The Effect of US Sanctions on Iran’s Economy

The Effect of U.S. Sanctions on Iran’s Economy:
Lessons from the Past and Predictions for Future
(Saeed Ghasseminejad, July 10, 2019)

Transcript available below

About the speaker

Dr. Saeed Ghasseminejad is a senior Iran and financial economics advisor at the Foundation for Defense of Democracies, specializing in Iran’s economy and financial markets, sanctions and illicit finance.

Born and raised in Iran, Saeed earned his Ph.D. in finance from the City University of New York where he analyzed the effect of U.S. sanctions on Iran’s financial markets as part of his dissertation. He teaches finance at Baruch College of New York. Saeed has a BS in engineering from the University of Tehran and an MS in engineering from Ecole Speciale des Travaux Publics in Paris.

Saeed’s work has been published in The Wall Street JournalCNBCFox NewsForeign PolicyBusiness InsiderThe Weekly StandardThe National InterestNational Post (Canada), Hurriyet (Turkey), Arab News, and The Jerusalem Post.  He has also been quoted and interviewed by The New York TimesThe Washington PostThe Wall Street JournalFox NewsForeign PolicyBild, and BBC Persian.  

Watch his speaker playlist on YouTube.


Robert R. Reilly:


I’m very happy to welcome for the first time Dr. Saeed Ghasseminejad. He rehearsed with me the pronunciation of his name, so my Farsi would be so good tonight. As you know, he’s a senior Iran and financial economics advisor at the Foundation for the Defense of Democracies, an organization which is an old friend of ours at Westminster, and he specializes in Iran’s economy and financial markets, sanctions, and illicit finance.

He was born and raised in Iran, though he earned his PhD in finance from the City University of New York where he specialized in the topic he will be addressing this evening, including his PhD dissertation on the subject of the effect of U.S. sanctions in that country. He teaches finance at Baruch College of New York. He has a BS as a renaissance man in engineering from the University of Tehran and an MS in engineering from Ecole Speciale des Travaux Publics in Paris. He is widely published and I’m going to leave him with all the time now to speak on his subject, “The Effect of U.S. Sanctions on Iran’s Economy: Lessons from the Past and Predictions for the Future.” Thank you, Saeed.

Saeed Ghassemenijad:


Thank you very much. Thank you for inviting me here and for the opportunity, a special thanks to Bob for arranging it, and a special thanks yo you and my appreciation to you for coming here on this hot summer day. I apologize in advance for my time to time incomprehensible Iranian accent. It’s probably too late for me to change it, so you’re stuck with me.

I would also like to let you know in advance that when it comes to the Islamist regime in Tehran, I am quite biased, so ‘I don’t like the regime’ does not do a great job in describing my feelings about it. I really detest the regime. I think this regime has been a disaster for Iranians. It has been a disaster for the people in the region. Hundreds of thousands of Syrians are dead. Syrian children, women, men would confirm it if they could. And I think that this regime has harmed the United States. It has kills hundreds of American troops and basically, I think the world would have been a better place if this regime does not exist, so that’s my bias. My enemies accuse me of being anti-regime. I totally accept that, so they are right about that.

A few points about me, again, like about my background. I was born and raised in Iran after the ’79 revolution, during the war, so my early childhood memories are from the war and the morality police, that’s an experience that all Iranians have.

And then I went to the University of Tehran. I was to be a civil engineer, but I like politics a lot, so I became the political agitator of an Iranian student daily newspaper and when I was twenty years old, a few IRGC intelligence agents came into my car with guns and took me with my own car to the Evin prison, so I still find it very strange that they thought like I was some kind of leader of protestors or something like that, but that’s apparently what they thought and that also shaped my feelings and emotions about the IRGC.

So I remember when the first time Mark Dubowitz and I talked about working for FDD. He asked me – they saw a paper I had written about the IRGC and the Tehran Stock Exchange and he asked me, “Why did you choose this topic?” And I said because they arrested me, and that’s really the reason why I have been so interested in what the IRGC has been doing since then.


Tonight, I will be talking about the effect of U.S. sanctions on Iran. First, I just want to do a brief comparison of some economic trends pre and post ’79 revolution because that would be very relevant to the conclusions that I am going to make at the end.

Next, there will be a few notes about Iran’s economy, then an overview of U.S. sanctions against Iran from ’79 to 2013, and then I will guide into the Trump sanctions, how they are affecting Iran’s economy, how they are affecting Iran’s decision-making, and after that I would like to say a few words about what would be the optimal U.S. strategy about Iran given what we now about the effect of U.S. sanctions on Iran’s economy.

So here you have the GDP per capita, the real GDP per capita, for Iran, Turkey, and South Korea. It starts from 1960 and goes to 2017. If you look at the beginning of it, you see that Iran’s GDP per capita was actually above Turkey and South Korea, the real one, and it grows at a much faster rate than both of them.

As you see there, it grows quickly up to 1977 and that’s the year that you had some economic problems in Iran, the revolution starts, and in early 1979, the revolution, Islamic Revolution, succeeds, and then you see the trend totally reverses. Iran goes down, the GDP per capita goes down, South Korea and Turkey, they are going up. If you look at this, Iran’s GDP per capita has never reached back to its high level during the Shah, so that really summarizes the economic effect of the revolution on Iran.

