LITMIR.BIZ

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In the last decades, the overly complex and therefore weak constitutional design with a multipolar distribution of power – which is prone to fights for power – enabled several groups in Iran to accumulate wealth and power. The Islamic Revolutionary Guard Corps (IRGC), a military elite group with strong ideological claims, emerged as most powerful group. Under the presidency of Ahmadinejad almost all members of the cabinet were members of the IRGC, including the president himself.³⁴ The IRGC cemented not only their political influence but also their economic power, especially in the branches of finance, construction, telecommunication (monopoly on the internet), heroin production³⁵ and in the oil industry (president Ahmadinejad gave the IRGC the control over an oilfield – before that, the National Iranian Oil Company had the monopoly on the oil and gas sector.³⁶ Legal and illegal dummy companies at home and abroad and the weak legal system enabled the IRGC to benefit from economic sanctions: Foreign companies had to leave the country – the Supreme Leader announced a “resistance economy.”³⁷ The IRGC closed the gap and strengthened its economic and political standing at home.³⁸

Whereas the liberal urban middle class suffered most from the sanctions, the elite-loyal upper-middle class had the most opportunities in circumventing the sanctions and in taking advantage of the vast opportunities the new black market offered. Especially Dubai-based companies and dummy companies of Iranian businessmen and influential actors such as the IRGC were active in illegal oil exports and money laundering.³⁹ These domestic winners of the economic sanctions also opposed the nuclear deal of president Rouhani. In contrast to the case of Yugoslavia, sanctions didn’t cause a rally around the flag, still, they enabled the ruling elite to accumulate a massive amount of wealth and to further centralize power.⁴⁰

1.2 The analytical puzzle

      In both the Federal Republic of Yugoslavia and the Islamic Republic of Iran, economic sanctions helped the regime to consolidate its power. The regime ←32 | 33→centralized the distribution of goods and benefited from the sanction rents. The sanctions unwillingly created the opportunity for members of the elite to accumulate even more resources in political and economic terms (power and wealth). In Yugoslavia, disrupted trade led to benefits for the local political, economic, and criminal elite and weakened middle class and opposition. In Iran, we observe since the mid-2000s a shift of power from a so-called theocracy to a military dictatorship. The sanctions helped the new political elite to strengthen its power by offering opportunities in business. The sanctions disadvantaged the middle class and strengthened those in power. In both cases, economic sanctions had a remarkable spill-over effect on the political sphere of the target country. Economic causes and psychological factors explain the process.

The evaluation of sanctions by media was devastating: “Sanctions have seemed only to empower dictators,” writes The New York Times in regard to the cases of North Korea, Iraq, Cuba and others,⁴¹ and another journalist describes sanctions as “a policy that helps dictators.”⁴² Not only media, but also scholars observe similar dynamics to the ones described in the previous chapter in a number of countries that were subject to sanctions, e.g., in Ian Smith’s Rhodesia in the 1960s,⁴³ in Haiti in the early 1990s,⁴⁴ in Saddam’s Iraq in the 1990s,⁴⁵ and in contemporary Russia: Some think that U.S. and EU economic sanctions against Russia led Putin “to consolidate his authoritarian rule.”⁴⁶ By import substitution policies, “the Russian leadership has been able to reallocate resources to its allies within the elite and also to key economic constituencies across Russia.”⁴⁷ Also, sanctions enabled the Kremlin to blame the West for the poor performance of the economy and could thus generate a pro-regime rally around the flag.⁴⁸

Besides anecdotal evidence, scholars found empirical evidence that sanctions encourage leaders to increase repression,⁴⁹ reduce the level of political freedom in the target country,⁵⁰ decrease the level of democracy,⁵¹ they cause protectionism ←33 | 34→benefitting the elite,⁵² enhance economic transfers from the population to the elite,⁵³ and they stabilize autocratic rulers with strong claims to legitimacy.⁵⁴ With pressure from all sides, a very popular tool of modern foreign relations comes under scrutiny.

      Though we have anecdotal and empirical evidence for the described effect, it is puzzling why some (or so many) sanctions increase the level of autocracy. In many cases, sanctions should increase the level of democracy, not decrease them. This book does not analyze the effectiveness of economic coercion but its collateral damage to democracy and its spill-over effect on the internal power structure. Why do some sanctions have an autocratizing impact? The proposed mechanisms are not fully convincing. An analytical gap between case studies, (game) theoretical analysis, and large-N studies urges to specifically ask for the reasons of the deeply disturbing correlation. New data and a combination of autocracy theory and empirical evidence shall help with answering the research question: Why do some economic sanctions have a negative impact on the level of democracy in the target state but others not?

1.3 Relevance and novelty

      Research on economic dynamics within the system and their impact on regime stability and breakdown is essential not only because of the autocratic resilience in the last decade. The changing political and ideological landscape, with increased economic protectionism and political nationalism, also leads to the question whether economic sanctions are more damaging than useful in the foreign policy toolbox. To know which circumstances are responsible for an autocratizing effect of sanctions is vital for political decision-making. This study wants to contribute by conducting a comprehensive analysis. Reviewing the existing literature, several issues justify a thorough evaluation of the sanctions-autocracy hypothesis.

Ideological bias: Economic sanctions and their effects are heavily debated in politics, media, and academic scholarship. Some see them as a hawkish demonstration of power, others as a peaceful tool of conflict resolution. The prevailing wisdom in scholarship is that economic sanctions have a negative impact on democracy and human rights and are therefore counterproductive. However, the debate about sanctions and their impact on democracy is shaped by proponents ←34 | 35→and opponents and seems to be ideologically biased. There are reasons to suspect that this mirrors the ideological cleavage between realists and liberals in political theory and practice: “[R];ealists tend to denigrate the utility of economic statecraft […], neoliberals believe that economic interdependence can affect the behavior of

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