Bill to Reinstate Iran Sanctions Could Stunt Development

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PHILADELPHIA, Pennsylvania — A new piece of legislation aimed at reinstating the Iran Sanctions Act of 1996 was introduced to the House of Representatives Representative Edward R. Royce (R-CA) on November 14, 2016. The bill was passed in the House one day later and presented to President Obama on December 2, 2016.

Passage of the bill H.R. 6297 would reinstate sanctions against Iran that were lifted upon enactment of the Iran Deal in January 2016. Per the 1996 act, sanctions against Iran restrict the development, production and exportation of petroleum products in and from Iran.

Even before the 2016 deal was passed, experts like Shanta Davarajan, the World Bank’s chief economist for the Middle East and North Africa, posited significant financial development in a sanction-free Iran. According to an August 2015 interview with the World Bank, Davarajan stated that much of this development would be linked to oil exports.

Exports in Iran had decreased by one million barrels per day when the European Union sanctions tightened in 2012. An embargo included in these sanctions raised trade costs significantly as well, putting a strain on the country’s economy.

At that time, the nation had accumulated between 30 and 40 million barrels of oil stockpiled in the Persian Gulf. That alone had a potential to be a financial boost upon removal of sanctions. Daravajan also estimated that Iran’s Gross Domestic Product (GDP) growth would increase from three percent in 2015 to five percent in 2016.

Based on data collected since the Iran Deal’s passage, Daravajan’s thoughts about economic growth without sanctions were largely accurate. World Bank research from Spring 2016 indicates that Iran will experience significant GDP growth to 4.2 percent by the end of 2016 and 4.6 percent in 2017.

World Bank experts credit this growth to a more business-focused economic structure in Iran that would likely be lost if this new bill passes. One developmental pitfall could be a decrease in women’s employment. Maryam Zar, the founder of Womanfound, wrote in 2011 about the critical nature of women’s involvement in developing economies. Just before sanctions tightened further in 2012, she criticized the destabilization efforts that tend to drive Iran sanctions.

The burden of regime destabilization is often shouldered by women. By disrupting the Iranian economy in such a way over the next few years, women could face disempowerment in the workforce and elsewhere. According to Davarajan, certain analyses suggest that the rate of unemployment for women increased in Iran during the sanctions era. She credited this trend to a drop in service sector demand in a restricted economy.

Before the Iran Deal was enacted, she said, “The lifting of sanctions may reverse this trend, since the additional foreign currency in the market will typically give a boost to the services sectors, which tends to hire more females.”

Another concern is disruption of a five-year economic plan developed in light of the Iran Deal. As part of a 20-year vision document, this economic plan from 2016 to 2021 rests on three pillars. Those pillars focus on scientific and technological progress, promotion of cultural excellence and the creation of a secure economy.

Achieving the third goal is predicated on allocating oil revenue to important government programs, one of which is direct cash transfers. This program has replaced subsidies and it acts as a source of domestic aid to low-income households.

Although H.R. 6297 may appear to exist in the vacuum of nuclear proliferation, reinstating Iran sanctions could have drastic effects on Iranian development. If a more nuanced approach is taken, however, legislators in the United States and Iran could strike a balance between maintaining national security in the U.S. and allowing Iranians to thrive.

Madeline Distasio

Photo: Flickr

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Madeline Distasio

Madeline is from Philadelphia, PA. She has a degree in English and a postgraduate journalism certification. Madeline studied in London and loved it so much that she went back for her postgraduate work.

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