The Impact of Economic Sanctions on Nuclear Non-Proliferation: The Case of Iran (2005-15)

ABSTRACT Iran’s 2015 nuclear deal has defied the conventional wisdom over the futility of imposing economic sanctions to curtail its nuclear programme. However, the existing literature remains theoretically ill-equipped to deal with the complexities of the Iranian case. By developing a theoretical framework that elaborates on the causal pathways through which economic sanctions affect both the supply (constraints on the nuclear programme) and demand (domestic politics) sides of nuclear proliferation, the case of Iran is examined from the faltering of international nuclear negotiations in 2005 until the signing of the nuclear deal in 2015. In achieving this outcome, the demand-side pathway played a more decisive role than the supply-side pathway as it contributed to the formation of a broad-based coalition that was able to side-line the hardline neo-Principalists and pursue a path of negotiation and nuclear rollback.

The literature on economic sanctions is highly pessimistic on the tool's effectiveness, with Iran representing the case par excellence that validates this pessimism.More optimist scholars argue that relying on the case of Iran to demonstrate the ineffectiveness of sanctions is "theoretically misguided" (Miller 2014, 938) given Iran's political enmity with and economic insulation from its primary sender, the United States (US).Paradoxically, however, Iran's signing of the 2015 Joint Comprehensive Plan of Action (JCPOA) that curtailed its nuclear programme following decades of multi-level economic sanctions and proliferation breakthroughs, has challenged the conventional wisdom over the futility of economic sanctions, especially in the case of Iran.
While several papers have addressed the role of economic sanctions in the Iranian deal, they remain theoretically underdeveloped.Scholars have failed to distinguish between its different phases and identify the precise causal mechanisms, in addition to confusing the sanctions' different objectives between regime change and non-proliferation.This article seeks to address these shortcomings through developing a theoretical framework that integrates the causal mechanistic approach to economic sanctions (Arslanian 2020;Connolly 2018;Jones 2015) with the demand and supply sides of nuclear proliferation (Early 2012;Solingen 2012).More precisely, this article seeks to answer the following research question: what are the causal mechanisms through which non-proliferation economic sanctions have coerced Iran to sign a nuclear deal that curtailed its programme?
The case of Iran represents episodes of a prolonged and obstinate nature characterised by multi-level and dynamic non-proliferation sanctions regimes.Beyond the case of Iran, only the Democratic People's Republic of Korea (DPRK) fits this description.Nevertheless, these two cases are among the most salient cases around which debates over sanctions' effectiveness are centred.Furthermore, the fact that the DPRK has negotiated its potential disarmament in response to US President Donald Trump's maximum pressure campaign illustrates an unexplored pattern among these cases.Thus, rather than addressing such cases as 'theoretically misguided', they can be accurately described as 'theoretically underdeveloped'.
The proposed theoretical framework will lead to a better understanding of the causal pathways through which economic sanctions affect non-proliferation and better capture the complexity of protracted cases and their different phases.Accordingly, two main causal pathways are identified.The first, 'the supply-side pathway', examines the direct impact of economic sanctions on the target country's ability to procure the necessary material and technology for its nuclear programme; while the second, 'the demandside pathway', examines how economic sanctions affect the target country's international economy, its domestic system of political economy and its domestic politics.In addressing the dynamic nature of prolonged sanctions, the paper will view the sanctions episodes as a form of repeated interaction between the sender(s) and the target, where the sanctions regime is updated according to the target's response.
The empirical testing of the theoretical model will rely on the qualitative methodology of 'process tracing' which "attempts to identify the intervening causal process-the causal chain and causal mechanism-between an independent variable (or variables) and the outcome of the dependent variable" (George and Bennett 2005, 141).This methodology assumes "a plurality of factors work [ing] together to produce the outcome of interest", thus necessitating the "search for configurations of causal conditions or social mechanisms" and for "the details of the 'causal pathways' that lead to the outcome of interest" (Blatter 2012, 6).The investigation will rely on 'qualitative document analysis' which represents "a systematic procedure for reviewing and evaluating documents that entails finding, selecting, appraising (making sense of), and synthesizing data contained within them" (Kutsyuruba 2012, 20-1) that benefits from the extensive range of academic and policy papers which have discussed the case.
The paper will apply this framework to the case of Iran from the collapse of negotiations in 2005 until the signing of JPCOA in 2015.During this period, two main sub-episodes are identified.The first (2005-10) witnessed a shift in the sanctions regime from unilateral US sanctions towards multilateral targeted sanctions, whereas the second sub-episode (2010-15) witnessed a shift towards comprehensive sectoral sanctions.In both, the demand-side pathway that impacts the target's domestic politics played a more significant role as the political consolidation of the hardliners in the first episode and their weakening in the second was key to the outcome.
The paper is structured as follows.The following section will critically review the general literature discussing the impact of economic sanctions on nuclear proliferation and the specific literature on their impact on Iran.Afterwards, the theoretical framework will be developed.The rest of the paper will apply the framework to the case of Iran.The empirical analysis will be preceded by a background section which provides an overview of Iranian politics and the original unilateral US sanctions, before discussing each subepisode in accordance with the framework.Finally, the conclusion will address the framework's explanatory power and generalisability.

