The Case Against Iran Sanctions

When I was a kid, the boy next door once played a nasty trick on my brother, Paul. Our neighbor held his cat in his arms, brought it within a few inches of Paul’s face, and pulled its tail. The suddenly angry cat bit Paul’s face. My brother and I were upset; we both thought that the cat, if it bit anyone, should have bitten the perpetrator. I think of that incident whenever politicians and others call for economic sanctions against a whole country. On Tuesday, Dec. 15, the U.S. House of Representatives voted 412-12 to impose sanctions on Iran.

Let’s put aside the fact that the bill, taken literally, would give the U.S. government the power to cut off much of our trade with China. Even if that weren’t true, economic sanctions rarely achieve their stated goals and almost always harm innocent people. These innocent people will not thank our government for its action.

How would the bill cut off much trade with China? Here’s how. Section 3(a) (1) A of the bill, H.R. 2194, "Iran Petroleum Refining Sanctions Act of 2009," states:

"(A) INVESTMENT- Except as provided in subsection (f), the President shall impose 2 or more of the sanctions described in paragraphs (1) through (6) of section 6(a) if the President determines that a person has knowingly, on or after the date of the enactment of this Act, made an investment of $20,000,000 or more (or any combination of investments of at least $5,000,000 each, which in the aggregate equals or exceeds $20,000,000 in any 12-month period), that directly and significantly contributed to the enhancement of Iran’s ability to develop petroleum resources of Iran."

Congressman Ron Paul (R-Texas), who voted against the bill, pointed out on the House floor:

"Recently, the Financial Times reported that, ‘[i]n recent months, Chinese companies have greatly expanded their presence in Iran’s oil sector. In the coming months, Sinopec, the state-owned Chinese oil company, is scheduled to complete the expansion of the Tabriz and Shazand refineries – adding 3.3 million gallons of gasoline per day.’"

Congressman Paul went on to say:

"Are we to conclude, with this in mind, that China or its major state-owned corporations will be forbidden by this legislation from doing business with the United States?"

It seems so. Of course, no one believes that that is the intent of those 412 congressmen. But this wouldn’t be the first time that many of them voted for a bill that achieves destructive ends that they did not intend.

Even if the bill did not reduce trade with China, though, it would be a bad idea for two reasons. First, it would be a cruel imposition on people who are already hurting. Second, in part because of the first reason, it wouldn’t work.

When governments impose sanctions on people in another country, the main goal of the officials who favor the policy is to harm the person or people in charge of that country’s government so that they will change their policies. That’s the goal. What they do to achieve it is intentionally harm many innocent people in those countries, in this case by trying to reduce their supply of gasoline. The sanctions often work in a limited sense: they impose some harm on innocent people in the target country. But that’s not the goal. Nor is the goal to cut off the "bad guy" from gasoline. You can be sure that Mahmoud Ahmadinejad, approximately the 18th most-powerful politician in Iran, and Ali Khamenei, the most powerful politician in Iran, will not do without gasoline. No. Instead, imposing sanctions is hurting innocent people so that they, like our neighbor’s cat, will lash out at whoever’s face is right in front of them. The idea is to induce people to see their own government as the enemy and to try to put pressure on it.

But here’s the problem: people are smarter than cats. When Iranians suddenly find gasoline in short supply, so that even getting to work or to the store is a challenge, they will wonder who is responsible. And you know what? They will find out. Although the government of Iran has a great deal of power to censor what newspapers, radio, and television report, one piece of information that is sure not to be censored is the role of outside governments in the country’s economic distress.

Of course, the government will exaggerate the harm done by the sanctions. Although socialism is what’s killing poor people in Cuba, for example, Fidel Castro, for almost 40 years, blamed Cuba’s economic problems on the "blockade," his word for the embargo imposed by the U.S. government in the early 1960s. But he can plausibly make this claim because the embargo exists. Likewise, much of the Iranian people’s pain is caused by their government’s intrusive limits on economic freedom. In the annual index of economic freedom, published in Economic Freedom of the World, Iran dropped from 80th out of 141 countries in 2006 to 112th out of 141 countries in 2007, a breathtaking drop for one year. Although this is a substantial cause of Iran’s pain, the pain caused by further economic sanctions would be quite real. To impose further sanctions on Iran now would truly be to kick Iranians when they’re down. And the Iranian government would make sure that its citizens know full well who is responsible for the sanctions.

