During the debate about the Iran nuclear deal, President Obama famously said that the pact was an opportunity for Tehran “to get right with the world.” Implicit in that argument and numerous other such appeals was the assumption that welcoming Iran back into the family of nations would aid in the transformation of that nation’s society. Indeed, the president seemed to believe reintegration into the global economy would have a liberating effect on a country bowed down by a repressive theocracy and its terrorist allies in the Iran Revolutionary Guard Corps (IRGC). That faith seemed to also be shared by many of the Western nations and business that have plunged wholeheartedly into what has become an Iran gold rush. As we saw during Iranian President Hassan Rouhani’s European victory tour, everyone on the continent is eager to land deals they think will enrich them and their Iranian partners.
But it turns out that the skeptics that pointed out that the only people who would gain from the cash windfall created by the end of international sanctions on Iran were those already connected to the regime. As the New York Times points out today, despite the vast sums that are already flooding into their economy, “little or nothing is trickling down to the lower levels of Iran’s beleaguered but still enormous private sector.” The beneficiaries of the West’s largesse are the large state-run companies that are the economic arm of the regime. Ultimately, the money will also wind up finding its way into the hands of a large part of the economy run by the IRGC.
The Times puts some of the blame for this on the unwillingness of Congress to lift all sanctions on Iran. The banking restrictions still in place make it harder for private companies because they don’t have the cash to compete with the state-run sector. But while there is some truth to this, it misses the basic point about dealing with the Iranian economy. Money that is funneled to the Iranians will always wind up helping the government or its military/terror arm because that is the way the system is set up to work. Ending financial restrictions won’t enrich ordinary Iranians, let alone force the government to change. To the contrary, doing so means giving the regime even more cash since they will always find ways to restrict private businesses.
That this should be the case shouldn’t surprise anyone. Authoritarian regimes are primarily interested in their own survival, not bettering the lives of those they tyrannize. While, in a best case scenario, there might eventually be enough economic development to expand and enrich the private sector, analogies between China (whose totalitarian rulers have exchanged economic freedom for continued political despotism) and Iran. The theocrats in Tehran still see themselves as revolutionaries bent on achieving regional hegemony, not players in the global economy. The state sector is prioritized not just because they’ve got the cash on hand but also because the prosperity of those companies is integral to the survival of the Islamic Republic.
What this means in both the short term is that the money that goes into Iran is going to bolster the ayatollahs’ grip on power, not loosen it. The Tehran gold rush will also mean that the IRGC will soon be able to devote even more resources to strengthening terror groups like Hezbollah and continuing their private war on Israel. But the impact goes deeper than that. Social change, let alone political reform will become less likely because the West will have given the regime the tools to increase their muscle and to suppress dissent.
Nor will this do the Western firms now getting into bed with government-run businesses much good in the long run. As is the case whenever capitalists rely on states that don’t believe in the rule of law, they are making a losing bet with their money since the state always prevails in Iran.
President Obama passed on an opportunity to try to help the Iranian people in the summer of 2009 when the United States stood by silently as the Islamist regime crushed dissent when demonstrations arose in Tehran. But when he was given another chance to try to help change Iran, he chose instead to go partner with the ayatollahs and the result is a nuclear deal that not only preserves their nuclear program but also ensures that they will have the financial clout to keep their grip on a restive and dissatisfied Iranian people.
In the long run, the Iranian people would have benefited by the kind of economic pressure and embargo that would have forced the regime to drop their dangerous nuclear dreams or face a collapse. But instead, President Obama chose to make sure that the theocrats never run out of cash or lose power. That is a formula for helping Islamist tyrants and their state-sponsored terror; not the Iranian people.