Are the Sanctions Justified? Analyzing the Correlation between US Economic Sanctions against Iran & Iran’s Support for Terrorist Groups

In the Spring of 2012, I took Dr. Jim G. McGann’s PRAXIS course INTR 350: Research Methods.  The course is essentially a primer before Penn IR majors begin their senior thesis research.  It’s a great way to expose IR juniors to the various methods of research available in this academic niche, especially qualitative approaches (which are quite common in the humanities).

The sections below are excerpted from my final term paper, in which I constructed a research design to analyze what correlation exists (if any) between America’s economic sanctions against Iran and Iran’s support for terrorist groups.  I’m only including the background and literature review, because quite frankly, the research design itself is quite boring (and at any rate, I didn’t wind up actually gathering the data and conducting the research: my thesis examined a different aspect of US/Iranian relations).  If you’d like to read the full paper, feel free to comment and leave your email address so I can send you a copy.

I. Introduction

Ever since the Iranian Revolution of 1979, American and Iran have been at odds.  The sources of this two-way antipathy are varied and complex.  Furthermore, they have arguably intensified over the years: from President George W. Bush labeling Iran as part of the Axis of Evil to President Obama passing the strictest round of economic sanctions on Iran to date.

While the current news cycle is all abuzz with the latest US-led round of sanctions against Iran over the latter’s nuclear program, this research at hand will not concern itself with that aspect of the row between the two nations.  Rather, the purpose of this research is to examine a different justification for US-led sanctions: allegations that Iran is a state sponsor of terrorism.  As far back as 1987, when President Ronald Reagan signed Executive Order no. 12613, the United States has been accusing Iran of “actively supporting terrorism as an instrument of state policy.”[1]  This was in fact the justification for the executive order itself, which prohibited imports of Iranian goods to the America.  Since then, the alleged link between terrorist groups and Iran has been referenced time and time again.  According to the US Department of State, one of the reasons for the sanctions against Iran is Iran’s support of terrorism.[2]  The CIA World Factbook explains that, “Iran has been designated a state sponsor of terrorism for its activities in Lebanon and elsewhere in the world and remains subject to US, UN, and EU economic sanctions and export controls because of its continued involvement in terrorism.”[3]

Thus, the focus of this research is to assess the relationship between Iran’s involvement with proxy groups and the economic sanctions placed on Iran.  This research aims to answer questions such as: To what extent is the US government’s claim that Iran is a state sponsor of terrorism legitimate?  If such a relationship does exist, does its strength over time correspond with the passage of US-led sanctions?  Does Iran respond to said sanctions by increasing or decreasing their support of proxy groups?

The results of this research will hopefully be twofold.  They first will assess to what extent America’s cited justification for economic sanctions is legitimate.  In other words, the hope is that this research will give real, evidentiary grounding (or lack thereof) for the US-led sanctions (specifically vis-à-vis terrorism).  Next, the results of this research will go one step further and attempt to understand what impact (if any) economic sanctions have had on Iran’s relationship with these proxy groups.  Essentially, if America so firmly believes that economic sanctions will persuade Iran to reduce its relationship with terrorist groups, then this research aims to discover if sanctions do indeed have the desired effect.


II. Literature Review

There are two existing groups of literature surrounding the topic of this research paper: economic sanctions as a tool for foreign policy and Iran’s alleged support of terrorism.  As such, a review of each of these areas is warranted.

The use of soft power, such as economics, dates back far into the annals of international relations.  Specifically, sanctions have seen their fair share of use.  Alerassool writes that, “economic sanctions have been used to exert pressure on target countries either to influence their political conduct or to destabilize regimes that are perceived as ‘unfriendly’.”[4]  With regards to sanctions against Iran, the tactic was first applied by President Carter in 1979 with Executive Order no. 12170, which froze $14 billion of Iranian assets.[5]  Just over a year later, Iran agreed to release the US hostages in return for the unfreezing of its assets.[6]  So America’s first implementation of sanctions against Iran can be seen as a success – the political objectives of the US were achieved.  Alerassool explains the three factors that most contributed to this success: (1) that Iran’s assets were in US financial institutions, (2) that the US was willing to use private banks against Iran, and (3) that the US acted within the legal framework set out by the International Emergency Economic Powers Act.[7]