The next one is the GDP per capita of the current U.S. dollar, the difference between the real and the current is that the real actually takes into account that one dollar for example in 1960 is not the same as one dollar in 2016, but even here, you see the same trend, right? So in 1960, 1970, Iran’s GDP per capita was still higher than Turkey and South Korea. It grows at a fast rate. It grows at a faster rate than Turkey’s and South Korea’s, and then after the revolution it goes down, so the conclusion here is that not only Iran’s GDP per capita, the real one, did not go back to its pre-revolution level, [but] what would have happened if there had not been a revolution?

A colleague of mine, Dr. Mohammad Reza Jahan-Parvar, who’s an economist at Fed., he has a very good paper of this. I think the name is The Cost of a Revolution. But the answer is that Iran’s economy should have been much better than South Korea and Turkey if the Shah’s economic policy and the Shah’s foreign policy had continued, and that’s really, again, the cost of the revolution.

Social Effect

So one may say that after the ’79 revolution, what happened was that Khomeini, who was the Shiite cleric who looked at the Shia as the chosen tribe of Allah, he actually told Iranians that you need to have more children, and that happened. The reason was that the Shia should have been much more numerous than the Sunnis, right, in Khomeini’s mind, and that happened.

And one may say that okay, so the population went up, so the GDP per capita mechanically should go down. It is not the effect of the mismanagement, so if you look at the GDP – not just the GDP per capita – again, you see the same trend. You see the GDP is going up during the Shah era and then you have the revolution. It goes down, so it’s not really the effect of population in the GDP per capita. The economy has really gone bad under the Islamic regime.

And in the next slide we have the current level, the same trend. We talked about the economic effect of the revolution. On the social effect, I think as you can see in this picture, the effect was much harder on Iranian women. So on the top on the left side you see an Iranian actress before the revolution. On the right, you see the same Iranian actress after the revolution. On the left on the bottom you see Iranian students before the revolution. On the right you see Iranian students after the revolution. So the revolution really hit hard Iranian women more than anyone else.

I want to conclude this first part: first, the Islamist regime in Tehran has destroyed Iran’s economy. That’s a fact. Second, if the Islamic Revolution had not happened and the Shah’s economic and foreign policies had continued, Iran’s economy in terms of GDP and GDP per capita would have been far above South Korea and Turkey. That’s something that we can conclude.

From an Ally to an Enemy

On the U.S. side, the U.S. lost a key ally following the 1979 Revolution. Shah was a pro-U.S. monarch. Iran was a stabilizing force in the region and a key partner in the fight against communism and the Shah actually was fighting Islamism long before the U.S. did. At the time, 1979, Islamism was not much of a threat to the U.S. The U.S. started fighting Islamism long after that.

What replaced the Shah? The Islamic Republic became the U.S.’s main enemy in the region. It had become the engine behind this destabilization of the region, and responsible for the deaths of hundreds of Americans in Lebanon, in Iraq, around the world. And what was the U.S. action to that? If setting aside Carter at least at the beginning of the revolution, after the hostage crisis, all U.S. administrations have tried to somehow contain the negative effect of the Iranian regime’s behavior. And one of the tools that they use was economic sanctions. So we will be talking about how this happened, how they used the economic sanctions to contain Iranian behavior, and whether it actually helped.

Iran’s Economy Today

Before that, I have to say a few words about Iran’s economy. We will see after how the sanctions evolved over time. So Iran’s economy is significantly dependent on oil. So even after the economy has grown and it diversified, oil is still 20% to 25% of Iran’s GDP. Here you see from 2002 to 2012, but that does not summarize the real effect of oil because if you look at the exports, at least 50% of Iran’s exports – sometimes more, sometimes a little less – comes from exporting crude oil, so this is the hard currency which comes into Iran, which is really important, which is really the engine of the Iranian economy, and over the past few years another 15% of Iran’s exports come from the petrochemical products. So again, this is not crude oil, but it is very much dependent on oil. This is some kind of oil product.

So why that is important is because Iran’s dependence on oil means that if you actually go and target the channel, you are actually putting a lot of pressure on the regime. This is not a well-diversified economy, so just by putting pressure on oil, you are going to cut at least 50% of Iran’s hard currency flow.

If you put pressure on the petrochemical, you are putting another 15%, so like 65% to 70% of Iran’s hard currency is coming from these two industries, so that means sanctions actually can be very effective and they can quickly lead to an observable effect on Iran’s economy, which should, in turn, be observable in the way Iran makes its political and military decisions, and that’s actually something that we see.

IRGC and the Supreme Leader

Another important point about Iran’s economy is the role of the IRGC and the Supreme Leader, so this is something which is discussed in the financial and economic literature generally under the term of the political connection, so these are politically-connected entities in Iran’s economy, and what makes it very interesting in Iran is that these are bad actors. These are bad actors who are actually making decisions in Iran and they have significant economic influence there. They have significant assets that can be targeted. A few days ago the United States targeted the Supreme Leader, right? That’s at least $200 billion dollars of assets under his direct control in three foundations.

So when you have like these actors who have real economic interests, real financial interests, and you go after their assets, the pressure is directly imposed on them. It’s not like you have many private sector companies and then you sanction those companies and those companies should go to policymakers and tell them that these sanctions are hurting us. You are sanctioning the IRGC, you are sanctioning the Supreme Leader’s business empire. It’s directly imposed on them. They quickly feel the pressure.

