This week, the United States imposed new sanctions on Russia and entities based in other countries in an effort to continue to limit Moscow’s access to finance and products that support its invasion of Ukraine.
Companies based in Kyrgyzstan, the United Arab Emirates and Serbia all face sanctions for aiding Russia in the war.
“They’re fabricating their alternative network of alliances around the world,” former ambassador to Poland Daniel Fried said. “With the exception of China, Russia’s friends are the pariahs of the world, generally speaking. Iran is certainly helping Russia. It’s an alliance of convenience.”
Iran has aided Russia in its war efforts by providing drones. Both countries are also trying to ease the economic pressure the sanctions have caused and have recently tied their banking systems.
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“You see the Russians starting to pick up some of the tactics the Iranians perfected, and continuing to deepen their political, economic and security ties with Tehran,” said Behnam Ben Taleblu, senior fellow at the Foundation for Defense of Democracies. “Iran has a master class in sanctions busting that it is helping to teach the Russian Federation right now.”
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Iran’s main source of income comes from oil exports. Since the United States reimposed economic sanctions, Iran has turned to illicit trafficking to maintain that revenue. His production hit a new high despite the added pressure.
“While these sanctions remain on the books, the problem here is that they are not being actively enforced. This lack of active enforcement, coupled with a very public desire for diplomacy and de-escalation with Iran, is encouraging more risk-tolerant players to buy more Iranian oil,” Taleblu said.
Iran disguises its ships by renaming them at sea. It changes identification codes to evade international tracking systems. It has also made discreet ship-to-ship transfers to covertly deliver its oil to tankers belonging to other countries, including China and Syria.
“Iran already had a diverse and illicit shipping network,” Taleblu said. “Iran also has an extensive illicit money laundering network in place to help recoup some of this revenue. So it’s an adaptive adversary.”
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Iran’s shadow banking system has covered up sanctioned Iranian entities to disguise business with foreign customers. The United States recently announced sanctions against this financial network.
“Iran continues to thumb its nose at U.S. sanctions, our allies, and continues to work to undermine and abolish the State of Israel,” said Rep. Mike Lawler, RN.Y.
“We must be very united, with our allies, to vehemently push back against any actions that Iran takes, whether it is producing and distributing oil or trying to undermine the sanctions that have been put in place.”
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The United States first sanctioned Iranian oil imports in 1979 in response to the Iran hostage crisis. Since then, additional restrictions have been added and lifted as Iran tries to circumvent the upcoming move by the United States and its allies.
“You have to constantly tinker, because every time you put a rule in place, what a penalty is, people try to figure out what the holes are and how to fix them,” said Rep. Jared Moskowitz, D-Fla. “I think the sanctions against Russia with what’s happening in Ukraine and the sanctions against the Iranian regime are both equally important.”
Iran’s response to sanctions has been aggressive. According to the US Navy, the regime has harassed, attacked or seized nearly 20 internationally flagged merchant ships in recent years. His threats at sea last even longer.
“These are threats almost as old as the Islamic Republic itself. Iran has long viewed oil as a weapon, and it has often been threatened for more than one to two decades now that if it can export oil, no other state in the region could peacefully export oil,” Taleblu said.
Despite the regime’s efforts to impact the oil market, the sanctions are still having an impact. Inflation is around 40%. It also has a trade deficit of $6.5 billion for non-oil trade. The country’s currency has also weakened.
“If they didn’t work, both countries wouldn’t keep asking them to disappear,” Moskowitz said. “We must continue to keep the pressure on with sanctions against Iran and let it take its course.”
The Russian economy has had its own difficulties. Its GDP fell 2.1% in 2022, according to the Organization for Economic Co-operation and Development. The OECD predicts that the Russian economy will contract another 2.5% this year.
“These sanctions are intended to primarily apply economic pressure and force behavioral change,” Lawler said. “In the case of Russia, I don’t think they anticipated the unified backlash that would come from their invasion of Ukraine.”
Experts believe that while Iran and Russia have found ways to avoid sanctions, pressure continues to mount on their economies.
“You’ll never be 100% effective. That’s the bad news. The good news is that you don’t have to be. You don’t have to be airtight in your sanctions. The purpose of sanctions is to cause economic stress. You can be flawed and cause economic stress,” Fried said. “Cheating doesn’t mean sanctions don’t work.”