Economic Sanctions and Iranian Containment

By Jonathan Winer

Ray Takeyh, who has devoted years of study to Iran and to Iranian-U.S. national security policy, has taken a strong view opposing economic sanctions on Iran's Revolutionary Guards in a piece in the August 28 Financial Times which argues that such sanctons would make it more difficult to undertake the comprehensive talks with Iran that he sees as essential to deal with Iraq, proliferation and terrorism issues.

Takeyh argues that the proposed sanctions would anger Iranians who need to be part of the political framework that would make it possible for broader talks, and that such sanctions would be ineffective, "given the murky and ambiguous nature of the Revolutionary Guards’ business enterprises," which means that "the type of information and intelligence that is needed for targeted sanctions is unlikely to be available."

The question is whether this is in fact the case, or whether the U.S. has by now been able to obtain sufficient data on the front-companies and mechanisms involved in Iran's proliferation activities, enabling it to specify particular companies that can be subject to sanctions. Any listing by the U.S. designating a particular entity for sanctions is immediately picked up by the software screening systems now routinely used by the vast preponderance of the financial institutions that operate internationally. Publicly traded banks simply cannot tolerate sanctions-related risk. Privately held or government owned institutions have to calculate the risk that the U.S. will find out about such assets held in their institutions, and of the potential impact on their access to the U.S. payments system. The very act of listing a company as subject to sanctions ordinarily has profound consequences for the target, at minimum substantially raising the cost of its doing business as well as increasing the scrutiny of its activities and relationships wherever it is doing business.

Designating named individuals among the revolutionary guards for economic sanctions also would tend to make it more difficult for those designees who have foreign slush funds from accessing those funds for personal uses unrelated to proliferation. This is an unappetizing consequence for them over time. In other contexts, targets of such sanctions, such as Libya and its senior political figures, have in the end come to the U.S. and negotiated agreements that substantially achieved U.S. policy goals motivated in part by the goal of lifting sanctions.

There may well be a near-term trade-off between achieving the ability to negotiate comprehensively with Iran, as Takeyh suggests, while containing it, and punishing bad actors through imposing sanctions on particular entities, firms and individuals in Iran.

But to label further application of economic sanctions to cover those supporting nuclear proliferation and terrorism as "yet another example of Washington’s incoherent Iran policy" is to caricature an option that potentially remains a powerful mechanism to provide incentives to Iran to seek negotiations, and perhaps, even to moderate some of its most troubling behaviors.

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