Sanctions on Iran

Sanctions against the Islamic Republic of Iran is seen in the news often these days. This is an important topic for international relations in the UPSC syllabus. In this article, you can read all about the issue’s background, events and latest developments for the Civil Services Exam.

Iran Sanctions Background

  • In Iran, between 1978 and 1979, a series of events took place which ushered in what is called the Islamic Revolution or the Iranian Revolution.
  • The first time the US imposed sanctions on Iran was in 1979 after a group of students took control of the American Embassy in Tehran and took the people inside hostage.
  • These sanctions included:
    • Freezing Iranian assets to the tune of USD 12 billion (gold deposits, bank deposits, etc.)
    • Trade embargo
  • These sanctions were lifted in 1981 as part of the Algiers Accord.
  • The US imposed sanctions again in 1987 because Iran had initiated some actions against US shipping vessels in the Persian Gulf. The US was also against Iran’s support for non-state militant actors such as Hezbollah, Hamas, etc.
  • In 1995, these sanctions were expanded in that now, even companies that dealt with the Iranian government were penalised with sanctions.
  • In 2006, the UNSC had passed a resolution demanding Iran halt its nuclear enrichment programme.
  • When Iran refused to comply, sanctions were imposed by the UN.
  • Iran claims that its nuclear programmes are only for civilian and medical purposes.
  • In 2014, talks between western and the Iranian governments failed on the nuclear issue.
  • In 2015, there was a meeting between Iran and the P5 + 1 (the five permanent members of the UNSC + Germany).
  • In January 2016, the International Atomic Energy Agency (IAEA) had announced that Iran had sufficiently dismantled its nuclear weapons programme paving the way for the UN to remove sanctions with immediate effect.
  • They reached a framework that would life most of the UN sanctions on Iran, and accordingly, UN sanctions were lifted in 2016. This was called the Joint Comprehensive Plan of Action (JCPOA) or the Iran Nuclear Deal.
  • In 2018, the US withdrew from the deal trying to force Iran to alter its policies such as supporting militant groups in West Asia and developing ballistic missiles.

How the Joint Comprehensive Plan of Action affected Iranian Economy

  • The Iranian economy was severely affected by the series of sanctions imposed by the UN, the US and other countries.
  • Since the US had problems with anyone dealing with Iran, many countries did not invest in Iran in a profound manner.
  • The Iran Deal helped its economy in the following ways chiefly:
    • Iran’s frozen assets abroad were released
    • Sanctions against the export of oil from Iran were lifted
    • Foreign firms were allowed to invest in Iran in oil and gas, hotels, automobiles and other sectors
    • Allows Iran to engage in trade with the rest of the world through global banking systems like SWIFT.

Iran Sanctions Latest Developments

  • The US withdrew from the Joint deal in 2018 and reinstated sanctions on Iran.
  • Sanctions have hit the Iranian economy hard.
  • Other countries which were party to the deal (the UK, China, Russia, Germany and France) have not been able to mitigate the effect of US sanctions on Iran’s economy.
  • When the US withdrew, many international firms pulled out of the country fearing a US backlash.
  • For many decades, Iranians have not been able to enjoy freedom of trading in the open market. There have been rising inflation.
  • France, Germany and the UK created a new payment channel INSTEX to bypass the new restrictions by the US.
  • The worst affected by the sanctions are patients. Medical devices and pharmaceuticals do not fall under the ambit of sanctions, but Iran’s inability to use international payment systems cause a severe shortage of drugs.
  • It was under the Obama administration that the US had entered into the Iran Deal. After a transition in power, i.e., when Donald Trump assumed office of the President of the USA, the change in policy was overseen with respect to the JCPOA.

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