What do people in embargoed countries do when they find out that foreign governments threaten their survival? They want to do what our neighbor’s cat wouldn’t do: bite the hand or face of the perpetrator. The idea that one country’s government can, by inflicting pain on people in another country, cause them to pressure their government to change is simply wishful thinking.

To understand how people in embargoed countries feel, you will have to use your imagination. Assuming you’re an American, picture yourself back in 1974. President Nixon’s popularity has hit bottom. Many Americans want him out, but he holds on. Now imagine that the head of a freer country – say, Switzerland – thinks Nixon is a vicious leader and imposes sanctions on us. Because of these sanctions, we can’t get medicine. (Of course, this is implausible in the United States, which is why I said you would have to use your imagination.) Now ask yourself: Is your first thought that you should organize and try to overthrow Nixon?

I bet not. For one thing, you don’t have much of a shot at succeeding. The Nixon administration is probably in charge of allocating the scarce medicine. But more important, you’re furious with the Swiss government. "Who are they to interfere in our country’s affairs?" you ask. So if Nixon offers you a war against the Swiss infidels, you’re likely to say, "Hell, yes," and postpone thoughts of getting rid of your president until you’ve gotten those foreign bums off your back. And that’s probably how Iranians will feel about the U.S. government if the sanctions are imposed.

The further tragedy in the case of Iran is that there does appear to be a strong moderate element there that would like to have better relations with the United States and other people and governments in the West. If the U.S. government imposes further sanctions, it will nip this movement in the bud.

Do I have the solution to stop the Iranian government from a push to develop nuclear weapons? No, I don’t, but it doesn’t matter for the issue of sanctions. It doesn’t matter for three reasons.

First, according to the U.S. government’s own National Intelligence Estimate of 2007, it’s not clear that the Iranian government is seeking to develop nuclear weapons.

Second, even if the Iranian government were to develop nuclear weapons, that would not be a threat to Americans. It would not even be much of a threat to Israel. Although the Israeli government has never acknowledged having nuclear weapons, everyone knows that it does. An Iranian government that "nuked" Israel would face a second-strike response from Israel’s nuclear-armed submarinesand the Iranians know that.

Third, if a proposed measure would harm innocent people and not even achieve its goal, that’s a sufficient argument against the measure. The alternative way of thinking, so common among politicians, was parodied in the British comedy show Yes, Prime Minister. "Something must be done. This is something. Therefore, it must be done."

But I do have a partial solution: Have the U.S. government get rid of all current sanctions on Iran, quit subsidizing Israel, and pull all U.S. troops out of the Middle East. These actions, more than any others, would go a long way toward convincing Iranians that the U.S. government is not a threat. Otherwise, many of them will think, justifiably, that the U.S. government is like our cruel neighbor who owned the innocent cat.

Copyright © 2009 by David R. Henderson. Requests for permission to reprint should be directed to the author or

Author: David R. Henderson

David R. Henderson is a research fellow with the Hoover Institution and an emeritus professor of economics in the Graduate School of Business and Public Policy at the Naval Postgraduate School. He is author of The Joy of Freedom: An Economist’s Odyssey and co-author, with Charles L. Hooper, of Making Great Decisions in Business and Life(Chicago Park Press). His latest book is The Concise Encyclopedia of Economics (Liberty Fund, 2008). He has appeared on The O’Reilly Factor, the Jim Lehrer Newshour, CNN, MSNBC, RT, Fox Business Channel, and C-SPAN. He has had over 100 articles published in Fortune, the Wall Street Journal, Red Herring, Barron’s, National Review, Reason, the Los Angeles Times, USA Today, The Hill, and the Christian Science Monitor. He has also testified before the House Ways and Means Committee, the Senate Armed Services Committee, and the Senate Committee on Labor and Human Resources. He blogs at