“Maximum pressure” hardened Iran against compromise

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Iran’s Supreme Leader Ayatollah Ali Khamenei has sent seemingly mixed messages about his country’s intentions regarding its nuclear program. In early February, he vowed that once the United States completely lifted economic sanctions, Iran would again comply with the 2015 nuclear deal. But just two weeks later, Khamenei said that the Iran could enrich uranium up to 60% purity if the country needed it. In addition, he supported a new Iranian parliament law ending the International Atomic Energy Agency’s inspections of the country’s nuclear facilities.

Iran is not just playing hard. Its hardened position truly reflects the state of mind of a country that no longer sees the West as a likely economic partner. The reimposition of US sanctions under President Donald Trump has discredited the usefulness of diplomacy to many ordinary Iranians, even as it has hardened a distribution of wealth that favors hardliners. Washington may have turned the screws on the Iranian economy in hopes of weakening the hand of its political elite, but instead Trump’s “maximum pressure” campaign has led to a consolidation of economic power. and politics in Iran that militates against compromise.

Economic pain

In the first two years of maximum pressure, and even before the onset of the novel coronavirus, US sanctions shrank the Iranian economy by nearly 12%, its real per capita income by 14%, and exports of the country’s oil by 80%. . Judging by the Iranian Household Income and Expenditure Survey, administered by the Statistical Center of Iran, the country’s absolute poverty rate increased by 11% between March 2018 and March 2020, while the level of average life fell 13% nationwide. The national currency has lost nearly a quarter of its value, pushing the value of the minimum wage from $ 260 to nearly $ 70 per month, while the cost of a 2,100 kilocalorie food basket has nearly tripled. In 2017, 27% of Iranians could not meet the basic daily nutritional requirement of 2,100 kilocalories. The proportion of the population suffering from such deprivations increased to 40% in 2019. During this period, Iranian families spent less on education and recreation, respectively, by 30% and 32%.

Trump’s maximum pressure campaign altered the country’s social class structure by shifting a significant portion of the middle class toward the poverty line. The result has been to stigmatize the idea of ​​engagement with the West as a solution to Iran’s economic problems.

Trump’s sanctions were almost twice as devastating as those of his predecessor, President Barack Obama. But because Trump’s sanctions came without any clear incentive or purpose, they did not produce domestic political pressure for a compromise or negotiation with the United States. During Obama’s sanctions, presidential candidate Hassan Rouhani promoted the idea that Iran’s economic and social problems were linked to the country’s isolation and argued that diplomacy and engagement were key to overcome these problems. Rouhani won the presidency in 2013 on this argument. No such argument seems plausible today.

Iran’s hardened stance reflects the mood of a country that no longer sees the West as a likely economic partner.

Rouhani has raised public expectations about the likely benefits of a deal and he has kept his promise to parts of the Iranian electorate. During the lifetime of the 2015 nuclear deal, Iran’s economic growth rate increased by 17%, generating 3.5 million jobs, mostly for small service sector companies in big cities. . The poverty rate in Tehran and major cities fell, in the case of Tehran, to less than 20% after the implementation of the agreement. Still judging from the household survey, 45% of Iran’s population in 2017 could be considered an economically middle class, neither poor nor at risk of poverty.

But the Rouhani administration has lost critical ground by not distributing the benefits of the nuclear deal fairly among different segments of society. In small towns and villages, unemployment and poverty remained at the same level as before. For poor families in these neighborhoods, the lifting of US sanctions between 2015 and 2018 did not bring new jobs or put food on their tables. The rural poverty rate has remained above 40 percent since 2013, with no notable change following the nuclear deal. A flood of new sanctions in 2018 then dramatically increased the number of poor Iranians, from 22 million to 32 million, and reduced the size of Iran’s middle class from 45% to 30% by March 2020. The poverty rate is expected to reach 45. –48% in 2021.

The uneven distribution of the benefits of the 2015 nuclear deal, as well as the growth in poverty after the imposition of new sanctions, served to disillusion the lower strata of Iranian society from any idea that diplomacy and engagement would remedy. to their economic pain. A campaign such as the one led by Rouhani in 2013 would come up against the harsh experience that the lives of many in Iran first did not improve, and then deteriorate, after the country struck a deal to curb its nuclear program.

Political consolidation

The Trump administration has succeeded in changing the class composition of Iranian society and dramatically increasing the level of hardship in the country, but not producing results beneficial to American interests. On the contrary, the new sanctions have accelerated the militarization of the Iranian economy. The state now has a large budget deficit and has accumulated debts to private entrepreneurs who have bankrupted many of them. These private entrepreneurs have accounted for nearly 25% of job creation in Iran over the past decades; they have also been one of the main sources of funding for reformist politicians over the past 25 years. Today, most of the major private contractors are bankrupt, and the construction headquarters of Khatam-al Anbiya and the Jahad-e Nasr Institute, both affiliated with the Islamic Revolutionary Guard Corps (IRGC), are are attacked in their market. While in the past two years, 13 of the 14 major private road construction companies have declared bankruptcy, the headquarters of Khatam-al Anbiya Construction announced that the number of its road construction projects has doubled since 2019.

The IRGC seized the opportunity to make itself socially and economically indispensable. During Iran’s descent into misery, charitable student camps affiliated with the IRGC intervened, expanding their social base by providing relief and community support in poor areas. The IRGC cracked down on independent activists and cracked down on civil society organizations such as Imam Ali’s People‘s Student Relief Society, then took on the task of distributing food packages to millions of underprivileged families. The IRGC took advantage of this to undermine the credibility of the Rouhani administration, claiming that instead of fighting poverty, as the paramilitary campaign was doing, Rouhani was wasting time and energy in unnecessary nuclear talks. .

Iranian political elites, especially reformists, must now answer some difficult questions from a public that has come to view endless sanctions as a defining element of US policy toward Iran. Can supporters of the pledge guarantee that resolving concerns about Iran’s nuclear and missile programs, for example, will not simply lead the Americans to focus on a new issue in order to bring back the sanctions? A country exposed to a permanent risk of US sanctions is unlikely to attract substantial foreign investment. So, does it really make sense to advocate engagement with the West, especially since the International Monetary Fund has forecast Iran to return to 3.2% growth in 2021, even under current constraints?

Iranian hardliners have not only consolidated their economic strength, but have succeeded in casting doubt on the wisdom of diplomatic engagement as a means of improving the lives of ordinary people. Through the mainstream media they control, hardline political factions argue that “resistance”, not engagement, will allow Iran to force a better deal: one in which the United States will ultimately be forced to. recognize Iran’s rights as an emerging power in the Middle East.

Those in the United States who oppose the lifting of sanctions in return for Iranian compliance unwittingly reinforce the radical Iranian narrative that Trump’s approach was the rule rather than the exception in terms of US policy. According to this understanding, economic sanctions will remain an integral part of US Iranian policy, regardless of who the president is and whether or not Tehran continues its engagement. In fact, to curb Iran’s missile program and its regional influence, the United States will seek to create even more economic leverage, through more sanctions. Opponents of the Tehran engagement are wielding this prospect to prove that the United States is not honoring its commitments – on the contrary, it is playing a never-ending game. The truth is that circumstances have changed since 2015 for both countries. Trump’s self-defeating policies made the compromise less attractive and more costly for Iran.

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