Economic sanctions and nuclear (non-)proliferation
Within the broader literature examining the impact of economic sanctions on nuclear proliferation, several papers have addressed the issue using large-N statistical frameworks (Early 2012;Miller 2014) and small-N causal mechanistic approaches (Solingen 2012;Drezner 2012).Bryan Early (2012) examines the impact of economic sanctions on both the demand and supply sides of nuclear proliferation and finds more evidence for demand side explanations in the sense that economic sanctions increase the target's development of its nuclear capabilities given its greater sense of insecurity (demand side).However, he fails to find evidence that sanctions prevent the target's access to critical material, technologies and finance for nuclear proliferation (supply side).Nicholas Miller (2014, 937), on the other hand, attributes this failure to "selection effects" as targets often comply during the threat stage, whereas only economically insulated countries prefer to undergo sanctions as a price for developing nuclear weapons.
Etel Solingen (2012, 11), focusing on causal mechanisms, argues that countries differ in their "domestic receptivity" to sanctions given that they are "conditioned by […] specific attributes of the domestic political landscape that provide the context against which different causal mechanisms operate".Among these attributes, the target's "model of political survival" represents the most relevant.Solingen inter-relates "a state's relation to the global economy" with its ruling coalition.As such, she distinguishes between inward-looking and internationalising coalitions, with the latter being more likely to respond to the pressure of economic sanctions in comparison to the former.She argues that "leaders relying on economic growth through internationalization and global integration" require "abiding by international institutions" to "maximise access to foreign markets" and thus "have largely shied away from nuclear weapons" (12).In contrast, coalitions in inward-looking nationalist regimes which consist of bureaucratic industrial complexes protected from international competitiveness are less likely to respond to external pressure to denuclearise (11)(12).Daniel Drezner (2012, 164-65) elaborates on the various potential forms of causal mechanisms through which sanctions affect the target.He argues that multiple pathways can be at work simultaneously and potential affect the country's international relations or its domestic politicswhether through its elites or the general publicthus shaping its response to sanctions.
Considering the developments in the mechanistic approach within the general sanctions literature, recently scholars have highlighted the importance of more complex causal mechanisms that more thoroughly relate the economic impact of sanctions to their political repercussions (Arslanian 2020;Connolly 2018;Jones 2015).Richard Connolly (2018, 25) argues that the "target country's pattern of integration with the global economy […] shape[s] the manner in which sanctions will affect that country" given that its "relationship with the global economy affects the [domestic] distribution of power and resources" or, more generally, contributes towards reconfiguring the country's "domestic system of political economy".As such, sanctions affect the economic basis of a regime's coalition-building strategies of co-optation and repression etc.In turn, they create the potential for changing the ruling coalition's nature and consequently may shift its position on the sanctions-related dispute (Arslanian 2020, 40;Jones 2015, 46).Thus, going back to Solingen, it could be argued that it is not only domestic politics that shape sanctions' effectiveness but sanctions themselves that contribute towards reshaping the country's domestic politics and its attitude to sanctions.
Papers discussing the impact of sanctions on Iran's nuclear deal were cautious about the associated discourse of triumphalism.Agnese Macaluso (2014) and Ali Fathollah-Nejad (2014) argue that sanctions have failed to achieve the broader objective of regime change and have even strengthened the regime's authoritarian practices.Fathollah-Nejad (2014) stresses the correlation between the surge in sanctions and the advancement of the nuclear programme as a sign of their failure.Consequently, the deal was attributed to the softening of the US "position from no nuclear enrichment to no nuclear bomb" while sanctions per se failed to curb Iran's nuclear programme (Mousavian and Mousavian 2018, 169).Suzanne Maloney (2015) acknowledges the role of sanctions in facilitating the negotiations but argues that sanctions are a "blunt" tool given the difficulty in "calibrating" sanctions relief with nuclear rollback.Farhad Rezaei (2017) provides the most optimistic and structured view showing how sanctions' escalation contributed towards Iran's economic deterioration, thereby threatening regime legitimacy and forcing the curbing of the nuclear programme.The most theoretically articulate paper, however, pre-dates the nuclear deal.James Sebenius and Michael Singh (2013) examine the negotiation process and identify the nuclear options acceptable for both sides as the "Zone of Possible Agreement" (53).Within this context, economic sanctions represent a cost that shifts the zone in a manner that would compel Iran to settle for a less favourable outcome.As insightful as the framework is, it focuses on the outcome of the sanctions and bypasses the various intervening processes that shape the available options in the first place.In general, the literature discussed in this paragraph somehow lacks the necessary theoretical engagement with both sanctions and nuclear proliferation literature and, consequently, lacks a clear focus on the particular objective that infers sanctions effectiveness as well as the process through which sanctions affect the target.Based on the aforementioned points, it could be argued that sanctions have failed on the supply side of nuclear proliferation, in the sense of adversely affecting the nuclear programme, yet succeeded on the demand side, as they have contributed to creating the political conditions for the nuclear deal.

Theoretical framework: causal pathways and repeated interaction
In order to assess how sanctions affected Iran's nuclear deal, a more thorough theoretical framework is required.It should integrate the multiple causal pathways approach to sanctions with the supply-side and demand-side factors of nuclear proliferation.As such, two distinct pathways pertaining to proliferation's supply and demand sides can be developed.The demand side defined as the state's willingness to proliferate entails factors of "security interests, status-seeking, and domestic politics" (Early 2012); whereas the supply side relates to its capacity to proliferate and addresses "the roles played by economic capacity, international trade, civilian nuclear infrastructure and expertise, and the receipt of foreign nuclear assistance" (5).

