How do sanctions relate to domestic policy in Iran?

• A. Sanctions have no impact on policy choices.
• B. Sanctions are only external and do not influence subsidies or policy.
• C. Sanctions shape subsidies and diversification, and shape negotiations; crises used to justify policy and legitimacy.
• D. Sanctions force immediate liberalization of civil liberties.

Answer: (C)

Sanctions are external pressure that a regime learns to translate into domestic policy decisions. When economic constraints tighten because of sanctions, the government must reallocate scarce resources, which often means adjusting subsidies and pursuing strategies to diversify the economy away from heavy oil dependence. This can include reshaping energy subsidies, launching targeted transfers to protect vulnerable households, and pushing investment into non-oil sectors or domestic production. Sanctions also influence how Iran engages with foreign powers, shaping negotiation tactics and leverage in diplomacy. Additionally, leaders may frame economic crises or external threats created by sanctions as justification for policy choices and to bolster political legitimacy, using the situation to rally support and maintain control. In short, sanctions drive shifts in economic policy, spur diversification efforts, shape bargaining with others, and become a tool in maintaining regime legitimacy.