The arrival in power of the moderate Hassan Rouhani in 2013 was a groundbreaking moment in Iran, marking a clean break from eight years of sociopolitical conservatism under the previous president, Mahmoud Ahmadinejad. What provoked this change? This article argues that the institutional shift toward relative moderation under Rouhani was facilitated partly by sanctions, which were imposed when the regime was facing its greatest legitimacy crisis, caused by the fraudulent elections of 2009. It was also riven with infighting among the ruling conservatives. At this critical juncture, sanctions could have undermined the regime's mechanism of co-opting the lower classes, its major support base. Ahmadinejad's mismanagement of a sanctioned economy also contributed to the infighting. Major decision makers had to mitigate the crisis, and they let Rouhani run for office and get elected. The literature on the Islamists does not account for this relative moderation, while the literature on international sanctions lacks the explanatory power to account for sanctions-related elite infighting among hardliners and the fraying social contract induced by sanctions. This article creates a unified framework by taking stock of both phenomena.