The demand-side pathway
In addressing what areas sanctions are most likely to impact, the demand-side pathway will focus on the domestic politics, as discussed by Solingen, rather than security and status issues.The theoretical framework will develop Solingen's causal mechanisms to include more intervening variables that reveal the process through which sanctions affect the target country.The area through which sanctions affect the target is through its integration with the international economy.Its pattern of integration in the global economy is more broadly shaped by the interaction of sanctions with third countries' responses and the target's counter-sanctions strategy (Arslanian 2020, 40).In turn, the change in the target's "relationship with the global economy affects the [domestic] distribution of power and resources" (Connolly 2018, 25), impacting the economic basis of the regime's coalition-building strategies or more generally its 'domestic system of political economy'.This resulting domestic system of political economy represents a new platform on which the target's domestic politics are predicated, creating the potential for restructuring the ruling coalition and its position towards the sanctions-related dispute (Arslanian 2020, 40, 48).Thus, following from Solingen, sanctions may make the ruling coalition more outward-looking in nature, making it more prone to compromise.Alternatively, it can become more obstinate towards nuclear proliferation with the strengthening of its inward-looking elements, such as in the case of developing import substitution strategies as part of its counter-sanctions strategy.

The supply-side pathway
As for the supply-side pathways, economic sanctions affect the target's capacity to acquire critical materials, technology and revenue to finance its nuclear programme.They also affect third countries' nuclear assistance programmes in a more direct manner than the target's industrial capacity.Producing fissile material, such as enriched uranium, or designing and building nuclear reactors, are difficult processes that require technology and expertise from abroad.Sanctions can disrupt the target's illicit proliferation networks or suspend third countries' official nuclear assistance.Finally, sanctions can cause economic contraction by constraining the budget and foreign revenue for financing the target's nuclear programme (Early 2012, 7-8).
Beyond causal mechanisms, a theoretical framework should better capture the causal complexity of prolonged cases.Thomas Biersteker et al. (2016) disaggregate the sanctions' episodes into different phases and examines each phase as the unit of analysis.This logic is validated by the fact that senders tend to broaden the sanctions package over time through the accumulation of additional sanctions (Reynolds and Wan 2012).The empirical literature on DPRK illustrates this with sanctions broadening in response to the target conducting nuclear tests (Haggard and Noland 2010;Haggard 2016).In other words, the sanctions' episodes can be viewed "as the result of chains of choices that the actors make in response to each other through iterated rounds of interaction" (Hall 2003, 384).More specifically, the target and sender(s) repeatedly interact as progress in the target's nuclear programme reshapes the sanctions regime in relation to the countries involved and the type of sanctions imposed.Either sanctions are eased in case of a decision to curb or suspend the programme or sanctions harden in response to the decision to advance the programme leading to the repetition of the whole causal mechanisms under new conditions.
Operationalising the theoretical framework takes the following steps (Figure 1): . The sanctions regime: The initiation of the sanctions regime, or its reiterated round, depends on the progress in the target's programme.It entails their type (targeted, comprehensive or extra-territorial) and the senders' characteristics (unilateral or multilateral, either led by an international institution or representing a coalition of countries). .The target's international economy: This represents the aggregate of the target's international economic relations including its "trade and capital flows structure" (Connolly 2018, 26).The target's international economy is shaped by the interaction of sanctions with third countries' response and the target's counter-sanctions strategy.
The reshaping of the target's international economy will impact the target's domestic economy and nuclear programme, allowing for a separate examination of the demand and supply-side pathways. .The demand-side pathway: Two sequential intervening variables are examined.The 'domestic system of political economy' defined as "the inter-relations of the target country's economic structure with its political dynamics in terms of identifying the economic basis of politically influential groups and the regime's co-optation strategies" (Arslanian 2020, 45), and its 'domestic politics' defined as "the dynamic, evolving nature of social conflict in target states" (Jones 2015, 47). .The supply-side pathway: The impact on the nuclear programme is examined through addressing their impact on three variables: illicit proliferation networks, third countries' nuclear assistance and access to financial resources. .The target's new nuclear policy: Changes in either the target's domestic politics or its nuclear programme will lead to a change in its nuclear policy related to deciding on the programme's resumption, escalation, curbing or suspension.As such, both pathways converge towards this decision although the dynamics of this convergence is not a priori deducible and will be left for empirical examination. .A new sub-episode/termination of the sanctions episode: A reiterated round of sanctions may emerge in response to the target's new nuclear policy yielding a new set of demand-and supply-side pathways and eventually another new nuclear policy.However, if the new nuclear policy complies with the demands of the sender, then it may result in the termination of the sanctions episode.