IRGC Business Empire

So a few notes about the IRGC business empire. So the IRGC is Iran’s main military force and a key player in the country’s economic policies, but established after the 1979 Revolution by Khomeini’s followers. Its main goal at that time was to be a counterweight against the army, which was a royal army. And the Mullahs really feared that there would be a coup, so they created the IRGC to watch the army and to be a counterweight, but then you had the war. During the war, the IRGC became actually more like a conventional army. So before it was more like an intelligence service. During the war, it added the conventional army to its characteristics.

Another point to make about the IRGC is that the IRGC entered Iran’s economy after the war. The reason was that during the war, most of Iran’s resources were going to the war effort and the IRGC was getting the lion’s share of it, so the IRGC amassed lots of equipment and assets and things like that, and you couldn’t take it back from them. It was not easy to do that.

When the war was over, Khomeini died and Rafsanjani came, so the reconstruction era started, and Rafsanjani told government estate entities to go and raise your own money, like we don’t have much money, you can go and raise your own money.

And lots of contracts went to the IRGC, and it’s not very related, but it’s important to know that when Rafsanjani came into power, Rafsanjani was actually much closer to the IRGC than Khamenei. Khamenei was not that close to to the IRGC. The IRGC people actually did not like Khamenei at all. Khamenei didn’t have that much power in the ’80s and he was much closer to the army and Rafsanjani was very close to the IRGC, so Rafsanjani I think thought I’m going to give all these contracts to my IRGC pals and I will be using them to control the Supreme Leader, Ali Khamenei. That actually didn’t happen. Khamenei outsmarted him.

But anyway, so the IRGC entered Iran’s economy. IRGC penetrated Iran’s economy gradually. The historic point was 2004. So before that the IRGC intervenes in Iran’s economy through three channels. One is the IRGC Cooperative Foundation, Basij Cooperative Foundation, and Khatam-al Anbiya garrison, the Khatam-al Anbiya headquarters. All three of them – I’m not sure if the treasury has designated the Basic Cooperative Foundation, but the IRGC Cooperative and Khatam-al Anbiya headquarters are sanctioned.

They have a vast network of subsidiaries. Currently, I think the last number that I have identified, I have identified until now is like 800 subsidiaries, companies, and close to 2,000 managers. So we are tracking these companies and managers. These are like – the number is huge. It’s like 800, 900. I don’t think it’s even ten percent of it.

As we said in the ’90s, they started to penetrate Iran’s economy. A main point, a historic point, was 2004 when the Guard seized Tehran’s new airport to protest the involvement of a Turkish company in the managing of the airport, so the IRGC controls all of the ports and airports. That’s important to them for the terrorism-supporting activities, for smuggling, the IRGC is the main smuggler in the country. IRGC is heavily involved in drug trafficking, so they really control the border.

Seizing Assets

So this Turkish company was supposed to manage the new airport and the IRGC was not happy about it, so what did they say? They said that this Turkish company is connected to a Zionist company. And they went in actually to take over the airport. They said as long as the Turkish company is here, no airplanes are coming here. And what happened is the Turkish company had to leave. So IRGC in fact showed everyone that it has the right of first refusal for large projects in Iran, so that was a turning point

Another one was May 2005. So Iran’s economy after the revolution – state took over everything, so they kicked out entrepreneurs, took their assets, and everything was state-owned, so in 2005, the Supreme Leader issued a decree, demanding a vast privatization program over a five year period. So what happened actually was that lots of these state-owned assets went to Khamenei’s business empire and the IRGC-owned companies. So you had a transfer of assets which were owned, which were controlled by the executive branch, to entities controlled by Khamenei and by the IRGC.

I think the reason that Khamenei decided that was that in 1997, Khatami came into power. He quickly turned out not to be a reformist. He was a fake reformist, but still to Khamenei who wants to control everything, he suddenly figured out that all these assets which were under the control of the executive branch, when there is a president who may be a little independent, it becomes difficult for Khamenei’s cronies to have the largest share because the president has his own cronies, right, so he’s giving his money and assets to his friends. So the solution was that okay, we are going to have the fake privatization, take the assets from the executive branch, give it to the IRGC and my own business empire. So that’s what happened in 2005.

Another point for the IRGC was 2009. You had this Green Revolution in Iran and the normal hardline, conservative or whatever they call them, so these political forces in Iran, supporters of the Supreme Leader, they really failed to neutralize the Green Revolution. What actually helped was the IRGC. The IRGC came in, they crushed the protests, and they needed a reward, right, so you had the vast transfer of assets to the IRGC after 2009. In one case, for example, the telecommunication company of Iran at the time was [worth] $8 billion dollars and it’s not a lot in the context of the U.S., but in the context of the Iranian economy, that was a very big company, so that was transferred to the IRGC and lots of other assets.

What They Control

The IRGC controls like between 15% to 20%, 25%, the number goes up and down. It receives billions of dollars in contracts, especially when Ahmadinejad was in power as a considerable share of Iran’s underground economy. Iran’s underground economy itself is estimated to be 25% to 35% of Iran’s GDP and the IRGC has tight control over that. And they are really involved in everything.

