Do sanctions reduce the military spending in Iran? This is the question we sought to answer by modeling the effects of sanctions on military spending in Iran to investigate the impact of unilateral sanctions (where only the United States sanctions Iran) and multilateral sanctions (where the United States acts in conjunction with other countries to sanction Iran). The results show that the increasing intensity of sanctions dampens the military budget of Iran. But by separating unilateral and multilateral sanctions, we show that only multilateral sanctions have a statistically significant and negative impact on Iranian military spending.
The Trump administration’s effort to change the political and military behavior of Iran has raised the important question of the effectiveness of sanctions. Will banking, energy and economic sanctions imposed by the United States hinder the ability of the Iranian government to expand its military ambitions? This is not the first time Iran is experiencing sanctions pressures. The Islamic Republic has been subject to different kinds of political and economic embargoes, which were mostly imposed by the US government. However, there were particular periods in political life of Iran where other global powers, such as the European Union joined US sanction initiatives under the endorsement of the United Nations Security Council resolutions and through the imposition of their own sanctions regimes.
Beginning around 2005, Iran was subjected to a growing range of multilateral sanctions imposed by the US, the EU and the UN with involvement of other main economic powers. The most expansive of these sanctions were implemented in 2012 when the US and the EU agreed to impose an oil embargo against Iran and to restrict Iran’s ties to the global financial system. Following a series of intense negotiations and the compliance by Iran to international monitoring standards, most sanctions were lifted on 16 Jan 2016 as part of implementation of the Joint Comprehensive Plan of Action (JCPOA). Notably, Iran’s military expenditure reduced by 30 percent between 2006 and 2015, one of the highest percentage decreases in military spending globally.