Iranian politics in the late 1990s-early 2000s
Iran's political system is a post-revolutionary hybrid regime which combines "clerical leadership, embodied by Supreme Leader Khamenei" with a "limited multiparty system" (Borszik 2016, 23).Its political economy relies mainly on channelling revenues from its crude oil exports through its "state-controlled economic system" to finance social policies.Predicated upon this system, Iran's domestic politics is characterised by factionalism between Conservatives and Reformists.The Conservatives, representing the traditional elements of society in both the government sector and the traditional mercantile class, have traditionally held power owing to their institutionalised control over several statal and para-statal bodies, and their control over their financial resources independent of state oversight (Akhavi-Pour and Azodanloo 1998, 81-2).The Reformists, on the other hand, drawing support from the modern elements of society, including students, intellectuals, the educated middle class and junior clerics, strive to reform the regime's unelected institutions, relax socio-cultural restrictions and focus on boosting production and investment by re-integrating Iran into the international economy (Forozan and Shahi 2017, 22;Seifzadeh 2003, 67-9).The Reformists held power between 1997-2005 with the election of Muhammad Khatami as President of the Islamic Republic.However, during the two terms of his presidency, Khatami failed to achieve any meaningful reform as he was trapped between the growing civil society activism and conservative forces (Bernard 2012, 35-9).Subsequently, the Iranian Revolutionary Guards Corps (IRGC), the elite military formation, started playing a wider part in politics by playing a key role in the Conservatives' counterattack against the Reformists (Forozan and Shahi 2017, 75).As the IRGC increasingly penetrated the country's political and economic institutions, it developed a distinct outlook from the traditional Conservatives.Drawing its personnel from the middle ranks of the IRGC, it had a more anti-clerical and nationalist outlook in comparison and economically envisaged a Chinese style capitalist development and global competitiveness: as such, they were dubbed as the neo-Principalists.The neo-Principalists successfully challenged the Reformists in various elections between 2003-5, with voters disillusioned by the failure of the Reformists to deliver on their promises, leading to Mahmoud Ahmadinejad, the hardline mayor of Tehran, winning the 2005 Presidential elections (Safshekan and Sabet 2010, 543, 549-50).
US sanctions on Iran date back to 1979 following the creation of the Islamic Republic of Iran and can be traced to the freezing of Iranian assets in response to the hostage crisis (November 1979-January 1981), where a group of armed Iranian students stormed the US embassy and held American diplomats hostage, with the issues of terrorism, human rights and nuclear proliferation included in the objectives of the sanctions regime.US sanctions expanded in the mid-1990s culminating in a blanket trade and investment ban on Iran (Fayazmanesh 2003, 221-2).Nevertheless, the sanctions regime remained unilateral with European allies reluctant to jeopardise their trade relations with Iran and preferring to pursue diplomatic engagement instead (Maloney 2015, 889-90).Furthermore, the United Arab Emirates (UAE) played a key role in undermining US sanctions by allowing the illicit transhipment of strategic products and technologies to Iran (Early 2015, 13).While the US did attempt to impose extra-territorial sanctions in 1996 through its Iran and Libya Sanctions Act (ILSA) and sanction foreign companies willing to invest in Iran's energy sector, the act met with fierce resistance from both European states and companies and ultimately failed (Rilea 2012, 54-5).As such, the sanctions' economic impact remained minimal as European energy companies replaced their US counterparts albeit on less favourable terms for Iran (Amuzegar 1997, 193).
The election of Khatami in 1997 and his call for international dialogue resulted in Bill Clinton's administration relaxing the sanctions regime.However, this trend was soon reversed with growing concerns over Iran's nuclear cooperation with Russia leading to the Iran Non-Proliferation Act of 2000 (ICG 2013, 8).In the aftermath of the 9/11 terrorist attack, political relations with the US deteriorated as Iran was designated as part of 'The Axis of Evil' (Seifzadeh 2003, 73).It was within this context that the 2002 nuclear crisis developed when the Iranian opposition group, Mujahedin-e Khalq, revealed the existence of Iran's clandestine nuclear reactor at Natanz built in 2000 and the heavy water plant in Arak dating back to 1996 (Simmons 2012, 49).Prior to that, mystery had surrounded Iran's nuclear programme with speculation over Iran receiving assistance from the AK Khan proliferation network,1 Pakistan and the People's Republic of China (PRC) (Malus 2018).The only publicised aspect of the programme was the 1995 agreement with Russia to build the Bushehr nuclear facility which Moscow continually emphasised was compatible with the International Atomic Energy Agency's (IAEA) requirements (Orlov and Vinnikov 2005, 51).
The Iranian side, facing the threat of IAEA referring the case to the United Nations Security Council (UNSC), engaged with the EU-3 (France, the United Kingdom (UK) and Germany) and signed the Paris Agreement in November 2004.The Iranian side agreed to voluntarily suspend its enrichment activities until negotiations led to a permanent deal (Oncel 2019, 62-3;Simmons 2012, 50-1).However, the failure to agree on specific terms, with the Iranian side opposing the EU-3's insistence on "permanent suspension", led to the decision to resume enrichment in a "step-by-step and calibrated" basis (Farhi 2010, 11).This development was further intensified when the neo-Principalist Ahmadinejad came to power.A proponent of Iran's "sovereign right to nuclear power" and highly critical of the previous administration's handling of nuclear negotiations, Ahmadinejad took a much tougher and confrontational stance announcing the resumption of enrichment activities at Natanz in January 2006 and, in response, the IAEA voted to refer the matter to the UNSC (Fieldler 2018, 296;Rezaei 2017, 77).
Sub-episode 1: multilateral targeted sanctions  The sanctions regime Despite the Iranian case being referred to the UNSC, the threat of UN-led sanctions did not deter the Iranians from resuming the programme.On the contrary, Ahmadinejad laid the foundations for the Arak heavy water reactor and officially announced the resumption of enrichment at Natanz in April 2006 (Majidpour 2013, 6;Oncel 2019, 64).Iranian defiance encouraged European countries to backtrack from their diplomatic approach and, as such, the sanctions regime gained a multilateral dimension.Multilateralism followed two different forms.The first was related to the UNSC sanctions which involved three rounds of sanctions (1737 [2006], 1747 [2007], 1803 [2008]).In addition to European countries, Russia and the PRC also voted for sanctions.However, their rationale for voting in favour was related to averting a US military attack on Iran while working on diluting the sanctions package from within (van Kemenade 2010, 100, 108).As such, UNSC sanctions mainly targeted Iran's nuclear programme including travel bans and asset freezes on entities and personnel involved, as well as bans on sensitive nuclear commercial activities related to uranium enrichment and ballistic missiles (Portela 2011, 19;Rilea 2012, 60).The UNSC sanctions were further restricted by the EU's 'supplementary' rounds of sanctions (Portela 2011, 20).This was specifically related to sanctions on the Islamic Republic of Iran Shipping Line Group (IRISL) and its provision of services and insurance coverage (Shamgholi 2012, 44).
The other form of multilateral sanctions was related to innovative targeted financial sanctions, through which the US targeted third country corporations for engaging with designated targets.They depend on utilising the Dollar's centrality in the international monetary system and forcing commercial banks "to police the financial system and isolate bad actors" (Arnold 2016, 80).Their underlying logic was related to the inability of non-US banks to afford being isolated from the US dominated financial system, as they required corresponding banks located in the US to arrange cross-border transactions (McDowell 2021, 641).The unexpected success of using targeted financial sanctions against al-Qaida's financial networks and DPRK 's finances convinced US policymakers to implement the same policy on Iran (Arnold 2016, 79-81).This policy began with the June 2005 Executive Order 13882 targeting groups and individuals supporting Iran's nuclear programme (Maloney 2015, 892).The designations of non-US firms and individuals engaging with Iran increased substantially, now facing heavy penalties not only for recent activities but for past activities as well.Such measures were "accompanied by a concerted campaign that primarily focused on financial firms in Europe, Asia, and the Gulf, intended to highlight both the increasing legal roadblocks as well as the reputational risks of investing in Iran" (893).

