Sanctions against foreign investment firms hurt ordinary Iranians, too, because those businesses pour money into companies that make medicine and build roads and housing, providing jobs for the millions of young Iranians who graduate each year with limited job prospects.  Further isolating Iran economically may in fact play right into the hands of Revolutionary Guard hard-liners. Tougher sanctions would rally this fratricidal conservative bloc against an old common enemy and help the Guards’ many businesses, which include smuggling goods through secret landing spots on the coast.  The “targeted” financial sanctions that the United States instituted in 2005 have been ineffective because Iran, despite its reputation as an international pariah, conducts substantial financial transactions with countries as varied as Brazil, France, Italy, South Korea and, of course, China and Russia. In March, when the Treasury Department froze the assets of our company’s main competitor, First Persia Equity Fund, that firm’s reputation took a huge hit. Yet its day-to-day business was not affected, for it has always dealt mainly with European banks and investors that see Iran not as a national security threat but as a money-making opportunity.  Despite this, American officials believe sanctions can be effective, and often cite as evidence the case of Banco Delta Asia, a bank based in Macao that handled much of the North Korean regime’s external transactions. The United States blacklisted the bank, resulting in a freeze on $25 million in accounts linked to North Korea. In 2007, American negotiators used those accounts as a bargaining chip in an effort to persuade Pyongyang to dismantle its nuclear weapons program.  But the comparison doesn’t hold up because Iran’s foreign financial networks are far more complex and pervasive than North Korea’s. By my count, at least six state banks that the United States considers to be financiers of Iran’s nuclear or arms programs have operational branches throughout Europe. Bank Sepah — a bank that the Iranian military uses for funneling money to the country’s ballistic missile program — even has an office on Fifth Avenue in New York City.  Iranians by now have grown used to the constant saber-rattling. In December 2006, when the United Nations Security Council froze assets of weapons proliferators in Iran, according to calculations made by the fund where I worked, the Tehran Stock Exchange fell 7 percent. After the next round in March 2007, the index fell about 3 percent. By the third round last year, markets didn’t budge. Local shops have adapted by routing their transactions with international merchants through second-tier banks in third-world countries like Pakistan.  Companies that import equipment like electronics have likewise hired middlemen in Dubai. Hewlett-Packard, for example, has officially sold zero computers here. But according to research by the firm I worked for, Iran is the company’s largest market in the Middle East.  By driving large chunks of business outside the regulated economy, sanctions have benefited not only the Revolutionary Guards but also shadowy money lenders called hawalas. The hawalas swap debts without any cash exchanging hands — a particularly good way to minimize the risk of detection when transferring more than $10,000. (Most European banks will happily handle any transaction under this amount.)  Financial sanctions can never really work until Europeans sever their banking ties to Iran. But Iran is one of the Middle East’s largest economies, and the European Union is Iran’s largest trading partner. Some $20 billion worth of goods, exported each year from Europe to Iran, is at stake. Even when European countries have imposed sanctions, they are often not enforced.  In any case, at this point sanctions may not be needed. The Iranian government’s brutal crackdown in the wake of the disputed presidential election is becoming its own greatest undoing. YouTube videos of protesters dying in the streets and news reports of prison abuse and show trials do more to isolate the government here than a gas embargo ever could.  An Op-Ed article on Sept. 2, about sanctions against Iran, misstated the status of sanctions against an Iranian bank with operations in Italy. Sanctions against the institution, Bank Sepah, remain in place; Italy has not lifted them.  Jerry Guo was an analyst for a hedge fund in Tehran this summer.  A version of this op-ed appears in print on , on Page A23 of the New York edition with the headline: Buying American in Tehran. Today's Paper|Subscribe
American sanctions against Iran are not only ineffective, but they often have unintended consequences that hurt American interests.