A powerful myth has permeated the West in the decades since the Cold War ended. The “smart” sanction, a foreign policy tool meant to be a clean, precise, and humane substitute for war, is a myth. The idea is that a successful attempt can be made to defeat a hostile regime’s main revenue sources and finances without causing harm to its citizens.
This delusion is risky. The sanctions regime on Iran was far from a surgical strike, as our recently published research on the subject revealed, but it was a sledgehammer that defied the middle class, the group that provided the best chance for a more moderate and stable future. In this regard, the West’s major strategic failure is the devastation of the Iranian middle class.
The modern middle class’s rise in Iran took a long time to come about. A secular, professional class of civil servants, professionals, and managers who funded the country’s modern infrastructure, which was funded by oil rents, was the birth of the Pahlavi dynasty. The Islamic Republic continued to expand the middle class after the revolution of 1979, bringing millions of previously underprivileged families into a new world of opportunity and education.
The political foundation for change was this educated, powerful class. In the late 1990s, President Mohammad Khatami’s reformist movement based its power there. The “Woman, Life, Freedom” protests were led by the faces of the 2009 Green Movement’s crowds. The entrepreneurs who created localized versions of Amazon (Digikala) and Uber (Snapp) that provided millions of their fellow citizens in Tehran were responsible for creating a vibrant tech scene from scratch.
A contemporary Iran with a future bent on this was its engine. Sanctions destroyed everything.
How can we be certain that sanctions were to blame for this, rather than just the regime’s ongoing mismanagement? Beyond anecdotes and partisan claims, we had to look beyond the evidence to find out. We constructed a “virtual Iran” using data in our peer-reviewed study that was published by the European Journal of Political Economy.
We created a data-driven twin of Iran using a potent statistical technique known as the synthetic control method, a composite weighted average of comparable nations like Tunisia, Qatar, Malaysia, Azerbaijan, and Indonesia, which perfectly mirrored Iran’s economic and social trajectory before 2012 but was never the target of international sanctions.
Without sanctions, this rigorous analysis provided a reliable, empirical baseline to assess the actual damage. Iran has been the target of a number of sanctions since its radical foreign policy began in 1992, but the intensity and scope of those sanctions are much higher than they were in the previous years.
The outcomes are heartbreaking. Iran’s middle class began to shrink significantly in 2012 in comparison to its sanction-free equivalent in our model. Between 2012 and 2019, there was a 17 percentage point difference between Iran’s middle class’s potential and actual size. The cumulative effect was devastating, with the middle class now 28 percentage points smaller than it should be, one year after US President Donald Trump launched his “maximum pressure” campaign against Iran.
These are not abstract numbers. There are literally millions of these people. They are the retired engineers, doctors, teachers, small business owners, and retirees who finally gained economic security before the sanctions regime, which ended it all, caused by.
You can see it in the way Iranians view themselves, not just in the way our model tells the story. A global representative survey (World Value Survey) conducted in 2005 revealed that 79 percent of the respondents were confidently classified as middle-income. They had arrived. That figure was down to less than 64 percent in the early 2020s. Economists on the ground in Iran have also confirmed that it is a devastating collapse.
This economic collapse was directly caused by foreseeable economic mechanisms, not by accident. First, the sanctions deprived the nation of the skilled, well-paying jobs that needed to be created. The money that would have been used to build factories and finance tech startups has vanished.
Second, they slowed the trade of the nation. The backbone of any healthy society is formed by thousands of small and medium-sized businesses, which were suddenly unable to import essential components or export finished goods.
Finally, and perhaps most cruelly, sanctions caused a flurry of inflation. Families’ life savings were wiped out as the currency fell. This was a devastating blow to the middle class’s very core, which included salaried professionals and pensioners on fixed incomes. They were referred to as the “new poor.” In consequence, informal employment has increased significantly.
Sanctions did not operate in a vacuum, of course. They entered a country with political corruption and mismanagement that the Iranian government has already hampered. However, these already present flaws are explicitly explained in our analysis. A difficult economic situation turned into an unavoidable social catastrophe as a result of the sanctions.
A story about economics transforms into a story about profound injustice at this point. The middle class is a nation’s most potent force for moderation and stability. It supports gradual reforms, serves as a buffer against extremism, and has the resources to sustain organized political movements.
Western governments cleared the way for the very hardliners they claimed to oppose by crushing this group, not just creating hardship. The ruling party now had the ability to blatantly blame all suffering on a foreign country, while its economic dominance gave it even greater control over a famined populace.
The ultimate irony of “maximum pressure” is that it created ideal conditions for the most extreme elements of the regime to flourish. It is much harder to organize for democratic reform when people’s top priority is putting food on the table. Desperation fosters authoritarians, but it also fosters instability, which in turn gives rise to democracy.
Sanctions were portrayed as a surgical strike, but in reality they were a self-defeating economic war against a whole society.
Those who pushed for them to impose severe UN sanctions on Iran today should reevaluate their position: Are we merely reducing suffering and empowering the very actors they claim to oppose, or are we just making things worse?
No modifications to previous sanctions are made. They are a foolish gamble that will ultimately result in the punishment of the nation’s future leaders rather than its current ones.
