Abstract: Economic sanctions can affect development not only by reducing aggregate output but also by changing the composition of production. This paper studies how Iran’s post-2012 sanctions episode was associated with sectoral reallocation and manufacturing technology intensity. Using annual World Bank and UNIDO data for 1995–2023, we construct outcome-specific synthetic controls for real GDP, broad sectors, industrial subsectors, and manufacturing technology groups. Real GDP, industry, and services fall below their synthetic paths, with gaps that generally widen after sanctions were reimposed in 2018. Within industry, non-manufacturing activity shows the strongest underperformance. Within manufacturing, medium/high-technology value added displays a larger and more persistent shortfall than low- and medium-low-technology value added, and its share of total manufacturing also declines relative to a synthetic comparison. Agriculture does not show a comparable negative gap. The findings connect the macroeconomic costs of sanctions to a broader development concern: persistent external restrictions may weaken industrial upgrading as well as current output.