Then we have the Khamenei-controlled companies. Khamenei has a vast business empire too. It’s usually controlled through three foundations: the EIKO, which is the Execution of Imam Khomeini Order, the Mostazafan Foundation, which is the foundation of the oppressed, and the Astan Quds, which is the eighth imam’s shrine in the east of Iran. These three companies have acquired a good portion of their assets through the confiscation of dissidents’ assets.

At the beginning of the revolution, they got the Shah people’s assets and then as they kicked more people out of the country, they could get assets. Until now if the government goes after your assets and if somehow they cannot find who should be the just owner, it goes to the Supreme Leader. In many cases, they cannot actually find who is the real owner, so those assets are going to the Supreme Leader, but we can call that the seed money that Khamenei received from Iranians.

After that, they are getting all the contracts. For example, after the JCPOA, the first oil contract, the first big oil contract, went to the Supreme Leader’s business empire. That has actually a very funny story because the company which got that was a company that Khamenei created. The name is Barkat Foundation. It was supposed to be a microfinance company, giving small loans to people in the rural part of Iran, the small cities, so they can create their own small businesses, but suddenly it became a vast pharmaceutical holding and then it went into the oil. You can see all these foundations which are presented as charities. This is really a big business empire owned by Khamenei.

Khamenei’s Assets

I actually did an evaluation of Khamenei’s assets and in the most conservative estimate, it has $200 billion dollars of assets. That is the most conservative. I think that the actual number should be much higher, at least like around $300 billion, $350 billion dollars. I tell you why: the Mostazafan Foundation, which is one of these foundations, says that in one year only, its manufacturing holding exported €700 million euros, and they say this is 10% of their total revenue in that year, so they had a total revenue of €7 billion euros.

If you say okay, you have an asset turnover of just 10%, that means only the manufacturing part of the Mostazafan Foundation should have €70 billion euros in assets. That’s just one part of it. You don’t consider the real estate holding, you don’t consider the service holding of them, and that’s just one of the foundations. The EIKO’s assets have been estimated to be $95 billion dollars, so the real number, the point is that it’s really above this $200 billion dollars.

Tax Evasion

They do not pay taxes. They cannot be audited unless the Supreme Leader himself allows it, gives the permission, so they do not pay taxes, they cannot be audited. They basically do whatever they want. In 2013, EIKO and 37 of its subsidiaries were designated by the Obama administration and it was not related to the nuclear issue. It was related to support for terrorism, I think, and corruption.

In 2015, as part of the JCPOA, to make the deal sweet to the Supreme Leader, the whole business empire of the Supreme Leader has been delisted, so they were not sanctioned after that. We actually tracked it and they received lots of deals after the 2015 when the foreign companies started going into Iran. Lots of European companies and Chinese companies, South Korean companies, they signed big deals with these foundations controlled by the Supreme Leader.

History of Sanctions

The next part that I want to talk about is a brief history of sanctions against Iran between 1979 and 2013, after 1979, the first sanctions that happened, what related to the hostage crisis. As a result of the hostage crisis, you had some sanctions. They reached a deal, but in the ’80s, the Iranian regime started to kill Americans.

In the ’80s, you had new sanctions. For example, in 1987, you had the import of all goods, including oil from Iran, became forbidden. In 1995, the Clinton Administration banned U.S. investment in Iran. One year later, the U.S. banned any investment of more than $20 million in Iran’s oil sector and in early 2000, the United States introduced a few authorities to sanction Iran for supporting terrorism and WMD.

But those were not very significant sanctions. The U.S. said we are not going to trade with you. In the ’80s, Iran was not a good place to trade. In the ’90s, Europeans and Eastern Asian companies started to trade with Iran. In 2003, IAEA confirmed the presence of undeclared nuclear sites in Iran, which led to negotiations between Iran and European powers and they reached an agreement in 2005. Iran decided that they don’t want to be in the agreement anymore, so they reactivated their nuclear program.

Nuclear-Based Sanctions

The 2005 breach of the agreement was the time that the international community started to really go after Iran’s economy with the sanctions and as we will see, the sanctions really evolved over time. The international community started to use the sanctions, obviously, at the very beginning, they were not very good. Iranians were quick to find the way to bypass these sanctions and the sanctions themselves were not very strong.

You have UN sanctions, EU sanctions, and U.S. sanctions. There are other countries like Canada, UK, Japan, they introduced their own sanctions, but the main sanctions are U.S. and EU. The UN sanctions usually provide the legal authority for other countries to do more. The UN sanctions in terms of economic effects have never been very strong. It’s the U.S. and EU sanctions which have been very strong.

Here you have like the list of EU sanctions and here you have a list of U.S. sanctions between 2006 and 2013. The sanctions until 2010, they really did not have the teeth to bite Iran. It was in 2010 that the EU and U.S. went after Iran’s oil. As I said at the beginning, Iran is very dependent on oil, so if you want to put pressure on them, you should go after the oil. Talking about like we are not allowing you to import, I do not know, the nuclear facility, that doesn’t help that much. You need to go after the oil.

Targeting Oil

In 2010, the EU and U.S. targeted Iran’s oil. The United States sanctioned the sale of gasoline to Iran for supporting its domestic production. The EU banned the sale of technology to Iran. In 2011, the United States expanded its sanctions on Iran’s energy and financial sectors. Financial sector sanctions are important because Iran sells its oil, let us say, China buys it from Iran, but if you go after the financial sector, then they cannot repatriate the revenue. It becomes very difficult for Iran.