Since that instance of an economic freeze, nearly 20 additional executive orders have been signed to limit the economic relationship between American and Iran.[8]  However, the impact of America’s sanctions against Iran has been highly contested.  There is debate surrounding not only whether or not the sanctions actually hurt Iran’s economy, but also to what extent they are able to influence the policies of the Iranian government.[9]  Askari and co. argue that due to the effects of a globalized and highly-interconnected economy, the impact of America’s sanctions on Iran is limited, citing other domestic sources as the causes of Iran’s lackluster economic performance over the years.[10]  In short, the direct impact of economic sanctions is ambiguous at best.

We turn now to the other area of research within this paper: Iran’s alleged support of terrorist and other proxy groups.  To be sure, the language surrounding this accusation is strong.  Berman writes that “no other nation on earth provides more financial, military and political support to Islamist terrorists”[11] than Iran.  Berman goes on to enumerate specific groups that Iran supports, including Hezbollah, the Palestinian Islamic Jihad, and al-Qaeda.[12]  Pfaltzgraff specifies when he writes that Iran has funneled sophisticated missile technology to Hezbollah and has intended to transfer nuclear knowledge to its “friends and allies.”[13]

O’Ballance further describes the history of Iran’s exportation of violence, citing incidents in the immediate aftermath of the 1979 Revolution when operatives were hired to assassinate the Islamic Republic’s enemies.[14]  After 1982, however, it seems that the Iranian government shifted away from hiring single hit men to channeling its proxy efforts into Hezbollah and other such groups in Lebanon.[15]  That being said, O’Ballance goes on to provide other explicit examples of Iran’s willingness to use extrajudicial and violent means to carry out its foreign policy: the Salman Rushdie fatwa (religious edict ordering his death), the assassinations of Kurdish leaders and former members of the Shah’s government in Austria and France respectively, and the collaboration with other extremist groups such as the Irish Republican Army.[16]  More recently, Iran has entered into a formal alliance with Hamas, agreeing to provide the Palestinian Covenant of the Islamic Resistance Movement with financial and political support.[17]  While such alliances fall along common religious bonds (namely, Shi’ism) Jones even found evidence of Iran’s collaboration with al-Qaeda from 2001 thru 2011.[18]  Such evidence is arguably more troubling than Iran’s relationship with proxy Shi’a groups because it suggests that animosity towards the US is becoming such a strong rallying point that even traditional rivals are willing to overcome their differences in the fight against the West.

However, there does exist a dissenting view within this aspect of the literature.  Bahgat argues that Iran’s relationship with Hezbollah could actually become helpful for the United States when it comes to brokering an Arab-Israeli peace deal in Palestine.[19]  Samii takes a position that is even further removed, insisting that questions of relativism are the real root of the problem.  In other words, Samii essentially takes the broad perspective that the inherent difficulty in creating a hard-and-fast definition of “terrorism” produces an impasse between the two nations: both accuse each other of sponsoring terrorism due to differing perspectives on the matter.[20]  Byman presents the middle-of-the-road evidence, suggesting that while Iran does indeed deal with terrorists, these interactions have not only been declining over the years, but also are unlikely to result in the transfer of any weapons of mass destruction.[21]  In fact, Byman argues that Iran serves as a restraint on its proxy partners, due to fears that attacks too strong could incur an even stronger American response.[22]  America’s response, in turn, has been to rely on the relatively softer power of economic sanctions, but Byman notes that sanctions “have not persuaded Tehran to abandon its support for terrorism.”[23]

