These 6 charts show how sanctions are crushing Iran’s economy

Iran’s economy is collapsing after years of U.S. sanctions – and Tehran insists that Washington must lift these restrictions before the two sides can return to nuclear talks.

The two countries have expressed interest in returning to the negotiating table, but neither the United States nor Iran wants to give in to each other.

Iran signed the nuclear agreement – officially known as the Joint Comprehensive Plan of Action (JCPOA) – with the U.S., China, France, Russia, the UK and Germany in 2015.

But former U.S. President Donald Trump withdrew from the deal in 2018 and imposed sanctions under a “maximum pressure” policy to force the regime back into negotiations.

Here are six charts that show how Iran’s economy is struggling.

Iran’s economy contracted about 4.99% in 2020, steadily declining since 2017.

In comparison, the Islamic Republic experienced strong economic growth of 12.5% ​​in 2016 after the signing of the nuclear agreement. However, this extension was short-lived.

“It is impossible to know exactly what the numbers would be if there were no sanctions,” said Abrams, former US special representative for Iran during the Trump administration, who is now a senior researcher on Middle East studies at the Council on Foreign Relations (CFR) . “But I think it is quite clear that the sanctions have had an impact on the Iranian economy and the government’s budget.”

The International Monetary Fund sees Iran’s gross domestic product growing 3% in 2021.

The sanctions reduced Iran’s ability to sell oil and prevented it from repatriating money from energy sales, Abrams said.

“There are billions of dollars in banks in Iraq, China and South Korea … that Iran cannot get into its hands due to sanctions,” he said.

According to IMF estimates, the Islamic Republic’s oil exports are expected to continue falling in 2021.

The Iranian currency has fallen steadily since the beginning of 2018, but Matthew Bey, a senior global analyst at Stratfor, said the rally “has stabilized somewhat”.

Still, its value in the unofficial market is over 250,000 rials per dollar – this is far from the central bank’s official rate of 42,000 rials per dollar that is used for most imported products.

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 a labor market.

High unemployment rates are expected to increase further due to Iran’s economic difficulties.

It is estimated that 12.4% of the population is expected to be out of work in 2021, according to IMF projections.

The government of Iran is spending beyond its means, and has seen a widening fiscal deficit. While this is not always bad, it can restrict the country’s ability to improve economic activity and recover from the coronavirus pandemic.

“I’m sure the national budget has some interest (for Iran’s supreme leader, Ayatollah Ali Khamenei), because he would like money for the Revolutionary Guards, for Hezbollah, for the Shiite militias in Iraq and for various other expenses that they have, “said Abrams of CFR.

However, he pointed out that the usual concerns of a civilian government – such as national income, average family income, inflation rate or unemployment rate – may not be important for religious leaders.

A deal between the U.S. and Iran is not impossible – but only if each side softens its current position, according to Bey.

The United States, Bey said, would have to accept that easing sanctions is a necessary step in making Iran comply with the JCPOA. On the other hand, Iran needs to recognize that if it does not take “substantial steps”, the Biden government will not be able to suspend sanctions altogether.

Abrams, on the other hand, said that there is a “very significant problem” in the Biden government’s policy towards Iran, which is to reactivate the nuclear deal before negotiating a broader deal that includes Iran’s missile program and its support for militias. in the region.

“But after returning to JCPOA, you have lifted most of the significant economic sanctions,” he said. “So you eliminated most of your advantage to get Iran to agree to these additional things that he doesn’t want to … agree with and I don’t see why you would agree on that point,” he added.

Bey from Stratfor pointed out that Tehran insisted that sanctions be lifted before negotiations start.

“Iran seems to have calculated that it can withstand the economic pressure that is building up by taking a tougher stance against the Biden government,” said Bey.