This is what actually happened. Yes, on paper, let us say China buys oil from Iran. On paper it has all the reasons to pay them, right? But if you have the sanctions on the financial sector, the Chinese are very smart. They want to get a better deal then from Iran, so they tell the Iranians that we cannot actually pay you back. We are doing you a favor buying your oil, but we cannot give you your money because our banks are being sanctioned, so let us have your money brought here.

And what happened was that Iran was forced to buy lots of Chinese goods at a very high price. Even if you see that for example, in the news you may see that China will be buying some oil from Iran, it doesn’t mean that Iran gets the money and that’s really what’s very important. If we can actually put pressure on China, make sure that it doesn’t buy oil, that’s very good, but even if they buy some level of oil, that doesn’t mean that Iran is going to get the money.

Real Sanctions

In 2011, as I said the oil sanctions and financial sanctions – you had new developments there. More significant sanctions happened there. You had the SWIFT sanction in the same year and in 2013, you had some sanctions again on Iran’s energy sector, on the automotive industry, and on the riyal, so that was the sanctions up to 2013.

The real sanctions started in 2010 and that is something that we will be discussing when we talk about the current sanctions because Obama’s sanctions really took like three years to affect Iran’s economy. Trump’s sanctions have done it in a much more effective way in one year and that’s very interesting because the consensus among the DC experts, the DC foreign policy establishment, has always been that if you don’t go multilateral, if you go unilateral, the sanctions are not effective.

We actually saw that the sanctions have been more effective when the United States went unilateral and there is a reason for that because if you go multilateral, you have to convince everyone, and then everyone comes back to you and says okay, this is really too tough so our businesses are not happy with this, so let us make it a little softer. If you go unilateral, you don’t have to do that, right, and the U.S. economy is quite powerful and even if the European countries, the governments, they say they don’t want to comply with the sanctions, the European countries will comply with the sanctions. And that’s what we actually have seen.

How Sanctions Affected Iran’s Economy

The point about the sanctions up to 2013, the lesson, is that the oil and financial sanctions were the most effective ones. They really affected Iran’s economy. Here is Iran’s oil exports between 2011 and 2014 and as you see, at some point between 2012 and 2013, Iran’s average oil exports went to one million barrels per day. Right now, Iran’s exports is estimated following the May 2019 to be between 200,000 barrels per day or 400,000 barrels per day, much below the highest achievement of the previous round of sanctions. That’s quite important.

This is the GDP growth for Iran, this is from the World Bank, and as you see, Iran’s GDP growth started going down from 2010. It entered the negative area in 2013 and then only in 2014 it went back after they had the JPOA, the joint plan of action. Here you have the inflation. As you see, the inflation here goes from close to 10% in 2010 up to 40% in 2013, so again, it took the Obama sanctions, the real sanctions, three years to put Iran in a place where when its GDP growth became negative, the inflation went really high, up to 40%.

So that was the point in 2013, that was the point that Iran decided that we have to come and negotiate, right? The economy was really under pressure. Their access to hard currency was very much limited. Their asset reserve was going down. The inflation was high. The unemployment was high and the Supreme Leader decided that we have to come to the negotiation table and they found a partner who was willing to give them what they want, right?

Forcing Iran to Negotiate

Iran made some concessions, but the concessions which were made was not proportionate to the leverage that the U.S. had, so the U.S. was very close to actually forcing them to collapse economically, right: very high inflation, negative growth, limited access to hard currency. But that leverage my belief is that had not been used well, so the concessions that Iran made were not enough.

A few points about the sanctions up to 2013. As I said, the sanctions were successful. The sanctions against politically-connected entities were successful. I studied the effect of sanctions on the IRGC firms and the Supreme Leader’s firms. Those sanctions were quite successful. If you look at their numbers, those which are in the financial market – we have the numbers – the sanctions show a very real effect on these politically connected firms. The politically connected firms are doing much worse than the non-politically connected firms. The sanctions forced Tehran to negotiate.

The key question: the Obama Administration said that we had to negotiate with Iran at that point because the sanctions were falling apart. If we were not going to the negotiation table, the sanctions were falling apart. Is that true? We know now that this is not true. The U.S. economy could put pressure on Iran even if the Europeans and the Chinese and the Russians, they were saying okay, we want to deal with Iran, the pressure could be continued.


Then the nuclear deal happened. In 2013, you had the JPOA, which was some kind of temporary deal between Iran and the P-5+1. Iran was allowed to sell some oil. I think the petrochemical sanctions were removed until they reach a permanent deal, right, and then in 2015, they reached the permanent deal, which was called the JCPOA. Right, and the JCPOA was reached in July 2015. In October 2018, which was the adoption date, Iran started implementing some measures. The U.S. and EU, the P5+1, started to get prepared to lift the sanctions.

Then you had the implementation day in January 2016, which is the real day that the sanctions have been lifted, and then you have the transition day. This something that you have been hearing a lot like in transition day, lots of these sanctions are going to be removed. At the time, it looked too far, October 2023, that the IAEA should say that Iran’s nuclear program is peaceful and then P5+1 remove all of the other sanctions. Right now, it seems very close, right? So the critics of the nuclear deal were saying that these sunset clauses are not helpful, many of these restrictions on Iran’s nuclear program should be permanent. And I think they were right because right now what we saw after the deal was that Iran’s economy has improved.


