'Iran sanctions may gravely impact region's economy'

International Crisis Group says sanctions on Iran could undermine regional stability for years to come.

February 27, 2013 17:17
2 minute read.
Iran currency exchange

Iran sanctions 370. (photo credit: REUTERS/Raheb Homavandi)


Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

LONDON - Sanctions on Iran are so intricately woven that they will be very hard to untangle, while their impact in swelling Iran's black economy could undermine regional stability for years to come, the International Crisis Group says in a new report.

Describing the "unintended consequences" of sanctions, the report noted that those with the best access to state resources, including the elite Revolutionary Guards (IRGC), had been best placed to circumvent the sanctions, while smuggling networks had become an integral part of the economy.

Be the first to know - Join our Facebook page.

"This does not necessarily harm the regime. To the contrary, it has facilitated a symbiosis between state-affiliated organizations such as the IRGC and transnational smuggling networks," it said.

"Over time, organized crime networks likely will become more sophisticated, enabling them to survive even after sanctions have been lifted. Iran's proximity to two countries rating highest on the corruption scale - Iraq and Afghanistan - likely contributes to cross-border criminality, undermining longer-term stability."

Increasingly tough sanctions imposed on Iran's oil and banking sectors over its nuclear program have put enormous pressure on Iran's economy and forced it to seek innovative ways around them.

The West says Iran's nuclear activities conceal a drive towards a weapons capability, an allegation Tehran denies.

The ICG's recommendations are broadly similar to those of many other Iran experts. It calls for a gradual easing of sanctions in return for Iranian concessions on its nuclear program, accompanied by direct talks between Iran and the United States.

But the report, "Spider Web: The Making and Unmaking of Iran Sanctions", is unusual in underscoring the difficulties of easing sanctions, despite the limited progress made this week in talks between Iran and major world powers on Tehran's nuclear program.

Sanctions have become so extensive and complex, and subject to so many different laws worldwide, that it will be hard to find the flexibility needed for diplomacy, the ICG said.

It quoted an unnamed sanctions expert in Washington as saying easing the sanctions was "like dancing in a minefield".

"There are tripwires everywhere," the expert said.

Click here for full Jpost coverage of the Iranian threat

As Iran has adapted its economy to sanctions, the introduction of another tier of exchange rates, the use of barter, front companies and the informal "hawala" system for financial transactions have all contributed to the rise of the informal or black economy, the ICG said.

"Crime rates and corruption have been rising; and smuggling is booming as clandestine networks replace commercial ones. Indeed, smuggling networks are becoming an integral part of the shadow economy that reportedly accounts for 21 percent of GDP."

The growth of the informal economy in the region has been a particular worry in Afghanistan, where the United States has been unable to convince the government in Kabul to crack down on corruption as part of efforts to restore peace before most foreign combat troops are withdrawn at the end of 2014.

In Iran's other neighbor, Pakistan, the black economy has created space for militant groups to flourish, often funded by money from the Gulf, also routed through the hawala network.

Related Content

A picture illustration shows a Facebook logo reflected in a person's eye
August 22, 2018
Facebook: Iran behind new disinformation social network