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  • Writer's pictureCharlotte Salmon

Sanctions as a Catalyst for Change: Positive Impacts on Iran's economy

Although sanctions are typically seen as a negative tool used by governments to penalise or exert pressure on other nations, they occasionally have the potential to be advantageous for the country being isolated. Iran's economy has been significantly impacted by the numerous waves of sanctions that the United States and other nations have imposed on Iran's oil industry to curb Iran's nuclear program and other activities deemed to be violating international norms. These sanctions have made it difficult for Iran to sell its oil on the global market. Of dread of breaking the restrictions and incurring consequences, many nations hesitate to conduct business with Iran. Yet, despite being excluded from international trade, there are multiple ways in which Tehran might have benefitted from foreign sanctions.

Iran has been compelled to broaden its economy and look for new markets due to the sanctions. Indeed, the country has had to turn to other nations for trade and investment as a result of the isolation of many of its longtime allies, which has increased economic diversity. For example, in response to sanctions on its oil industry, Iran has invested in other sectors, such as agriculture, tourism, and technology, which help reduce its dependence on oil exports. Iran's 2025 Tourism Vision Plan aims to increase the number of tourist arrivals from 4.8 million in 2014 to 20 million in 2025. Since Iran is home to 21 UNESCO world heritage sites –ranking 9th worldwide–, and is recognised as the most cost-competitive travel destination by the World Economic Forum due to low prices (specifically fuel and hotels), there is a great economic potential for the country. Iran has already invested in key elements of the tourism sector, such as infrastructure, manpower, culture, and advertising. Ultimately, as more tourists visit Iran, there is also the potential for increased international cooperation and exchange. This can foster greater understanding and goodwill between Iran and other countries, which can have positive implications for diplomacy and international relations.

Additionally, by looking to different partners for trade and investment, Iran has been able to explore new markets and opportunities. Countries such as China and Russia have been willing to invest in Iran's energy sector and purchase Iranian oil and gas, providing a crucial source of revenue for the Iranian government. In order to facilitate trade with Russia, the Iranian government is developing a system of covert shipping routes and other mechanisms to deliver oil without attracting the attention of Western authorities. These mechanisms include using front companies and other intermediaries to disguise the oil's origin and employing tactics such as ship-to-ship transfers at sea to avoid detection. The Iranian government has also been known to use barter arrangements and other non-monetary forms of payment to avoid the need for financial transactions that could be subject to sanctions. However, such a system has raised concerns about the potential for Iran to use this strategy to fund other activities that are subject to sanctions, such as its nuclear program and support for regional proxies.

Furthermore, Iran has been exploring opportunities in other sectors, such as agriculture, telecommunications, and transportation, with new allies. For instance, Iran has been developing partnerships with countries such as Brazil in the agriculture sector to boost exports of Iranian agricultural products. In transportation, Iran has been exploring opportunities for joint investment with countries such as Azerbaijan and Kazakhstan in rail and road infrastructure. Moreover, some analysts say the U.S. focus on countering the Russian war in Ukraine has allowed Iran to boost oil exports not only to China but also to India and Turkey. While the full impact of these partnerships on Iran's economy is still a matter of debate, they have provided Iran with new sources of revenue and investment that could help to mitigate the effects of the sanctions over the long term and strengthen Iran's economy.

Secondly, the sanctions have stimulated innovation in Iran. With access to certain technologies and products cut off, Iran has had to develop its own solutions which could benefit Iran's economy in the future. For example, in response to the sanctions, Iran has developed a range of domestically produced medicines, including cancer drugs, that are not only cheaper than their imported counterparts but also more accessible to the Iranian population. Additionally, Iranian researchers have developed new medical technologies, such as a biosensor for the early diagnosis of cancer, that have the potential to benefit the broader global community. Iran has innovated in many other sectors, such as agriculture. It has developed new farming methods and techniques tailored to its specific climate and soil conditions, increasing productivity and efficiency. Hence, the Iranian response to the sanctions could lead to the development of more robust and competitive industries, which could help Iran compete globally once the sanctions are lifted.

Thirdly, with many imports unavailable or prohibitively expensive, Iran has had to rely more on domestically produced products and services. Soroush, an Iranian messaging software, has been presented to Iranian people as an alternative and homemade application. Today, it has more than 5 million subscribers. Hence, Iran is becoming more self-sufficient in producing goods and services domestically by relying less on imports. It has reduced dependence on other countries and helped to insulate the economy from external shocks. Moreover, as domestic industries expand, they create new jobs and opportunities for Iranians, helping to decrease unemployment and boost economic growth. Finally, with increased domestic production, Iran can export more goods and services to other countries, expanding its export earnings and improving its trade balance, as it was illustrated with steel.

Lastly, the restrictions have helped Iran become more united as a country. Many Iranians see the sanctions as unjust and unfair and, ultimately, have rallied around their government in opposition. This greater national cohesion and a stronger sense of national identity could be a positive force for Iran's future.

It's important to note, however, that the impact of sanctions on Iran is complex and multifaceted. The sanctions also have many negative consequences for the Iranian people, especially for the most vulnerable segments of society, such as women and children. This example is intended to show that there can be potential benefits, but it should not be taken as a comprehensive assessment of their overall impact on Iran. Any discussion of the impact of sanctions should consider both their potential benefits and their broader implications for society as a whole.

Therefore, sanctions are often used as a tool by countries to influence the behaviour of another country or to punish a country for specific actions or policies. Proponents of sanctions argue that they can effectively change a country's behaviour by creating economic pressure, reducing resources available to the government, and causing political unrest. However, there is a general debate over whether sanctions are actually an effective tool in achieving their intended goals. As seen in the case of Iran, sanctions can be counterproductive if the targeted country has alternative sources of support or is willing to endure short-term economic pain for long-term strategic gains. It is crucial for countries to carefully evaluate their use of sanctions and consider the potential consequences before imposing them. Sanctions should be designed to minimise harm to the civilian population and should be targeted at specific individuals or entities responsible for objectionable actions rather than being imposed on entire countries. Additionally, countries should explore alternative approaches to resolving conflicts and promoting human rights, such as diplomacy and engagement.

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