The Iranian Government’s Response to Sanctions: A Case Study of New Regionalism

Iran has faced significant economic sanctions and diplomatic isolation from the West, primarily the U.S., since the nationalization of its oil industry in 1951, up to its recent response to Israeli attacks. Despite the adverse effects of these sanctions on Iran’s economy, the country has demonstrated resilience through various substitution policies. These include the “Asianization”, “De-westernization”, or “Look to the East” foreign policy since 2005, as well as the “Resistance Economy” strategy advocated by the Supreme Leader from 2012 to promote self-sufficiency and self-reliance. Iran’s economic resilience has maintained relative stability rather than decline by reducing dependence on imported goods and oil exports, fostering domestic production, and relying on accumulated technological reserves and industrialization. Although able to mitigate short and mid-term impacts, Iran now faces the lagging effect of the sanctions, including a lack of investment crucial for long-term growth, with a risk of de-industrialization looming. In recent years, Iran has strengthened its economic and security ties with China and Russia through bilateral and multilateral agreements, as well as regional and transregional cooperation, including its recent integration into the Shanghai Cooperation Organization (SCO) and BRICS, along with trade agreements with the Eurasian Economic Union (EAEU). Using an inductive approach with qualitative methods, this study analyses Iran’s recent shift towards new regionalism, emphasizing the benefits and opportunities to attract the needed investments. It concludes that this evolution is crucial for neutralizing economic sanctions by leveraging the expanding role of new regionalism within an emerging multipolar order and a rising Global South.