How Sanctions Hurt Iran’s Protesters

The deeply suspicious death of 22-year-old Mahsa Amini in September 2022—which came after she was arrested and allegedly beaten by the morality police—was a pivotal moment for the people of Iran. The incident unleashed a wave of outrage that fueled protests throughout the country. The demonstrations were remarkable for displays of bravery, especially from Iranian women, as well as for the solidarity shown across ethnic and class lines. In the first few weeks, protesters snarled traffic and shut down university campuses in dozens of cities. Many observers believed the demonstrations were even the initial stages of a revolution.

But after more than seven months, the Islamic Republic still stands. Despite Iran’s long history of mass protest movements and the widespread and righteous anger expressed across Iranian society, the demonstrations remained small and sporadic and have now largely subsided. Acknowledging the limited scale of the protests does not discredit the efforts of organizers and activists in Iran. On the contrary, all those who believe in the need for fundamental political change in Iran must grapple with the Iranian public’s obviously diminished capacity for political mobilization. While there have been multiple waves of protests in Iran in recent years, none has matched the scale of the 2009 Green Movement, which brought millions of Iranians to the streets.

The most recent protest movement faltered in part because of the state’s violent response: over 500 demonstrators were killed by security forces. But Iranian protesters have faced down the brutality of security forces before. A more important factor appears to be Iran’s ongoing economic crisis, characterized by high inflation and languishing economic growth—a combination that led to a 20 percent drop in annual household consumption between 2010 and 2020. In the same period, the proportion of Iranians living below the poverty line rose by 10 percentage points to 30 percent. Years of stifling sanctions, which exacerbated governmental domestic mismanagement, have made most Iranians so financially insecure that they can no longer act as agents of change.

Consider the relative absence of major strikes from the recent unrest. Large-scale strikes are one of the most powerful forms of protest, but they never took off after Amini’s death, even though there were months of calls for workers to withhold their labor. That is because many people, especially in the working class, simply could not afford to forgo their wages or risk losing their jobs. As one Iranian labor activist wrote, workers were hesitant to join the demonstrations because “the participants know that not only is there no mention of wages [in the protests] but the risk of losing one’s job must also be consciously accepted.” The sentiment was echoed by a student protester, who told the The Wall Street Journal: “Many people say that if they get killed in the protest, their family will die of hunger.”

Since the demonstrations began, prominent leaders in the Iranian diaspora have called for Western policymakers to maintain or even tighten strict sanctions against Iran. It is an understandable request, given the government’s vicious crackdown on the protests, unconscionable drone sales to Russia, and continued intransigence in nuclear negotiations. If the West squeezes hard enough, sanctions advocates argue, the government might even collapse. But diaspora leaders have failed to consider how their calls to maintain maximum pressure are fundamentally in conflict with calls for large and sustained protests, including strikes. Increasing the economic precarity of ordinary Iranians simply reduces their capacity for political action.

Given that economic restrictions will remain the centerpiece of Western policy toward Iran, activists inside and outside the country must help craft more sophisticated sanctions policies, with the goal of restoring the political power of the Iranian people. The United States and the European Union should retool their current restrictions, which make it hard for Iranians to receive remittances, make it very difficult for Western businesses to hire Iranian freelancers, and make it nearly impossible for anyone other than Iran’s richest citizens to store their money abroad. Opening new financial channels while keeping others closed would allow Western policymakers to move beyond the failed paradigm of maximum pressure and instead adopt a kind of calibrated pressure. In doing so, they would account for the important connections between the economic resources available to households and the political power of ordinary people.

WHAT THEY NEED

In a seminal 1977 paper, the sociologists John McCarthy and Mayer Zald argued that “resources are necessary for engagement in social conflict” and “must be aggregated for collective purpose” if a movement is to succeed. In their view, participants in a movement must be able to provide money and time to the cause, and the more resources they can aggregate, the more likely it is that the social movement can develop the formal organizations needed to triumph.

Subsequent empirical research supports this theory—including in the case of Iran. The 2009 Green Movement, which successfully helped pressure Iran’s theocrats to allow Iranians to elect a reform-minded president, reflected the time, effort, and money that Iran’s middle classes brought to bear. By comparison, members of the working class could only play a small role in those protests. As the anthropologist Shahram Khosravi found, many Iranian workers declined to take part in the movement because they worried that it could cost them their jobs or suppress their earnings. The political historian Stella Morgana came to the same conclusion in her study of worker activism in Iran.

Western governments, of course, cannot be expected to pull Iranians out of poverty. But they can be expected to help households secure their livelihoods in ways that enable political participation. In fact, doing so might even be an obligation, given that Western sanctions are the cause of Iran’s most acute economic woes. To start, the United States and Europe should make it easier for Iranians in the diaspora to send remittances to relatives and friends in Iran. Right now, financial sanctions prevent people from making international wire transfers to Iranian banks. Global money services, such as Western Union, do not operate in the country. As a result, when members of the diaspora want to send money to Iran, they either have to go through opaque and byzantine havaleh exchange bureaus (which U.S. citizens are forbidden from using) or carry cash into the country. It is therefore no surprise that remittances to Iran are far lower than those to peer countries, according to World Bank estimates. In 2021, for example, remittances totaled $1.3 billion—just $50 per Iranian worker. Remittances to Egypt, by contrast, totaled $31.5 billion—more than $1,000 per Egyptian worker.