Here you have the inflation. The inflation quickly went down like from 40% in 2013 to a little above 15% in 2014. In 2015, it went to 13%, then after that it went below 10%, so from the inflation point that really helped Iran. The GDP growth: Iran had a two digit GDP growth in 2016, 13%, after that in 2017, that’s the year that Trump came in, right, so that’s the Trump effect. It goes down, but it is still close to 4%, right?

If Trump was not president or if Trump was not going to end the deal, Iran’s economy was going to do very well. We followed the number of companies which entered Iran, foreign companies, so we tracked 300 foreign companies, which decided to have a deal with Iran. These are like at least tens of billions of dollars of deals, probably hundreds of billions of dollars, so lots of money coming into Iran.

Iran’s Influence

Iran’s GDP is growing. Iran’s inflation is going down, so what’s happening in the political side in the region? After the deal, Iran took control of four Arab capitals in the region: in Yemen, in Lebanon, in Syria, in Iraq. These are the countries which have been under Iran’s control.

Iran was able to actually inject lots of money into its proxies. Israeli military intelligence estimates that Iran’s support for Hezbollah after the deal actually quadrupled from like $200 million dollars to $800 million dollars, so that effect you saw in Iran’s growing influence in the region, right?

The Trump Effect

Everything was going well for the Islamic Republic until Trump came in. Trump came into power with the promise that he would get out of the deal. At the beginning it was not very clear that he was doing it or not doing it. In October 2017, it became clear that he is really serious about that, right? And in January 2018, he gave an ultimatum to the EU and to the P4+1 and Iran that you need to fix the clause of the deal or I’m going to get out of the deal.

People did not take it that seriously still, and then in May 2018, he said we are going to leave the deal, right, and after that in August 2018, the sanctions which Obama lifted, the first round of them, were reimposed. And then in November 2018, the second round. The November one was the oil sanction. The most important one was the oil sanction and I think the petrochemical was also very important.

Under Obama the United States gave a waiver to countries to buy Iranian oil at a limited level, so in November 2018, Trump gave the same waiver for eight countries. The number has not been revealed, but based on the reports we have, I think it was 800,000 barrels per day to one million barrels per day, something between that, for those eight countries. And in May 2019, the waiver ended, so the United States said you are not going to buy Iranian oil, and what happened since then is that Iran’s exports of oil quickly went down. So as I said, it’s estimated somewhere between 200,000 barrels per day and 400,000 barrels per day.

Iran’s Currency

So again this shows that the unilateral sanctions are quite effective. So what happened after Trump came in in Iran’s economy? Iran’s currency has significantly lost its value. In January 2017, when Trump came to power, one dollar was worth 39,350 riyals. The riyal is Iran’s currency. Right now, one dollar is 129,500 riyals and at some point went even much higher, so Iran managed to curb it a little.

What they did was basically, they went after people who were buying dollars. They put them in prison, those who were selling dollars. They didn’t approve, they put them in prison. I think they actually executed someone related to this. They told the families that you cannot hold dollars. I do not know about how much, but they set a limit that you can only have this amount of dollars. If we catch you and you are having more than that, you are going to prison and we get your money. They also set a limit on the number of dollars that Iranians who are traveling abroad can buy, so they suppressed the demand and they controlled the supply, but still this is very high, so this is like almost three times, right?

Foreign Investment in Iran

And then, following the nuclear deal in May 2018, 300 companies went into Iran, signing deals. Right now, we tracked that only 15% of them are saying they will be staying in Iran and many of them are in the sectors which are not sanctioned, right, so not all of them are saying that we are not complying with the U.S. sanctions. If you look at them, even this 15%, not all of them are going, I think a majority of them are going to honor the deals that they have. The only thing that they are doing is that they want to stay in Iran to make sure that when the sanctions are lifted, they will be the first companies which are getting those deals, so it’s not that this 15% of companies are actually doing anything in Iran.

Iran from the FDI point of view, from the trade point of view, has lost a lot. The economy is facing very high inflation. This is the number up to March 2019. As you see in the grey one, which is the twelve month average, its above 30%, and the twelve months point to point is above 50%. What it tells you is that in less than a year, the Trump sanctions have managed to put Iran from the inflation point of view very much close to the height of the sanctions in 2013. Again, this shows the power of the unilateral sanctions of the United States.


And from the GDP point of view, as we said, Iran actually had a two digit GDP growth in 2016 and in 2017, Trump was in power but he had not yet left the deal, it had a decent 4% growth. In 2018, it went into the negative area, so Iran’s economy is in recession now and in 2019, in the conservative estimate, it’s a 6% negative, so Iran’s economy will shrink by 6%. That’s another important point. GDP growth is going down. Iran’s economy is shrinking.

From the oil export point of view, Iran was exporting 2.5 million barrels per day in April 2018. It is now between 200,000 barrels to 400,000 barrels. And the sanctions on Iran’s petrochemicals, here, in November 2018, you had sanctions on Iran’s petrochemicals introduced. If you look at the number for October, it is somehow close to $1.6 billion dollars of petrochemical products. In March 2019, it’s almost halved. It is 50% of it.

