Recent disclosures about corruption and resource waste have revived a blunt but unavoidable truth: lifting economic sanctions is a necessary precondition for any meaningful reform in Iran’s oil, gas and external trade sectors.
As long as sanctions remain in place, sanction-evasion becomes structurally inevitable. And whenever evasion becomes the modus operandi, opacity, rent-seeking and large-scale leakage become inseparable from the process.
A recent warning from a member of the Supreme Council of the Cultural Revolution captured this dilemma succinctly.
He noted that “parallel crude sales” conducted outside the National Iranian Oil Company have caused extensive harm to national interests, urging senior authorities to halt this destructive practice.
His remarks pointed to a crucial detail: corruption in oil trading emerges primarily during transportation—where phantom demurrage fees, inflated costs for storage, and ship-to-ship transfers hide massive illicit commissions.
His concluding question—whether senior state institutions will intervene—reveals the depth of doubt surrounding the feasibility of controlling such a system.
To understand why, one must turn to the late Nobel laureate James Buchanan and his theory of public choice.
Buchanan argued that people do not shed personal incentives when they move from the private sector into government. The same self-interested motivations that drive individuals in markets operate among policymakers and bureaucrats as well.
Structurally Vulnerable
Without institutional safeguards, public office—no less than private enterprise—becomes vulnerable to conflicts of interest, resource diversion and rent capture.
Advanced economies have developed strict mechanisms to mitigate such conflicts. Yet even there, media reports routinely uncover new cases, underscoring the persistent complexity of the issue.
In developing economies, where institutional checks are weaker and political structures more centralized, the problem is exponentially more severe.
Iran represents an extreme case. A half-century of a state-dominated, command-style economy—combined with over a decade of crippling external sanctions—has created an environment where conflicts of interest, economic distortions and rent-seeking thrive.
Legal oversight and ethical exhortation are insufficient; the only effective remedy is to remove the structural conditions that generate these conflicts in the first place.
The senior official’s example of fuel smuggling illustrates this dynamic: when an individual or entity can instantly pay a hefty fine without public disclosure of identity, the scale and embeddedness of the networks involved become self-evident.
If authorities struggle to control smuggling operations of this magnitude, how can they realistically regulate the far larger and more opaque domain of sanction-bypassing oil trade?
Dangerous Illusion
The economic damage inflicted by sanctions extends far beyond these governance failures. They elevate the cost of production and trade, suffocate exporters, limit access to global markets and erode competitiveness at home.
Believing that Iran can achieve sustainable growth under perpetual sanctions is a dangerous illusion—one that risks steering the country toward a “Cubanization” of its economy: chronically constrained, inward-looking and structurally stagnant.
Sanctions are not just one policy challenge among many; they are the fundamental barrier blocking any serious economic reform agenda. Yet the diplomatic discourse emerging from Tehran remains formulaic and defensive, lacking the creativity and initiative necessary to reduce or remove economic pressure.
What is urgently needed is an economically literate diplomacy—one that prioritizes sanction relief, proposes actionable pathways for de-escalation and initiates structured economic dialogue with Western partners.
Facilitating technical and commercial exchanges between Iranian and foreign business communities could open narrow but meaningful channels for problem-solving.
Iran’s vast resources and market potential remain strong incentives for engagement, if diplomacy is prepared to actively cultivate them.
In this critical moment, enabling even limited economic re-integration is not optional; it is a strategic necessity.
