How Can Iran Circumvent American Sanctions?

Iran is no stranger to economic sanctions. The country has been facing some sort of sanctions for the past four decades. This has resulted in the nation’s economy being stressed. However, the effect of the sanctions has not been fully felt by the Iranians. Otherwise, there would be no economy left as of now. It is a known fact that Iranians are skilled at evading economic sanctions imposed by America. Iranian leaders have often openly boasted of their capabilities to run a covertly evade sanctions. In this article, we will have a look at some of the plausible ways in which Iranian businesses are likely to evade American sanctions.

What Are Economic Sanctions?

Economic sanctions are America’s way of financial warfare against other countries. When America imposes sanctions, it is basically asserting the supremacy of America and its allies. When Americans impose sanctions, they basically tell other countries not to conduct any sort of economic dealing, lawful or unlawful, with Iran. If businesses and countries around the world do not follow this diktat, then they would be prohibited from doing business with America and its allies. Hence, when sanctions are imposed on November 5, all third parties will be given an option to choose between America and Iran. Given the fact that America and its allies have a widespread economic network, most parties will choose them. This is likely to lead to the economic isolation of Iran since Iran will simply be unable to find any parties with whom they can do business.

Iran has been skillfully evading American sanctions till now. Here are some of the mechanisms that they have used in order to evade these sanctions.

Front Companies

The most obvious way to evade sanctions is by creating front companies. Under this method, Iranians create front companies in order to trick other companies into trading with them. The other companies do not know that they are dealing with Iranian companies. This is because these companies use obscure names. Also, these companies are formed for a very short duration. They are created only to perform certain specific trades. After some time, these companies are then shut down. Since these companies leave almost no paper trail, it is impossible to accurately determine the transactions being undertaken by these companies. Such companies are usually formed for financial transactions. Front companies help Iranians access the financial system of the western world. This is where front companies are useful because transactions are instantaneous and no physical movement of goods is required.

Trade with Europe

Iran is planning to exploit the dire economic situation in Europe for its own financial gains. After the American sanctions come into effect, Iranian oil will become a distressed asset. It is for this reason that it will have to be sold below market value. Many European economies are facing financial crises. Also, oil happens to be the biggest line item in their import bill. This is the reason why cheap Iranian oil is very attractive to these countries.

The only problem is that the economy of the European Union is too intertwined with the American economy. This is the reason why they cannot openly defy the American sanctions. Hence, Europe is planning to use Russia as a middleman. Russia has very little economic ties with America. Hence, it can afford to violate American sanctions openly.

The sanctions can be circumvented if Iran sells oil to Russia which can then refine it and sell it to the rest of Europe. On the other hand, European countries can sell manufacturing equipment and other goods to Russia. Once again, Russia will trade with Iran and provide the required goods. In effect, Russia will be using its economy to shield European Union from the effect of the American sanctions.

Barter Deals

Iran is also planning to do barter deals with many countries. Countries like Turkey, India, and China are also willing to buy Iranian oil since it is cheap. The only problem is the currency which needs to be used for the transaction.

The Iranian government is more than happy to accept Chinese Yuan and Indian Rupee as payment for their oil. They have no reason to insist on United States dollars since they may not be able to use them. Hence, Iran will sell cheap oil in return for local currencies. This will be very beneficial to a lot of local economies.

The problem is that if Iran has to make payments for goods, these countries are unwilling to accept the rapidly depreciating Iranian currency. This is where Iran has promised to make payments in gold which is the most acceptable form of money all over the world.


Lastly, the cyber capabilities of Iran are also extremely improved now. Recently, it has come to light that Iran has perfected new cyber capabilities which will allow them to hack into bank’s networks. Iranian hackers can then temporarily disable the controls which enforce the sanctions levied by the United States.

To sum it up, Iran has a fledgling economic system which is based on its capabilities to divert sanctions. Hence, American sanctions are likely to have limited effect in Iran.

❮❮   Previous Next   ❯❯

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to and the content page url.