23.10.2025 CNN Feature: How Western sanctions on Iran have hurt the same middle class that drives reform

A recent CNN report (October 19, 2025) by Leila Gharagozlou highlights findings from a new study by Mohammad Reza Farzanegan (Professor of Economics of the Middle East, Marburg University) and Nader Habibi (Brandeis University). The article explores how prolonged Western sanctions have severely weakened Iran’s middle class, a social group historically associated with reform, moderation, and economic dynamism.

The study, published in the European Journal of Political Economy, investigates how Iran’s middle class would have evolved after 2012 in the absence of sanctions linked to its nuclear program. Using the Synthetic Control Method (SCM) with nested optimization, the authors construct a counterfactual scenario for Iran based on a weighted average of comparable, non-sanctioned countries.

The results show that sanctions led to an average annual reduction of 17 percentage points in the size of Iran’s middle class between 2012 and 2019. A complementary Synthetic Difference-in-Differences (SDID) analysis provides a conservative estimate of a 12-percentage-point annual loss, reinforcing the robustness of the findings. These effects capture both the direct economic shocks of sanctions and Iran’s domestic policy responses.

The study identifies real GDP per capita, trade, investment, industrial output, and vulnerable employment as key channels through which sanctions erode the middle class. Extensive sensitivity checks — including placebo, leave-one-out, and bias-corrected analyses — confirm the validity of the results.

Prof. Farzanegan notes that “sanctions, combined with corruption, function like Robin Hood in reverse — taking from the middle class and poor to enrich the powerful.”

The research underscores the long-term social and political risks of external economic pressure on societies with large, educated middle classes.

🔗 Read the full CNN article