Iran's international economy
Iran's international economy was adversely affected by a combination of several factors: financial, insurance and shipping sanctions that facilitated Iran's international transactions which led to the withdrawal of major international banks from Iran, as well as difficulties in utilising letters of credit for financing trade and increasing import costs by around 20-30 percent (Kittrie 2009, 797-8).In response, Iran circumvented these transactional restrictions through creating front companies, changing ownership of IRISL ships and transhipping its imports through the UAE initially, and subsequently through Turkey and the PRC with the increasing US pressure on the UAE in 2008 (Habibi 2012, 5).Nevertheless, Iran's oil exports, its key export commodity, were not affected by sanctions with their destinations shifting from the US and Western Europe towards the Asian markets of the PRC, Japan and India, as well as the Southern European countries of Italy, Spain and Greece (Majidpour 2013, 7).On the contrary, Iran benefited from the surge in oil prices in the years prior to the 2008 financial crisis (Ehteshami 2010, 38).Meanwhile, Iran's oil production was sustained through Chinese investments which replaced European and East Asian companies and, consequently, the PRC became the largest investor in Iran's energy sector by 2010 (Garver 2011, 76).

The demand-side pathway
The domestic system of political economy Benefiting from high oil prices, the Iranian administration under the neo-Principalists adopted a policy of 'Petro-Populism' where oil revenues were spent on expansionist social policies for the benefit of low-income groups (Forozan and Shahi 2017, 78).Thus, between 2005 and 2008, the government spent more than USD 200 billion on social spending (Ehteshami 2010, 38).This period witnessed the growing economic power of the IRGC, among other parastatal organisations, as they expanded into strategic areas such as oil and gas, finance and telecommunication.Economic sanctions facilitated their expansion as they replaced both foreign companies facing sanctions-related difficulties and domestic private companies facing sanctions-induced bankruptcies (Forozan and Shahi 2017, 77).More specifically, the Bonyads, Iranian charitable trusts, benefited excessively from economic sanctions and transformed into large monopolies as they replaced the retreating foreign companies and exploited their legal privileges to play an important role in by-passing sanctions (Sune 2020, 366).With the appointment of former IRGC personnel to the cabinet, the neo-Principalists' economic and political networks were further integrated (Forozan and Shahi 2017, 77).
However, the collapse of oil prices beginning in August 2008 in the aftermath of the global financial crisis, exposed the weakness of pursuing an economic policy that stirred inflationary pressures as well as unemployment and underemployment (Ehteshami 2010, 36-8).In response to the emerging fiscal difficulties, a mass privatisation scheme of public companies was implemented.The scheme involved putting a percentage of a public company's shares on the Tehran Stock Exchange and distributing the rest as 'Justice Shares' for the poor.However, due to the private sector's weakness and the government's politicisation of economic reform, parastatal organisations became the main winners of the new reforms.The lower classes, with little financial know-how, often resorted to selling their shares for a low price to meet pressing economic needs and such shares typically ended up back in the hands of the neo-Principalists (Forozan and Shahi 2017, 79;Safshekan and Sabet 2010, 555-6).

The domestic politics
The initial success of 'Petro-Populism' was accompanied by an increasing repression and militarisation of Iranian politics in what Anoushiravan Ehteshami (2010) refers to as "the deliberalization of public spaces" (37), leading to curtailing any debate about Iran's strategic choices and the weakening of any voices calling for a negotiated settlement over the nuclear issue (Farhi 2010, 5).Nevertheless, the policy's subsequent demise led to the revival of Iran's factional contestation of power.This first manifested in the 2009 presidential debates as the contestants attacked the incumbent over for his misguided economic policies (Ehteshami 2010, 39-40).Political contestation was further fuelled with the re-election of Ahmadinejad leading to an election crisis.Key figures from the political elite declared the elections as fraudulent.Waves of protests, dubbed as the Green Movement, spread on the streets and the regime resorted to a violent crackdown to quell these demonstrations (Borszik 2016, 27;Ehteshami 2010, 46-8).With the Supreme Leader Khamenei taking the side of Ahamdinejad, the crisis was averted albeit by creating a rift within the Iranian political system (Borszik 2016, 27;Safshekan and Sabet 2010, 557).
In conclusion, the re-orientation of Iran's oil investments and exports preserved Iran's key integration pattern within the international economy on which its 'Petro-Populism' policy was predicated.During its prosperous phase, the neo-Principalists consolidated their coalition through co-opting their subordinate classes with expansive social spending.Furthermore, their position in the economy was elevated as their representative institutions benefited from sanctions busting which consolidated their political position further.However, the policy's demise led to the weakening of the regime's coalition and its contestation.Despite this, the ruling coalition was precariously maintained through the violent suppression of dissent.