One point about petrochemicals is that if you look at which countries are buying Iran’s petrochemicals, except China, which is always there as its biggest buyer, the other ones are U.S. allies: UAE, Turkey. Turkey actually increased its average monthly import of petrochemicals from Iran twelve times, which is obviously not for Turkey itself, so what they are doing is they get these petrochemical products, they repackage it, and re-export it to other countries. But still, this is a 50% decrease in petrochemical exports.

Metals and Automotives

The U.S. managed for the first time to go after the metal industry. This is $5 billion dollars of Iranian exports. We do not have the number yet because the sanctions were recently introduced, but we expect to see the same trend here. We expect Iran’s export revenue in the metal industry to go down.

We see the same thing in the automotive industry, which is the largest industry after the oil and petrochemical industries. In terms of employment, it is actually the largest one. There are close to one million employed in the manufacturing. Close to one million people are employed there. We see a recession in that sector too.

Returning to the JCPOA?

The point is that the U.S. sanctions, the U.S. unilateral sanctions are very effective. Trump’s sanctions are much more effective than the previous round of sanctions that we had, so the U.S. has very strong leverage here. The point is, what is the U.S. going to do with that? Is it going to negotiate another deal with Iran soon or not? From my point of view, the best thing to do is just to wait, just wait and let the economic sanctions do their job. The Islamic Republic’s economy will collapse under sanctions.

The key is going to be who is in the 2020 election. Before the 2020 election, I really doubt that Iran is going to reach any deal with the United States. They will wait to see who is going to win. If you look at the debate in the Democratic Party, all of them want to go back to the JCPOA, which is something that Iran really likes, so it doesn’t make sense for Iran to reach any deal before 2020. So after 2020 if Trump wins, he has four more years, so this is six years of very serious economic sanctions on Iran. There is no way that their economy can manage to survive that.

At some point, they should come back to the table and at that point, the U.S. can get a much better deal than Iran. But the point with any deal with Iran about this nuclear program is that if you get the best deal from them, this is a regime which wants a nuclear bomb and one way or another if they are in power, they are going to build the bomb at some point because building a nuclear bomb is not a very technically difficult thing.

The U.S. right now has the leverage to actually force the regime to collapse. What the United States can do is to at least wait two years into the second Trump administration if he wins, wait for the collapse of the regime, support the pro-democracy movement in Iran. If they can actually take care of the regime themselves, that would be very good for everyone. If they cannot, then after two years in like 2022, something like that, right, you can go back to the negotiation table with Iran and reach a deal with them.

Achieving a Collapse

I do not think that deal is going to last. The moment that the pressure is gone, they have access to energy and financial markets again, they are going back to their previous behavior. But I think at least the United States should try to force them to collapse because it is very unlikely that you are going to get another chance like this any time soon.

There are things that the United States can do to help this regime collapse. For example, the State Department can actually support the more political groups, the Iranian political groups, which want to overthrow this regime. This is something that the State Department has not done. They are very much involved in civil society building and things like that like supporting environmentalists, supporting things like that which are good, supporting human rights movements, which are good, but this is not going to solve the problem which the United States has with the Islamic Republic.


Other things that can be done, for example, the U.S. has Voice of America and Radio Farda, which are broadcasting into Iran, they can be improved. There are lots of troubles with them. Many people are accusing them of even supporting the regime time to time, so their messaging can change.

And if you look at for example, Al Jazeera, the role that it played in operating against the Sunni countries in the Arab world, Al Jazeera was actually encouraging those protests. If you really want to encourage the Iranian people to go to the street, you may need something like Al Jazeera. Al Jazeera is an evil network, but you can use the method to do something good.

Use Intelligence

The U.S. intelligence agencies have access to information which can discredit officials, their corruption. If that pops up in the news, in the media, that would be very helpful. They can actually initiate a campaign of defection, help Iranian officials to leave the regime, join forces with the opposition. That is something that the intelligence agencies can do [and] other agencies cannot do.

Counter Money Laundering

Another thing for example, the FBI and the Justice Department can do is to really go after the regime’s money laundering network. All of this money laundering operation at some point touches the U.S. financial system. If you go after them aggressively, you really disrupt them. Also, they can go after the regime’s influence network here in the United States. This is something which has not been done.

Target Proxies

Other things which can be done: the Department of Defense can go after the Islamic regime’s proxies in the region. The U.S. has a very good chance to hit Hezbollah in Syria. The U.S. has a very good chance to hit the Houthis in Yemen. This has not been done. Putting pressure on the regime’s proxies will help, and also taking seriously the security of the international waterways. We have seen that the Iranian regime has attacked tankers in the Persian Gulf and seas in other places, so a strong response can actually be very, very helpful.


And I think through these measures the United States can actually force the regime to collapse. I think the best thing which can happen to everyone is if this regime collapses under the pressure of economic sanctions. Again, I think any deal that the United States reaches with Iran, with the Islamic regime, the moment that they get the money back, they go back to their bad behavior.

That is really the message I want to send tonight, that I think the best thing we all can do is to ask the people we know in the government, in the think tanks, in the media that this is really the best way to go. Help the Iranian people to overthrow the regime themselves. No one needs a military intervention, no one needs U.S. troops on the ground. This regime can collapse under the pressure of economic sanctions. Thank you so much.


