult. It has also meant that U.S. allies and other states have had less incentive to backslide from the sanctions regime, since their companies are vulnerable to U.S. regulatory action, if they have even very slight contact with the U.S. financial system.
Read the full piece at The Washington Post.
- Publication Type:Other Writing
- Publication Date:07/14/2015