‘Iran’s economy is closer than ever to collapse,’ says expert

After a period of stalemate, the United States and Iran have in recent weeks embarked on negotiations for a mutual return to compliance with the Iran nuclear deal: the Joint Comprehensive Plan of Action (JCPOA). So far, Iran has played tough, demanding that the United States act first and fully lift the sanctions it had imposed on business with the Islamic Republic. But Iran may not have the economic strength to maintain its stubbornness and survive economically under sanctions.

In 2018, then-US President Donald Trump acted on his harsh criticism of the JCPOA and withdrew from the agreement unilaterally. He then re-imposed strict economic sanctions on Iran. Importantly, these included secondary sanctions, which prohibited US companies from negotiating with non-Iranian entities that had economic deals with Iran. The JCPOA is a multilateral agreement signed under former President Barack Obama in 2015. The agreement, with Iran on the one hand, and the United States, its European allies, China and Russia, on the other hand, set limitations on the Iranian nuclear program, and also organized supervision. In return, the economic sanctions previously imposed on Iran were lifted. President Joe Biden promised, as part of his election campaign, to return to the nuclear deal with Iran. In a CNN op-ed, Biden called Trump’s “maximum pressure” policy a “boon to the Iranian regime” that allowed the Islamic Republic to get closer to developing a nuclear bomb, which Tehran says it has no intention of. to build. experts are unanimous in their estimate that Iran has taken significant steps toward building a bomb. Following the US withdrawal and the re-imposition of sanctions, the Islamic Republic has increasingly violated its obligations under the JCPOA, enriching uranium beyond the limitations of the agreement, for example. However, while the sanctions have failed to dissuade the Iranian regime from pursuing its nuclear ambitions, they have dealt a severe blow to the country’s economy. “I think Iran’s economy is closer to collapse than ever. Those who believe that Iran’s ‘resistance economy’ has worked because it was resistant to crippling sanctions are right. But the resistance is now fading, ”Dr. Mahdi Ghodsi, an economist at the Vienna Institute for International Economic Studies and an expert on the Iranian economy, told The Media Line. Gil Feiler, an expert on Middle Eastern economies and a senior fellow at the Begin-Sadat Center for Strategic Studies at Bar-Ilan University, told The Media Line: “Iran has reached a low point due to the Trump sanctions. … The [Iranian] The rial lost 50% of its value in less than two years. Which means that Trump’s sanctions had an immense effect, ”he said. “Almost 6 million people are unemployed.”

According to an April 2021 report from the International Monetary Fund (IMF), unemployment, which is currently 10.8%, is expected to rise in the next two years. In addition to sanctions, Iran has been hit hard by the coronavirus pandemic. Ghodsi says that “due to sanctions and COVID, the Iran crisis is a double-edged sword that hurts society more deeply than other countries.” To make matters worse, the country is expected to vaccinate a significant segment of its population no later than mid-2022, according to another IMF report. Predicament. “Annual inflation was very high (up to 50%) in the last three years,” he says, “Many people who were receiving monthly cash handouts since the time of the populists [former President Mahmoud] Ahmadinejad, came out of poverty. But due to the very high annual inflation since that Ahmadinejad policy and more strongly since the ‘maximum pressure’ campaign, that monthly cash delivery is now worth perhaps 1 to 2 kilos of chicken. ”“ Iranian debt reached $ 254 billion, ”says Feiler. , pointing to another economic indicator. “That is a great debt and you have to remember that Iranians are not living luxuriously in recent years.” The expert also adds that, for the first time since the 1979 Iranian Islamic revolution, the Islamic Republic approached the IMF last year and requested emergency assistance. Iran stated, it should be noted, that the $ 5 billion in aid requested was intended to help it fight the pandemic.The Iranian economy has contracted in recent years, experiencing negative growth of nearly 13% in 2018-2019, after the sanctions were imposed. Despite all this, the Iranian economy is not expected to collapse in the very near future, both experts say, even if the sanctions remain in place. Ghodsi says that “the Islamic Republic responded to the ‘maximum pressure’ from outside [campaign] with ‘maximum repression’ ”, killing hundreds of protesters in nationwide anti-government demonstrations that broke out in November 2019. The repression has helped the regime to silence discontent with the economic difficulties that have resulted from the sanctions. “I can say that Iran’s resistance economy coupled with ‘maximum repression’ will allow the government to continue its economy,” Ghodsi said. In addition to the crackdown on dissidents, Feiler points to a recent agreement signed between China and the Islamic Republic, cementing a 25-year trade cooperation agreement, among other issues. This agreement, along with other actions by countries that circumvent US limitations, gives the regime the breathing space it needs to survive. However, although the Israeli expert agrees that the Iranian economy will not collapse tomorrow, he believes that its ability to survive under the current sanctions is very limited. “If the Trump sanctions had stayed in place for another four or five years, and [if] they would have toughened them even more and monitored smuggling, ”the Iranian regime would have collapsed, he says. “What Biden is going to do is throw a lifeline on them.” Discontent caused by rising unemployment and poverty would have toppled the regime. All of this creates pressure on Tehran to achieve a revival of the JCPOA, which the United States and its European allies have overlooked, Feiler says. The Vienna expert does not speak of a political collapse, but says: “If the sanctions are not removed quickly, the government can borrow again from the central bank, and the money supply will continually grow more than the size of the economy. This can potentially lead to out-of-control hyperinflation, perhaps similar to what was observed in Venezuela. Then, given the exacerbated circumstances, the time bomb of cyclical protests at the national level will implode into a stronger internal uprising. Therefore, the prospects [for the Iranian regime] it cannot be represented with optimism if the sanctions are not eliminated ”. With this danger in mind, Ghodsi says the Iranians need to “compromise is the way the United States can get back to the JCPOA.” Instead of demanding a total lifting of sanctions, “while Iran’s non-compliance is still six or seven steps away from the JCPOA,” Tehran should push for a coordinated return to the deal. Furthermore, as Iran wants sanctions unrelated to its nuclear program removed, such as those linked to human rights violations, Ghodsi suggests that a broader deal should be reached after a return to the nuclear deal, a path that was previously suggested. , but so far with strong opposition from Tehran. Once the sanctions are removed, the Iranian economy is expected to prosper. “Iran’s economy can be expected to grow by exporting oil to the level it was before the secondary US sanctions under Trump,” says Ghodsi. Agreements with other countries will also boost the economy. However, he warns that business with Western companies may take longer to resume because “Western companies may still need some time to assess the political risks around Iran.” “They can take a leap forward” once the sanctions are lifted, Feiler says, “take a leap politically, militarily and economically, and this, of course, will strengthen the regime.” The Iranian economy has enormous potential, says the expert. of Bar-Ilan. However, he does not see this in a positive light. Western powers “do not have a true understanding of the Iranian regime”, or the fact that they will strengthen it and therefore enhance tyranny and encourage violations. of human rights.