Consequences of the Activation of the Snapback Mechanism on Iran’s Economy: An Analysis of the Economic Effects of the Reinstatement of International Sanctions under Resolution 2231.

Introduction
Following the escalation of tensions in Iran’s nuclear dossier, the likelihood of activating the "snapback mechanism" has once again become a priority for some JCPOA member states. This mechanism, included in the text of UN Security Council Resolution 2231, could lead to the automatic reinstatement of international sanctions against Iran. This article aims to provide a clear picture of Iran’s economic future by focusing on the economic consequences of this development.

What is the snapback mechanism?
The snapback mechanism is a clause in Resolution 2231 that allows the reinstatement of all pre-JCPOA UN sanctions if any party fails to comply with its obligations, without the need for a new vote in the Security Council.

With the activation of this mechanism, all sanction exemptions granted to Iran under the JCPOA will be revoked, and sanctions on arms, banking, energy, transportation, insurance, foreign investment, and technology will be reinstated.

Economic Consequences of the Activation of the Snapback Mechanism
1. Blow to Foreign Trade
In the event of the Security Council sanctions being reinstated, Iran will face even broader restrictions compared to the period of maximum pressure.

Exports of oil, gas, and petrochemicals will further decline; international insurance and transportation will be disrupted.

Non-oil exports will also be harmed due to difficulties in banking transactions and transportation.

The import of strategic goods, machinery, medicine, and raw materials will face difficulties, and transaction costs will increase.

2. Currency Market and Rising Inflation
The reinstatement of sanctions will lead to a sharp decline in the country’s foreign currency revenues. This decrease, both in real terms and psychologically, will cause a surge in the exchange rate, weakening of the rial, and heightened inflation expectations. Under these circumstances,

Prices of imported and intermediate goods will rise.

Cost pressures on production will intensify, leading to a new wave of structural inflation.

3. Budget Deficit and Financial Pressure on the Government
Declining oil revenues and disruptions in exports will confront the government with a revenue shortage.

In the absence of oil revenues, the government will be forced to increase borrowing from the central bank or sell assets.

This situation leads to the expansion of the monetary base, an increase in liquidity, and intensified inflation.

At the same time, the government's ability to fund development projects, welfare programs, and support for vulnerable groups diminishes.

4. Capital Flight and Decline in Investment
With the rise of political and economic risks, capital flight from the country intensifies, and domestic investors lose their interest in productive activities.

Foreign direct investment (FDI), which was already very limited, will effectively come to a halt.

Capital will increasingly move into safe assets such as real estate, foreign currency, and gold.

Major projects in the oil, gas, petrochemical, and industrial sectors will face suspension or halt.

5. Pressure on the Banking and Financial System
Iranian banks will be re-listed on international sanctions lists, and connections with SWIFT, correspondent banks, and global financial institutions will be severed.

Banking transaction costs will increase, and the efficiency of the monetary system will decline.

Currency smuggling, informal remittances, and alternative transfer systems will replace transparent mechanisms.

Impact on Different Social Groups
The consequences of these sanctions are not limited to the macro level; their effects also manifest in the daily lives of the people.

Severe inflation of consumer goods, decreased purchasing power of middle and low-income groups.

Unemployment in vulnerable industries such as automotive, textile, pharmaceutical, steel, and construction.

Intensification of inequality and growth of poverty, especially in underprivileged areas.

Outlook and Possible Scenarios
Sanctions Scenario and Economic Consequences
Full reinstatement of UN sanctions, official activation and unhindered enforcement, sharp decline in exports, rising inflation, deep recession
Symbolic activation with vetoes by China/Russia, high psychological pressure, incomplete enforcement, market fluctuations, reduced investment, instability
Renegotiation and de-escalation, revival of a limited type of agreement, gradual easing of pressure, partial return of stability

Conclusion
The activation of the snapback mechanism could push Iran's economy into one of the most risky periods in recent decades. With a sharp reduction in access to foreign resources, severed international financial connections, inflationary pressure, and a government budget crisis, all economic indicators will experience significant strain.

This situation requires that, alongside diplomatic efforts to manage the crisis, the government implement clear, realistic, and domestically-based strategies in the economic, currency, and budgetary fields.

Sources
International Monetary Fund (IMF) reports

Analytical report by the World Bank on Iran

Central Bank Economic Bulletin

Iran Customs Trade Data

Analyses by Independent Economic Experts