Audience member:

I want to pursue the issue of regime collapse. One of the issues which we look at is you take out a regime, who’s left? Is there a political leader available that can step in and does that person have a structure or an organization behind him to build up that regime?

Saeed Ghasseminejad:

I’m Iranian, so I may be biased here, but if you look at the pictures that I showed you, the graphs that I showed you, what you see there is that the pre-revolution Iran was actually at a very good performance and that’s reflected in the past two years events that you see in Iran, so many Iranians are chanting Pahlavi’s name. Shah’s son lives here in DC. His name, his father’s name, his grandfather’s name has been chanted a lot in Iran, so that’s a leader. He’s not Islamist, obviously, right? He is very much liberal, Westernized, and he defends a secular democracy. He doesn’t even defend monarchy, so that’s one of the leaders. There are other groups too. You have like the leaders of Iranian civil society who can organize the society for a post revolution Iran.

From the U.S. point of view I can tell you, there are some concerns that if the Islamic regime collapses, who comes? Things will go mad. This is the most dangerous state sponsor of terror. Like this is the regime which is supporting every terrorist around the world. They are in Latin America. They are in Africa. Why are they in Latin America? This is a very aggressive regime and if this regime falls, even if you don’t have a Western, liberal democracy in Iran, even if there is some period of trouble in Iran, that would be bad for Iranians living there. Living under chaos, that would be bad, right, even for six months, even for one year.

But from the United States’ point of view, if this regime falls, that is a big gain for the United States because you have the command and control of global terrorism falling apart, so Hezbollah is not going to get its money, the Houthis are not going to get their money. AQ, which has a relationship with Iran, they are not going to get the support they have now. The Assad regime is not going to get the support it needs. Hamas is not going to get the support it needs.

And we know from the recent reports, that this is not just in the Middle East. They are in the U.S. Hezbollah is in the U.S. Hezbollah has been preparing for attacks in the U.S., so I think that would be a good thing for the United States, just the collapse of this regime.

Audience member:

Is there any significance to Mr. Abei’s visit to Tehran?

Saeed Ghasseminejad:

The Supreme Leader actually, really mocked him, so you know the day he was there, they attacked the tanker. The Supreme Leader told him that he is not going to negotiate with Trump, so I don’t think it had any significance except that it showed that this regime really is not in a negotiation mode at this point.

Robert R. Reilly:

Thank you very much for that excellent talk. If I may ask you this question, I was worried about the reform of the Chinese military because corruption was endemic in the Chinese military. You could buy a generalship in the army. The question relates to the IRGC, which controls such an enormous part of the economy. Are they corrupt?

Saeed Ghasseminejad:

Yes, they are very corrupt. They actually arrested their own financial mastermind recently over corruption charges and obviously, it was not just corruption. The real reason I think is that they had an internal fighting inside the IRGC, but the charges that they brought in were real. The guy was quite corrupt. They are talking about even executing him at some point in the future. Yeah, they are very corrupt.

Robert R. Reilly:

In this respect, in the Chinese military, they were inept. The corrupt generals had militarily no idea what they were doing. Does the corruption in the IRGC reflect also military ineptitude or not?

Saeed Ghasseminejad:

The IRGC is very good in asymmetrical warfare like, you know, funding terrorist groups. They have done much with [unintelligible]. In Iraq, for example, the United States spent so much in Iraq, but this Qassem Soleimani is ruling Iraq, so they are good in some areas and they are very bad in other areas like in war games, people die in the IRGC war games all the time. I think they bomb each other, they kill each other, and they say they war martyrs.

Audience member:

Thank you for a very interesting presentation.

Saeed Ghasseminejad:

Thank you.

Audience member:

You wrote down a list of about half a dozen things that we could be doing that we aren’t doing. Just curious, why do you think we aren’t doing them if we are taking such a unilaterally effective approach, if it will eventually lead to sooner rather than later to an economic collapse, why aren’t we doing all of the other things in the interest of time? The current administration will be around, nothing is guaranteed, but most likely the reelection is likely. Why aren’t we doing any of those things?

Saeed Ghasseminejad:

The quick answer is that I don’t know, but the official policy of the U.S. Administration is not that we want the Islamic regime to collapse. The official policy is that we want to put pressure on them so they come back to the negotiation table, so some of the things I described are very much aimed at forcing the regime to collapse.

Audience member:

I’m wondering what the reaction of the Iranian public would be to a U.S. military action against Iran. Would it trigger a strong nationalistic response internally?

Saeed Ghasseminejad:

What kind of military action?

Audience member:

Well, some strike against Iranian territory.

Saeed Ghasseminejad:

First, I really don’t know. Iran has a divided population. You have a minority of Islamists, which are supporting the regime, and then you have a majority of Iranians who don’t like this regime, so I don’t know what the reaction of Iranians would be. I think it depends on where the United States is going to strike. If the United States destroys the Supreme Leader’s house, I think many people will be happy, but I assume that it should create a wave of nationalism among some sections of the Iranian population. How big it would be, I don’t know.

And there are sections of the Iranian population – like I was in Iran, I left Iran like ten years ago. At that time, if you sat in a taxi, there was always one person who was saying when is the U.S. going to attack Iran and get rid of these Mullahs, so you have that section too. But you don’t have any opinion polling in Iran, so it’s very difficult to say what would be the reaction.

Robert R. Reilly:

Great. Thank you very much.