Did Iran Sanctions Embolden the Revolutionary Guard?

Did the sanctions regime that preceded the Iran nuclear deal enable the regime's most notorious actor, the Islamic Revolutionary Guard Corps (IRGC)? That's among the implications of a recent New York Times piece by Thomas Erdbrink, which notes that by hobbling the private sector, the sanctions bolstered the IRGC's relative power within Iran.

The piece argues the IRGC was able to cement its privileged position because it was the entity most capable of evading sanctions, including by developing or partnering with bogus “private” companies. Now that the United States and the international community have lifted most of the sanctions, Erdbrink assesses that President Hassan Rouhani’s government is rooting out corruption and putting limits on the IRGC. Thus, he posits, “President Trump’s refusal last week to recertify the Iran nuclear deal—and the possibility of new unilateral sanctions that brings—could be welcome news for the Revolutionary Guards, restoring them to a central role in the economy.”

But even if the analysis of the sanctions boost to the IRGC is spot-on, that doesn't mean the sanctions regime was a bad model or one that Congress and the president should eschew as they look to alter the behavior of bad actors, either inside or outside Iran, in the future. It does, however, suggest that there are important lessons to learn.

From the perspective of the United States, the narrative of the lead-up to the negotiations that produced the Joint Comprehensive Plan of Action remains that of a successful sanctions regime. Comprehensive international sanctions isolated the Iranian economy to such an extent that Tehran had no choice but to come to the negotiating table. While Iran holds to a different story—they say the sanctions played no real role in its decision to deal—the $160 billion in lost oil revenue, $100 billion in frozen assets and an economy estimated to have been 15 to 20 percent smaller than it would have been without sanctions all certainly contributed to American officials' confidence that the sanctions regime is what brought the Iranians to the table.

Setting aside whether the final deal was beneficial for the United States, the focus of that narrative is on the question of whether the sanctions worked as intended. As former Treasury Secretary Jacob Lew put it, “that is exactly what happened.”

Of course, getting the Iranians to the negotiating table is only a win if the negative secondary effects did not outweigh the primary achievement. The United States considers the IRGC one of the most destabilizing forces in the Middle East. Empowering the Revolutionary Guard certainly would call the success of the sanctions regime into question.

But a deeper look at the IRGC efforts abroad instead suggests that the Revolutionary Guard largely continued their normal activity during the sanctions period, advancing longstanding Iranian objectives. Similarly, structural changes in the Iranian economy to make it resistant to external pressures have gone, and will likely continue to go, unrealized.

To be certain, the news in recent years has been full of headlines about IRGC involvement across the Middle East, from material and military support for the murderous Assad regime in Syria to supporting Hamas in Gaza. Yet the IRGC’s support has hardly been different than before the broad international sanctions regime. The U.S. first designated Iran a state-sponsor of terrorism in 1984. They’ve been rearming Hezbollah since the 2006 Israel-Hezbollah conflict, supporting the Shia insurgency that targeted U.S. troops during the Iraq War, and allowing Al-Qaeda to move “funds and fighters” through Iran since at least 2009. While reports say that Iran expanded its involvement in proxy wars while the sanctions regime was in place, this is largely a result of the continued fighting in Iraq and Iranian support for the Assad government in Syria. Iran’s behavior has generally been predictable.

In fact, it was only after the JCPOA led to an infusion of cash back to Iran that Rouhani increased the IRGC's budget by 145 percent, not during the sanctions. The Revolutionary Guard's budget doesn't tell the full story of its relative power before and after sanctions. But it does suggest that it was constrained during sanctions, just as policymakers would have hoped.

As the sanctions took hold, Iranian authorities recognized the need for a different economic plan, although they still haven't agreed on what that plan should look like. The election of Rouhani in 2013 was partly a rejection of isolationism and a mandate to change Iran’s future—including its economic future. Meanwhile, in February 2014, Ayatollah Khamenei called for creation of a “resistance economy" that would better insulate the nation from exposure to market fluctuations and, more importantly, from the impact of sanctions. Under this plan, higher oil production, growth of the knowledge economy, financial reform and greater economic independence all would help Iran establish self-sufficiency and escape dependence on the West.

The 2015 JCPOA brought the debate over the future structure of the Iranian economy to the forefront of the nation's political establishment. Rouhani's active moves to constrain the IRGC are, in part, an attempt to make the Iranian economy more palatable for investment. But as Ayatollah Khamenei’s support for rolling back IRGC power appears tepid, the Guard is expected to remain a major player in the economy. Both leaders hope to “sanction-proof” the economy, but have competing objectives about the degree to which either wants Iran to be brought back into the international system. The disagreement over these end-goals underscores that the advertised economic restructuring is far from full realization and that Iran still does not have a “sanctions-proof” economy.

Developing a successful sanctions package is inherently difficult. Policymakers have to think seriously about the secondary effects of any sanctions regime, which means avoiding overly simplistic narratives. The Iran sanctions should serve as a blueprint for how to develop primary and secondary sanctions to achieve a specific objective. However, it also can serve as a case study in how sanctions may be evaded, how bad actors might benefit from them, and how hostile states may try, successfully or not, to “sanction-proof” their economies.

At the end of the day, justifying the downsides of a particular sanctions regime are will always depend on the significance of the threat to be addressed and whether the United States has other mechanisms that could mitigate the negative consequences.