Under the Shadow of International Sanctions: Turkish- Iranian Economic Relations 1996-2014

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During the era of Muhammad Reza Shah, Iran acted as the ‘gendarme of the Persian Gulf’ in order to protect US interests in the Middle East. This was in tandem with most of the European states who operated their Middle East policies from Tehran. In 1978, over 100,000 Western people, including 40,000 American, who engaged with official and private sector projects in both the civilian and military field, lived in Iran.


The overthrow of the Shah in 1979 shattered these ties leaving a network of endangered contracts, claims and counter claims that ran into billions of dollars. The relations further deteriorated when pro-Iranian Revolutionary students took over the US Embassy and held 52 American as hostage for 444 days (November 4, 1979 to January 20, 1981) in Tehran.  In response, President Carter issued Executive Order 12170 in November 1979 freezing about $10 or $12 billion in Iranian assets, including bank deposits, gold and other properties on November 14, 1979.  As part of the negotiations concerning the release of hostages, the US government negotiated with Iranian officials in Algiers, jointly issuing an Accord in January 1981. The Accord called for the lifting of US sanctions against Iran, the return of seized Iranian government property being held by the US and the prohibition of legal action for damages by the hostages against Iran. The US government also pledged not to intervene directly or indirectly, politically or militarily in the internal affairs of Iran. The US government however has not fully complied with the Accords despite the fact that they remain a judicially recognized international agreement. The issue of Iran’s frozen assets emerged as an agenda for the first time during the Interim Geneva agreement on November 24, 2013. US Secretary of State John Kerry stated that the US would release a total of $8 billion in unfrozen assets included $4.2 billion which had accrued from the proceeds of oil and $1.5 billion from other sources, including trade in precious metals, petrochemicals and auto industry.  However, the sanctions relief of $8 billion is very limited compared with the $100 billion in foreign exchange that Iran has in its frozen accounts worldwide.

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