November 13, 2022 | The National Interest

By Not Enforcing Sanctions, Biden Helps Khamenei and Hurts Iranians

The time has come to maximize pressure on the regime as well as support for the Iranian people.
Saeed Ghasseminejad

Senior Iran and Financial Economics Advisor
November 13, 2022 | The National Interest

By Not Enforcing Sanctions, Biden Helps Khamenei and Hurts Iranians

The time has come to maximize pressure on the regime as well as support for the Iranian people.

Saeed Ghasseminejad

Senior Iran and Financial Economics Advisor

The Biden administration’s failure to fully enforce its sanctions against Iran is helping the Islamist regime in Tehran survive an unprecedented challenge to its authority while it doubles down on its aggressive foreign policy by sending weapons and forces for use against Ukraine and threatening to attack Saudi Arabia.

Tehran’s success in acquiring hard currency is directly related to the Biden administration’s decision not to enforce existing U.S. sanctions and impose new ones. And yet those financial resources are now critical to the regime’s ability to avert economic collapse and to buy the loyalty of its base at a time when an ever-growing share of Iranian society is in active opposition. One example: in recent days the Islamic Consultative Assembly passed a law that increased the salary of beleaguered security forces by 20 percent.

Since September 16, Iran has been the scene of widespread, revolutionary protests in all provinces and major cities. The latest estimates are that at least 300 protesters, including 47 minors, have been killed and more than 14,000 arrested. So far, neither protesters nor the regime has prevailed. They are engaged in a war of wills. Supreme Leader Ali Khamenei hopes protesters, facing brutal violence, will be demoralized and go home before the security forces crack under pressure.

To minimize casualties, protesters are using a pincer movement of demonstrations and labor strikes to bring down the regime. Labor strikes have spread beyond schools and colleges and are happening in the oil, gas, petrochemical, and steel industries, among others. While these strikes are not yet widespread enough to trigger an economic collapse, their fallout—combined with the protests—has been significant.

Determined enforcement of U.S. sanctions could help drive the regime into a corner. Instead, in October Tehran exported almost 1.2 million barrels per day of crude oil, much of it to China, one of the highest export totals of the last twelve months. Tehran also exported $28 billion of non-oil goods from March to October, 10 percent more than its non-oil exports in the same period last year.

The majority of Iran’s non-oil exports are also sanctioned goods such as petrochemical, steel, and oil products. Last year, Iran’s non-oil exports reached their highest value, at around $48 billion. At this rate, Iran may break that record, a clear sign the Biden administration has abandoned any serious effort to enforce sanctions.

Even without enforcement, the Iranian economy is under duress. The rial is at its lowest value against the dollar in four decades and inflation at 42.9 percent, a testament to the regime’s incompetence and the lack of confidence among the public regarding the economic future.

On November 8, the exchange rate for one U.S. dollar in Iran’s unregulated market was 360,500 rial, the highest in history. In the NIMA platform, a centralized system for importers and exporters to exchange foreign currency, the exchange rate was 276,805 rial for one U.S. dollar. Between Sept. 15 and Nov. 8, the price of a dollar in the unregulated market appreciated 13.8 percent while in the NIMA platform the price increased only 2.5 percent. The widening gap between the two is most likely a sign that the regime’s access to hard currency has not significantly diminished, while the public perception of the economy is dark.

Iran’s access to hard currency and ability to trade in defiance of sanctions not only helps it withstand popular rebellion but also to finance and expand its nuclear program. And there are deadly ramifications throughout the region, too. On Nov. 3, the U.S. Treasury announced it had designated a network of oil smugglers that had been generating revenue for Hezbollah and Tehran’s Quds Forces, which supports foreign jihadist groups.

Disrupting the regime’s network of oil smuggling by designating them is a good step but not enough. Thanks to satellites and other technologies, the U.S. government knows the location and path of tankers and can curb Iran’s exports through a variety of tools at its disposal. Indeed, it is time to confiscate the tankers that smuggle Iranian oil and their shipments, sell the oil in the market, and use any revenue that can be generated to support the Iranian people through projects such as the Iran Free Internet Fund and the Strike and Protest Fund.

The time has come to maximize pressure on the regime as well as support for the Iranian people.

Saeed Ghasseminejad is a senior advisor on Iran and financial economics at the Foundation for Defense of Democracies (FDD), where he contributes to FDD’s Iran Program and Center on Economic and Financial Power (CEFP). Follow Saeed on Twitter @SGhasseminejad. FDD is a Washington, DC-based, non-partisan research institute focusing on national security and foreign policy.

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Issues:

Issues:

Iran Iran Human Rights Iran Politics and Economy Iran Sanctions Sanctions and Illicit Finance

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Topics:

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