The supply-side pathway
As financial, insurance and shipping sanctions impeded Iran's international transaction capacities, they also adversely affected its proliferation networks, especially with the UAE cracking down on the evasion of sanctions on sensitive nuclear products (Early 2015, 132).Furthermore, there is no evidence that Russia continued its nuclear cooperation after completing the Bushehr reactor in 2004 (Orlov and Vinnikov 2005, 55, 59).Nevertheless, Iran's nuclear programme, though constrained, was able to progress by virtue of the circumvention measures pursued, Chinese military assistance in sophisticated technology and the absence of budgetary constraints to fund the programme with the continuation of oil exports (Esfandiary and Fitzpatrick 2011, 147, 151;Garver 2011, 76;Kittrie 2009, 802).By September 2008, Iran had achieved significant improvement in its nuclear programme with rapid progress in uranium enrichment and heavy water research and development, in addition to building a new reactor, the Fordow Fuel Enrichment Plant (Ehteshami 2010, 42;Omelicheva 2012, 332;Simmons 2012, 66).

The target's new nuclear policy
This progress led to an impasse between Iran and the P5 + 1 (US, UK, Russia, the PRC, France and Germany) which was only resolved after the Obama administration took office in 2009 and broke with his predecessors' obstinate position by engaging in negotiations without pre-conditions (Poneman and Nowrouzzadeh 2021, 1).The renewed diplomatic engagement led to a fuel swap deal in which Iran would "export its low enriched uranium to Russia and France for processing into higher-enriched rods for the Iranian reactor" (Omelicheva 2012, 332).Nevertheless, there was disagreement about the specific details of the swap, related to the precise amount of enriched uranium Iran could stockpile at any given time.This resulted in the deal's failure and was followed in February 2010 by Iran announcing its decision to begin producing its own high enriched uranium to power the Tehran research reactor (Oncel 2019, 67;Poneman and Nowrouzzadeh 2021, 28).

Sub-episode 2: sectoral sanctions (February 2010-July 2015)
The sanctions regime Following Iran's decision to produce high enriched uranium, the sanctions regime broadened towards sectoral sanctions that targeted its energy and finance sectors, among others, and culminated in a regime of "de-facto comprehensive sanctions" (Moret 2015, 120).The new regime came as a response to the limited impact of UNSC sanctions after they were diluted by the Russians and Chinese during the previous sub-episode and were confined to Resolution 1984 of 2010 which prohibited Iranian banks from opening branches abroad and vice versa (Rezaei 2017, 80).The US issued several legislative packages including the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010, The National Defense Authorization Act of 2012 (NDAA) and The Iran Threat Reduction Act (ITRA) of 2013, targeting Iran's financial, insurance, shipping, energy and automotive industries (Macaluso 2014, 5;Rezaei 2017, 82).The culmination of sanctions made it "practically impossible for U.S. financial institutions or other U.S. persons to engage in transactions with almost any Iranian bank" (Carter and Farha 2013, 911).Whereas the EU's most damaging sanctions were enacted between December 2011 and March 2012 when it imposed an oil embargo and a SWIFT ban that disconnected Iranian banks from its messaging system and, consequently, from the international financial system (Fieldler 2018, 296-7).The combination of "US extraterritorial jurisdiction" and "the restrictive measures imposed by the EU" was designed to "considerably restrain the Iranian regime's possibilities to sell its oil" globally (Blockmans and Waizer 2013, 4).

Iran's international economy
The combined impact of financial, insurance and shipping sanctions and trade bans had a severe impact on Iran's international economic interactions, especially considering their extra-territorial nature as their enforcement affected East Asian and the Gulf countries' engagement with Iran.The UAE and other Gulf countries, which played a significant role in sanctions circumvention during the previous sub-episode, imposed stricter controls on doing business with Iran immediately after the 2010 CISADA sanctions (Esfandiary and Fitzpatrick 2011, 149).Even the Chinese decided to "scale back" and put their investments in Iranian energy on hold (Hong 2014, 421).Iran's key export commodity, crude oil, witnessed a significant decrease from 3.9 million barrels per day in 2009 to 2.5 million in 2011 and to less than 1 million in 2013 (Borszik 2016, 28;Rezaei 2017, 82).Insurance and shipping sanctions forced Japan and South Korea to reduce their imports to around 20-30 percent of their 2011 level (Blockmans and Waizer 2013, 4).Furthermore, financial sanctions restricted Iran's access to its financial reserves.Around USD 60-80 billion of its USD 100 billion reserves were estimated to be frozen of which around USD 20 billion were locked in escrow accounts in the PRC, India and South Korea (Esfandiary and Fitzpatrick 2011, 55, 149;Macaluso 2014, 11).While sanctions restricted Iran's ability to use the international financial system for its illicit proliferation trade, they also affected the country's capacity to import foodstuff, medicine and hospital machinery (Esfandiary and Fitzpatrick 2011, 149;Moret 2015, 126).
In countering the impact of these sanctions, Iran relied on several circumvention methods.As Gulf countries imposed stricter controls, Iran's transhipment activities shifted towards Turkish and Southeast Asian ports.The blacklisted IRGC increased the complexity of its layers of front companies with new companies being set up as soon as existing ones were sanctioned (Esfandiary and Fitzpatrick 2011, 149).Excluded from the international financial system, companies relied on the informal 'Hawala' system 2 in addition to a few small Asian financial institutions insulated from the international system (ICG 2013, 16;Macaluso 2014, 11).The IRISL elaborated on its circumvention methods resorting to "switching flags, changing a vessel's registered name or owner, setting up shell companies, sailing under flags of convenience and counterfeiting shipping documents" (Shamgholi 2012, 44).It also benefited from the marine insurance provided by the government-sponsored establishment of the Moallem Insurance 2 The hawala is an informal system of financial transfers that does not involve the actual physical movement of funds but rather relies on the existence of a network of hawala brokers in different countries.The customer approaches the hawala operator in their country who in turn contacts their hawala partner in the recipient country to deliver funds to the beneficiary.Debt settlement between the brokers takes various legal and illegal forms including relying on the formal banking system, under/over-invoicing the shipments of goods if they are business partners or through clearance if the operator owes money to the partner (Chêne 2008, 2-3).
Company consortium, whose cover was accepted by several trading partners in Western and Asian countries (48-9).Sanctions also shifted Iran's trade towards its adjacent neighbours of Turkey, Iraq and Afghanistan, boosting its non-oil exports following the devaluation of the Iranian Rial.Turkey emerged as a key importer of Iranian oil and gas, a base for Iranian investors to target global markets and as a financial intermediary for Iranian oil transactions (Habibi 2012, 4-7;ICG 2013, 23-4).
The demand-side pathway The domestic system of political economy The plummeting of Iran's oil exports had pervasive effects on the Iranian economy with general living standards deteriorating and inflation levels accelerating.The EU's oil and SWIFT bans of 2012 severely hit the Iranian economy, with its GDP contracting by more than 5 percent and the Rial plummeting by 80 percent (ICG 2013, 25;Macaluso 2014, 8-11).In general, the successful targeting of Iran's oil sector and the consequent economic collapse put the country's political economy in a critical position, with circumvention measures and non-oil export promotion representing merely stop-gap solutions.