This brings us to the intersection of the two foregoing literature reviews: where economic sanctions meet Iran’s support of terrorism.  O’Sullivan sees the two as inexorably intertwined, as a peaceful means for a nation to influence even its enemies.  Iran in particular is an important case study at the intersection of unilateral sanctions and combating terrorism.[24]  O’Sullivan makes the link between sanctions and terrorism thusly: “Sanctions [against Iran] were viewed as a means of containing Iran’s ability to…support international terrorism [and] as a means of influencing Iran’s desire to undertake those activities.”[25]  While Iran’s support for terrorism has fluctuated over the years (be it against Israel or in Europe), O’Sullivan points out that there is little evidence that these shifts were a direct result of US sanctions.[26]  And for his part, Alikhani echoes O’Sullivan’s conclusion: while sanctions have comprised an integral component of US foreign policy towards Iran since 1979, they “have failed to achieve any of their major goals,” including curbing Iran’s support for international terrorism.[27]

While the foregoing literature on the subject is both insightful and helpful, it is lacking a critical component: the perceived threats from the proxy groups themselves.  That is to say, none of these authors address the question of Iran’s support of proxy groups from the perspective of the groups themselves, and the areas in which they conduct their activities.  Simply establishing the relationship between Iran and these proxy groups isn’t enough: it is the primary goal of this research to quantify that relationship in terms of the perceived threat of these groups over time.  Only by examining these groups’ activities over time will one be able to get a firm understanding of the relationship between economic sanctions on Iran and the activities of terrorist groups they support.

[1] Ronald Reagan, “Executive Order No. 12613: Prohibiting Imports from Iran,” October 30, 1987. <;.

[2] “Iran Sanctions,” US Department of State, 2012. <;.

[3] “Iran: Background,” The CIA World Factbook, March 26, 2012. <;.

[4] Mahvash Alerassool. Freezing Assets: The USA and the Most Effective Economic Sanction. (London: The MacMillan Press Ltd, 1993): 1.

[5] Ibid., 2.

[6] Ibid.

[7] Ibid., 4.

[8] Hossein G. Askari, John Forrer, Hildy Teegen, and Jiawen Yang. Case Studies of U.S. Economic Sanctions: The Chinese, Cuban, and Iranian Experience, (Westport, CT: Praeger Publishers, 2003): 188-189.

[9] Ibid.,172.

[10] Ibid., 211.

[11] Ilan Berman, Taking on Tehran: Strategies for Confronting the Islamic Republic. Lanham, MD, (Lexington Books, 2007): viii.

[12] Ibid., 2.

[13] Robert L. Pfaltzgraff, Jr., Counterproliferation Challenges in Taking on Tehran, ed. Ilan Berman. Lanham, MD, (Lexington Books, 2007): 86-87.

[14] Edgar O’Balance, Islamic Fundamentalist Terrorism, 1979-95: The Iranian Connection, (New York: New York University Press, 1996): 145-147.

[15] Ibid., 148.

[16] Ibid., 153-163.

[17] Ibid., 165.

[18] Seth Jones, “Al Qaeda in Iran: Why Tehran is Accomodating the Terrorist Group,” Foreign Affairs, January 29, 2012. <;.

[19] Gawdat Bahgat, “Iran, the United States, and the War on Terror,” Studies in Conflict & Terrorism 26 no. 2, (Routledge, London, 2003): 102. <;.

[20] A. William Samii, “Tehran, Washington and Terror: No Agreement to Differ,” Middle East Review of International Affairs 6 no. 3 (September 2002): 53-61.

[21] Daniel Byman, “Iran, Terrorism, and Weapons of Mass Destruction,” Studies in Conflict & Terrorism 31 no. 3, (Routledge, London, 2008): 170-172.

[22] Ibid., 175-176.

[23] Ibid., 176.

[24] Meghan L. O’Sullivan, Shrewd Sanctions: Statecraft and State Sponsors of Terrorism, (Harrisonburg, VA: R. R. Donnelley, 2003): 7.

[25] Ibid., 47.

[26] Ibid., 80-81.

[27] Hossein Alikhani, Sanctioning Iran: Anatomy of a Failed Policy. (I. B. Tauris & Co Ltd, London, 2000): 402-408.