Iran’s leaders have long found ways of circumventing sanctions.

The United States should issue broader sanctions exemptions that permit Americans to use non-U.S. money service businesses to send money to their personal relations in Iran. In addition, more proactive guidance by Western governments would spur private-sector firms to develop ways to get remittances into Iran. The additional financial support would then shore up the economic welfare of Iranian households suffering because of high inflation, which is primarily a product of sanctions. It also could give people the financial security they need to join the protest movement, including through strikes. These remittances would similarly help student demonstrators dedicate more of their resources to the movement.

In addition, Western governments can help Iranian activists by enabling the country’s young, urbanized population to freelance remotely for foreign clients. Such a policy would greatly benefit this demographic, which is typically highly educated and skilled in fields such as design, engineering, multimedia editing, and software development but also chronically underemployed. In a recent viral tweet, for example, a young Iranian graphic designer touted her skills in creating custom curricula vitae but ended with a plea: “For the love of god, please give me work.” Western governments should authorize companies to hire people like her. Ideally, companies would even permit such workers to be paid through the same financial channels opened for remittances.

Some Western policymakers and analysts fear that opening these financial channels would strengthen the regime. But policies focused on enabling remittances and freelance payments would provide little reprieve for Iran’s elite. Both forms of income are likely to amount to just a few hundred dollars a month per person and could even be capped by Western governments, limiting how much money the Iranian government can make. These income sources would also make Iranians less dependent on state funding. Right now, 90 percent of Iranian households benefit from regular cash transfers from the government. Reducing the dependence of households on those funds would make it easier for Iranians to engage in more robust political action.

BURST THEIR BUBBLE

Western governments can take an even more dramatic step to empower ordinary Iranians, especially relative to the country’s political elite: make it easier for Iranians to take their wealth out of the country. Right now, sanctions effectively serve as capital controls and force international banks to turn away Iranian nationals. Unable to take their wealth out of the country in a worsening economic crisis, members of Iran’s middle class have instead bought domestic real estate, stocks, hard currency, and gold coins to try to hedge against inflation and uncertainty. But in doing so, they have contributed to asset bubbles that only increase the wealth of Iran’s political elite, who have a large portion of their personal wealth invested in these same assets. The bubbles have proved particularly beneficial to sanctioned Iranians, who are generally unable to invest their wealth abroad. They have also been especially valuable to bonyads: tax-exempt endowments that function as holding companies. These endowments are controlled by various political groups, including the Islamic Revolutionary Guard Corps.

It would be better if Iran’s middle class—which has an important role to play in Iran’s continued push for democratic change—could reliably preserve their wealth and do so without bolstering the elite’s economic power. Western governments should therefore revise their sanctions policies so that Iranians can invest abroad, principally in nearby economies. Iranian nationals should be explicitly authorized to open foreign bank accounts and transfer personal funds into those accounts. Western policymakers could work with regional governments and banks to encourage them to provide services to Iranian nationals, as long as the accounts are carefully monitored and governed by rules that ensure the funds can be used only in the jurisdiction in which the account is opened.

Proponents of maximum pressure sanctions might object that these policies will also help Iranian elites get their money out of the country. But the reality is that Iran’s leaders have long found ways of circumventing sanctions, including by buying luxury properties in cities from Dubai to Vancouver. Opening channels for capital to flee Iran would simply give ordinary Iranians a safe harbor that elites already enjoy, deflating the domestic asset bubbles that have burnished their fortunes.

PAY THE PRICE

Western sanctions on Iran are almost guaranteed to remain in place and in the coming years will cause the country’s economic resilience to falter. Iran will transition from a decade of economic stagnation into a period of slow but steady decline. The measures recommended here would not change this trajectory, and they would certainly not bolster the finances of the Iranian state. Remittances and freelance earnings would allow money to flow into Iran to help the lower and middle classes, but accommodations to help the upper middle class would draw money out of the country. The policies would, in other words, represent a dynamic new approach to economic coercion: maintaining pressure on the state while bolstering the power of ordinary Iranians.

Some Western-approved income can also change the character of Iran’s future protests. In recent years, most Iranian demonstrations have focused on economic concerns. Indeed, when small groups of oil workers did manage to strike in December, their demand was for higher wages, not for the radical political transformation sought by many of the protestors galvanized by Amini’s death. In fact, these working-class protesters were really asking for more support from the government ahead of budget negotiations. Iranian sociologists have warned that increased hardships for middle-class Iranians could push them to adopt a similar emphasis in their political activity at the expense of any clear vision of political change.

A recalibrated sanctions policy could help avoid this fate by better accounting for the power of the Iranian people—the only actors who can truly hold the government responsible. Such a policy would recognize that if the West expects workers to withdraw their labor in support of the protests, it ought to provide for their economic welfare. It would acknowledge that if the West wants business owners to remain politically active, it ought to make it easier for them to withdraw their capital from Iran—alleviating concerns that political turmoil will come at the expense of their economic standing. When it comes to using economic coercion to seek behavior change or to advance political aims, preserving the economic power of the people is as important as seeking to constrain the economic power of the elite. To secure the future that Iran’s protesters envisioned in their slogan of “woman, life, freedom,” Iranians must first secure their livelihoods.