The domestic politics
The economic malaise had social repercussions with rapid increases in corruption and crime rates while "signs of public anger" were contained by the bitter experience of the Green Movement and the recent fate of the Arab uprisings (ICG 2013, 31, 37).While the increase in sanctions-induced smuggling allowed clandestine networks to flourish and create a "symbiosis" with the IRGC, they failed to further strengthen the IRGC politically in contrast to the previous sub-episode (38).Conversely, the dire economic situation encouraged the reconfiguration of alliances within Iran's factional politics.A new consensus emerged among a wide spectrum of the political elite that the ruling neo-Principalists represented the greatest "threat to the existence of the Islamic Republic" (Borszik 2016, 30).Increasing criticism of the government's economic policies and cronyism soon developed into an official media campaign against the ruling faction in May 2011 and, before long, the Supreme Leader Khamenei also endorsed the campaign (30-1).Khamenei managed to bring the different factions of Reformists, Centrists and traditional Conservatives together, mending the 2009 rift and transforming the landscape of Iran's factional politics, which resulted in the defeat of the neo-Principalists in the 2012 parliamentary elections (Borszik 2016, 31-2).This was followed by the 2013 presidential elections where Hassan Rouhani, the former head of Iran's nuclear negotiation team under Khatami, emerged as the candidate of this new elite consensus (32).Rouhani's campaign focused on improving the "people's economic livelihood" which was explicitly based on lifting economic sanctions through reaching a nuclear deal, in addition to "ending monopolies of special interest groups" in reference to the growing economic clout of the IRGC.His landslide victory in August 2013 indicated that the majority of Iranians were seeking to improve their livelihoods by ending international isolation (Forozan and Shahi 2017, 82).
Overall, the successful targeting of Iran's oil export eliminated European oil imports while mitigating Iran's ability to re-direct trade to Asian countries, whereas the asset freezes further constrained Iran's access to foreign revenue.This affected the external basis of the country's domestic system of political economy and created an economic and social crisis.Politically, the crisis of the system was reflected in a backlash against the ruling neo-Principalists through a broad-based coalition of elite factions backed by popular support.This led to the reconfiguration of the ruling coalition in a manner that undermined the neo-Principalists' position and paved the way for negotiations on the nuclear issue.
The supply-side pathway Economic sanctions had a significant impact on importing key materials necessary for the Iranian nuclear programme.The limited capacity to procure maraging steel affected Iran's ability to develop second-generation centrifuges, while its limited ability to replace it with inferior carbon fibre made the programme reliant on the less effective first-generation of centrifuges (Esfandiary and Fitzpatrick 2011, 148).Furthermore, the supply constraints on aluminium, tungsten powders and oxidised salt, and their replacement with sub-standard substitutions, delayed Iran's ballistic missile production and brought its long-range missile production to a temporary halt (ICG 2013, 19-20).
Nevertheless, these supply constraints did not hinder Iran's overall progress.Owing to its new circumvention measures and Chinese illicit shipments, Iran had managed to achieve many indicators by February 2013 (Esfandiary and Fitzpatrick 2011, 147-9).Iran's stockpile of low and medium enriched uranium had increased from 839 kg in November 2008 to 8,271 kg, the number of its installed 1 st generation centrifuges increased from 7,100 in April 2009 to 12,669, while its stockpile of high enriched uranium reached 280 kg, a level sufficient for developing nuclear weapons (Macaluso 2014, 13).On the other hand, with the contraction of the country's economy and public finances, sanctions adversely affected the relative cost of financing the nuclear programme and brought its "break-out capacity to an exorbitant high cost" (14).

