Two months after the United States, along with Israel, started a war against Iranthat conflict seems far from a lasting solution.
Much commentary on the protracted nature of the conflict has focused on the boundaries of the two military AND diplomatic approach to war. But the conflict has also exposed another key reality: the limits of US sanctions.
The United States has been the world’s leading economic and military power for decades, certainly since the end of the Cold War. It is at the center of many global financial activities and has a military budget far beyond that of China, its closest competitor.
Using this power, the US has long used economic coercion to achieve its foreign policy goals, whether against North Korea under the Kim regimeRussia for the invasion of Ukraine OR Iran since the 1979 revolution that overthrew the US-allied shah.
But as US power in the world has slowly declined amid the rise of China and an increasingly multipolar world, the country has also lost some of its ability to effectively use the economy as a weapon.
Indeed, how scholars of economic sanctions and citizenshipwe believe that the conflict against Iran has made the US’s diminishing returns clear economic sanctions.
The limits of sanctions against Iran
Since 1979, relations between Washington and Iran have been antagonistic. US policy has largely been to punish, contain or isolate Iran, and successive administrations have done so in part a mix of primary, secondary and targeted financial economic sanctions.
US economic sanctions have been applied to Iran for a variety of reasons, including the state’s alleged sponsorship of terrorism throughout the region and its nuclear program.
The emergence of that nuclear program in 2003, which later resulted in United Nations sanctions against Iransaw US and European Union interests around Iran converge.
This convergence led to US and EU cooperation on economic sanctions against Iran, which limited Iranian access to the European banking system. The combined coordinated efforts proved difficult for the Iranian economy, which, as political scientist Adam Tarock notes, meant that Iran was “winning a little, losing a lot.
The Joint Comprehensive Plan of Action (JCPOA), negotiated between the US, Iran, EU members, Russia and China in 2015, put limits on Iran’s nuclear program in exchange for sanctions relief.
At that time, the Iranian economy was suffering from crushing inflation AND rampant food prices. The deal will provide relief from decades of economic sanctions and the lifting of EU, UN and US economic sanctions.
However, The US withdrew from the agreement in 2018 under the first Trump administration and later reimposed sanctions on Iran. The reimposition of economic sanctions as part of the Trump administration’s first campaign of maximum pressure — even if not supported by other nations — has caused most global firms to refrain from doing business with Iran due to risk aversion.
Moreover, regardless of EU efforts to preserve the JCPOAIran restarted the nuclear enrichment program in 2019, a year after the US withdrawal. Subsequently, the Biden administration expressed its intention to re-enter the agreement it was never realized.
Believing that sanctions relief was not a realistic outcome after the deal’s failure, Iran – although battered by the loss of access to the global financial system – has found increasingly creative solutions.
They have included exploitation the so-called shadow fleets transporting illegal Iranian goods, creating a successful home army products such as cheaply manufactured drones and increased trade with partners outside the Western orbit.
Indeed, since the collapse of the nuclear deal, Iran has pursued much closer ties with China and Russia at the expense of previously strong economic relations with Europe. As Iran reorients its trade and economic relations, The US and the West have lost economic leverage.
Separated by a diplomatic finale, US sanctions — and the current blockade of Iran-bound shipping — it seems to be only strengthening Iranian resolve. Even if a deal is reached to reopen the Strait of Hormuz, Iran has said it plans to push for merchant ships to pay a tax going forward – something that did not exist before the war.
In fact, Iran’s continued de facto closure of the strait has redirected the US economic squeeze in the Trump administration.
Return to energy markets
The biggest costs of that ongoing shutdown for the US have been in energy.
The US today is one of the largest exporters of crude and refined oil globally, making it particularly exposed to oil price volatility. At the same time, some Americans see development of fossil fuel resources as a key policy priority.
As the US becomes more involved in the export energy sector, it is increasingly experiencing collateral damage – namely, higher oil and gasoline prices – when its foreign policy decisions hinder oil-related trade.
One way collateral damage appears is affordability problem for many Americans as gas prices rise, which is also likely to create political costs for the Trump administration.
While the U.S. has taken steps to ease economic disruptions for American consumers by easing oil sanctions on Russia and Iran—thus undermining its own sanctions policy—these policy changes have has done little or nothing to offset rising fuel prices.
they it will also fail to ameliorate the potential for economic harm caused by continuous disruptions in trade due to the dangers and uncertainties of the Strait of Hormuz.
Renowned economist Albert O. Hirschman once pointed out that countries use their strategic position to shift the cost-benefit calculations of others, particularly through trade disruptions. And for decades, the US used its privileged position in the global financial system to exert pressure on both emerging countries and those not clearly part of the US alliance.
But as the US becomes more exposed to the consequences of its own decisions, its ability to lead and compel has been hampered by costs it cannot easily absorb.
It no longer sets an example
Historically, US economic power has been made possible not only by the country’s unilateral strengths, but by its willingness to pool resources and work multilaterally with other nations.
Trump’s White House the impossibility of creating a multinational coalition To address the political and economic challenges posed by the US-Israeli attacks on Iran is not surprising. But they further reflect the evaporation of goodwill the US previously enjoyed with allies inside and outside the region.
As the US abandons a playbook that has sustained its power for decades, Russia has grown bolder, China is outpacing the West, and middle powers like Iran are able to resist American economic and military might.
None of this means that the US is no longer a significant global power. But its turn to a sanctions-first, ask-questions-later approach, we believe, has eroded its ability to shape the behavior of other nations.
And it has done so by imposing increasingly tangible costs on both American strategy and the well-being of its citizens.
Charmaine N. Willis is an assistant professor of political science, Old Dominion University AND Keith A. Preble is an assistant professor, East Carolina University
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