Publication
Omar Shaban Ismail · QudsNet · 2019
An analysis of the mounting impact of US sanctions on the Iranian economy and the regional implications of this economic crisis.
The American decision to deepen the sanctions on Iran and to impose a comprehensive ban on sales of Iranian oil will deal a very painful blow to an Iranian economy that has already been labouring under difficult conditions since the international sanctions against it began — sanctions that started shortly before the 2015 agreement with the West on Iran's nuclear programme was reached.
In May 2018, US President Trump decided to withdraw from that agreement without coordination with, or the blessing of, the other states party to it. Since that time the American administration has begun imposing punitive policies on Iran anew; these sanctions have brought about deep and multiple crises, causing a severe rise in inflation and the collapse of the Iranian currency against hard currencies, and throwing the work of the banks into serious disarray. They have driven many international companies to withdraw from the Iranian market, and numerous international firms have refrained from supplying the inputs and intermediate goods that industry and agriculture require, which has greatly affected the productive sectors — to the point that Iranian President Hassan Rouhani acknowledged at the end of this past January that "his country is facing the most difficult economic situation in 40 years."
Oil represents one of the most important mainstays of the economy in Iran, which reached 450 billion dollars in 2017. Oil exports make up 80% of total Iranian exports and 60% of total budget revenues. Iran also ranks fourth in the world in terms of proven reserves, with a volume reaching 150 billion barrels. Iran was producing 6 million barrels a day before the sanctions, but that has fallen to 2–3 million barrels a day at present. The International Monetary Fund likewise expected Iran's economy to contract by 1.5% in 2018, and to contract by 3.6% this year, 2019.
Should the sale of Iranian oil come to a halt, oil prices are expected to rise unless the other producing states, such as Saudi Arabia and the Emirates, move quickly to raise their production capacity to cover the shortfall — which serves their own interest, whether through an increase in the volume of production or by obtaining higher prices for their oil.
Some may ask whether the United States will succeed in imposing its will on every state and company to stop buying Iranian oil. The answer is no. There are many countries — among them European states — that have strategic economic interests with Iran and will work to avoid the American sanctions as far as they can. Iran is not a small country: it has a strong and diversified economy, it borders many countries, and it is centrally placed. There are a great many international companies that will work to take advantage of these sanctions and buy Iranian oil at prices far below market prices.
There is no doubt that the American sanctions will deepen the economic and political crisis in Iran, but they will not be a death sentence for the Iranian economy.
The former presidential candidate and current member of the Expediency Discernment Council of the Iranian system, Mostafa Mirsali, holds that the crisis in Iran is not attributable to the American sanctions alone, but also to the spread of corruption and favouritism and to the failure to make use of qualified people in the ministries.
Topic: International Economy — Text © QudsNet — archived here with attribution to the source. — Original source