The target's new nuclear policy
Negotiations with the P5 + 1 were resumed soon after Rouhani assumed office and, by November 2013, an interim nuclear deal was reached.The deal entailed a partial suspension of Iran's nuclear programme in return for a partial suspension of the sanctions regime while both sides worked towards a long-term agreement (Borszik 2016, 32;Rezaei 2017, 86).The final deal, the JCPOA, was reached in July 2015.The agreement reversed the progress of the Iranian nuclear programme back to its 2009 status, as its centrifuges were reduced to 6,000 first-generation centrifuges and its uranium stock was reduced to 300 kg of low enriched uranium in return for lifting nuclear-related sanctions (Rezaei 2017, 86).During this period, Rouhani tried to accommodate the IRGC and contain their opposition to negotiations by shortlisting their economic affiliates for prospective partnerships with foreign companies, a matter which allowed the IRGC's position to remain under the umbrella of the Supreme Leader in providing cautious support for negotiations (Forozan and Shahi 2017, 84;Rezaei and Moshirabad, 2018, 13).

Conclusion
This article has attempted to develop a theoretical framework that examines the pathways through which economic sanctions have influenced Iran's 2015 nuclear deal.To this end, a theoretical framework has been developed that integrates the causal mechanistic approach to economic sanctions with the demand and supply sides of nuclear proliferation, alongside an approach that considers the phasing of the sanctions' episodes as the sanctions' regime is updated according to changes in the target's nuclear policy.The developed framework identifies two causal pathways.The first, the 'supply-side pathway', examines the direct impact of economic sanctions on the ability to procure the necessary material and technology for the nuclear programme, while the second, the 'demand-side pathway', examines how economic sanctions affect the target country's international economy, its domestic economy and in turn its domestic politics.
The framework was applied to the case of Iran beginning with the faltering of nuclear negotiations in 2005 and ending with Iran singing the JCPOA in 2015.The empirical examination began with a discussion the pre-2005 baseline sub-episode in which US unilateral sanctions were undermined by European countries by replacing US economic engagement and pursuing diplomatic engagement, thus nullifying the causal mechanisms through which sanctions could have affected the target.The faltering of diplomacy in resolving the 2002 nuclear crisis, especially with the ascension of the hardline neo-Principalists, paved the way for the two main sub-episodes.The first (2005-10) was instigated by Iran's decision to resume its nuclear programme.This led to a shift from the original US unilateral sanctions to specific multilateral and extra-territorial sanctions targeting the nuclear programme and the financial sector.In examining the pathways, the demand-side pathway shows that sanctions evasion networks strengthened the incumbent neo-Principalists' control over the economy as their ruling coalition was consolidated by the policy of 'Petro-Populism' which benefited from high global oil prices and the redirection of oil exports.While the subsequent collapse of oil prices in 2008 undermined the dominance of the ruling coalition and created a rift within the political system, it was insufficient to overthrow the ruling faction and its hard-line stance on nuclear proliferation.In examining the supply-side pathway, the targeted sanctions do not appear to have significantly halted the progress of the programme owing to Iran's evasive measures and Chinese assistance.Both pathways contributed towards the decision to advance the nuclear programme and produce highly enriched uranium.In the second sub-episode , the multilateral and extra-territorial sanctions regime shifted from targeted to sectoral.Henceforth, the successful targeting of Iran's crude oil exports, among other measures, impacted the country's domestic politics, or its demand-side pathway, as the associated economic deterioration created a broad anti-sanction coalition that challenged the neo-Principalists and negotiated a nuclear deal once it assumed power.On the other hand, with regard to the supply-side pathway, economic sanctions slowed and increased the costs of the nuclear programme, but failed to halt its progress.
In examining the relevance of the developed theoretical framework for explaining the case of Iran, the framework clearly explains the repeated interaction between the target and the sanctions regime as each milestone in the nuclear programme is met by a qualitative change in the regime.As for the causal pathways, the empirical case shows more evidence of the demand-side domestic politics pathway in comparison to the supply-side pathway.Solingen's distinction between the different responses of inward-looking and internationalising coalitions to international pressure plays a role in explaining the differing responses of the Reformists and neo-Principalists.On the other hand, the broad coalition that negotiated the deal does not represent an internationalising coalition as much as it indicates the centrality of the target's pattern of integration in the international economy, with its reliance on oil exports, to its domestic system of political economy and its overall political survival.
These findings give credence to the traditional cost hypothesis in economic sanctions which relates sanctions' effectiveness to the target's incurred economic costs, a hypothesis that has been subject to an extensive critique.Nevertheless, the framework provides a clear pathway through which the hypothesis functions, namely through undermining the economic basis of the target's political system.As the framework is designed to examine prolonged and obstinate cases of non-proliferation sanctions, the findings can provide an insight into the case of DPRK by relating its brief period of readiness to negotiate disarmament in 2018 with the PRC's preceding strict enforcement of UNSC sanctions threatening the economic basis of its political system (Kim 2020).
One area which the framework did not address and a topic for future research, is related to the impact of negotiations and, more specifically, to the sender's preferences on the target's nuclear policy.In both the baseline and the first sub-episodes, the change in the target's nuclear policy was preceded by the collapse of negotiations with disagreement over the terms of the deal, while in the second sub-episode, the deal was reached following the Obama administration's acknowledgement that the Iranian nuclear programme should be curtailed rather than suspended.The importance of the sender's preferences is aptly demonstrated by the Trump administration's decision to unilaterally withdraw from the deal in 2018.

Notes on contributor
Ferdinand Arslanian is a Research Fellow at the Centre for Syrian Studies, University of St Andrews, St Andrews, United Kingdom.

Figure 1 .
Figure 1.Economic sanctions and nuclear non-proliferation: The causal pathways framework.