General view of a flag of Iran on January 12, 2019 in Abu Dhabi, United Arab Emirates.
Matthew Ashton – AMA | Getty Images
Iran’s economy is crumbling after years of US sanctions – and Tehran is urging Washington to suspend restrictions before the two parties can return to key talks.
Both countries have indicated that they want to return to the negotiating table, but do not want the US or Iran to concede to the other.
Iran has signed the nuclear deal – officially known as the Joint Comprehensive Plan of Action (JCPOA) – with the USA, China, France, Russia, the United Kingdom and Germany in 2015.
But former US President Donald Trump withdrew from the agreement in 2018 and imposed sanctions under a ‘maximum pressure’ policy to force the regime back into negotiations.
Here are six maps showing how Iran’s economy is struggling.
The Iranian economy has shrunk by an estimated 4.99% in 2020, which has been shrinking steadily since 2017.
In comparison, the Islamic Republic enjoyed sharp economic growth of 12.5% in 2016 after the signing of the Nuclear Power Agreement. However, the postponement was short-lived.
“It is impossible to know exactly what the numbers would be if there were no sanctions,” Abrams, a former U.S. special envoy to Iran, told the Trump administration. He is currently a senior fellow for Middle Eastern studies at the Council on Foreign Relations (CFR). “But I think it’s pretty clear that the sanctions have had an impact on the Iranian economy and on the government budget.”
The International Monetary Fund sees Iran’s gross domestic product growth in 2021 by 3%.
Abrams said the sanctions reduced Iran’s ability to sell oil and prevented it from returning money from energy sales.
“There are billions of dollars in banks in Iraq and China and South Korea … which Iran cannot get its hands on because of the sanctions,” he said.
According to IMF estimates, Islamic Republic’s oil exports are expected to decline in 2021.
The The Iranian currency gradually declined since early 2018, but Matthew Bey, a senior global analyst at Stratfor, said the rial has ‘stabilized somewhat’.
Its value in the unofficial market still stands at more than 250,000 rials per dollar – this is far from the central bank’s official rate of 42,000 rials per dollar used for most imported goods.
A weaker currency makes imports more expensive for locals, and high inflation means that the cost of living is rising at a time when people are already struggling with a weak economy and labor market.
Weak labor market
The high unemployment rates will increase even further, given Iran’s economic struggle.
It is estimated that 12.4% of the population will be out of work by 2021, according to IMF projections.
Iran’s government spends above its capacity, and saw a larger fiscal deficit. While not always bad, it may limit the country’s ability to improve economic activity and recover from the coronavirus pandemic.
“I’m sure the national budget is of some importance (to Iran’s supreme leader Ayatollah Ali Khamenei) because he wants money for the Revolutionary Guards, for Hezbollah, for the Shia militias in Iraq and for various other expenses. what they have said Abrams of CFR.
However, he pointed out that the ordinary concerns of a civilian government – such as national income, average family income, inflation rate or unemployment rate – may not be important to the religious leaders.
An agreement between the US and Iran is not impossible – but only if each party softens its current position, Bey said.
Bey said the United States should accept that easing sanctions is a necessary step to get Iran to comply with the JCPOA. On the other hand, Iran must acknowledge that Biden’s government cannot fully suspend sanctions if it does not take ‘substantial steps’.
Abrams, on the other hand, said there was a “very important problem” in the Biden government’s Iran policy, which is to revive the nuclear deal before negotiating a broader agreement that includes Iran’s missile program and its support for militias in the region.
“But once you are back to the JCPOA, you have lifted the biggest economic sanctions,” he said. “That’s why you eliminated most of your leverage to get Iran to agree to these additional things he does not want … to agree, and I do not see why it would agree at that point,” he said. he added.
Stratfor’s Bey pointed out that Tehran had demanded that the sanctions be lifted before talks began.
“Iran seems to be calculated to withstand the economic pressure that is accumulating as it takes a more difficult position against the Biden government,” Bey said.