US sanctions hinder Iran’s robust economic recovery

Iran’s economy would unlikely be restored to a robust level if major U.S. sanctions on the country remain, recent researches and opinions indicated.

8 July 2021
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Iran's economy would unlikely be restored to a robust level if major U.S. sanctions on the country remain, recent researches indicated.

Over the past years, Iran's economy has tumbled down into a recession under a number of circumstances, including the three-year sanctions by former U.S. President Donald Trump, who abandoned the 2015 nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), in 2018.

Joe Biden's victory in the U.S. presidential elections last year raised hopes for the revival of the JCPOA and potential removal of anti-Iran sanctions.

However, after six rounds of talks between Iran and P4+1 Britain, China, France, Russia and Germany, with the United States indirectly involved in the Austrian capital of Vienna since April, the prospect remains uncertain as both sides demand more.

Under current circumstances, what is grimly at stake is the Iranian economy, whose recovery is much linked with the U.S. sanctions, according to recent studies.

Although some Iranian politicians and critics have argued that sanctions are not a serious obstacle to Iran's economy and its industrial recovery, two official studies in the country have proven otherwise.

According to a study released by the Islamic Parliament Research Center of Iran on April 13, under U.S. sanctions, Iran's international banking transactions have been restricted and Iranian businessmen have encountered hurdles in their banking affairs with their foreign partners.

Also, the Iranian government has faced serious problems in dealing with the money it has earned from oil, gas and other service exports, the study noted.

Iran has been deprived of benefiting from credit lines and foreign investments, and international companies have withdrawn from the Iranian market and ceased cooperation with Iranian partners due to the U.S. embargo against the country's economy, the study indicated.

Meanwhile, it revealed that if the ongoing negotiations over the revival of the JCPOA end in the lifting of U.S. sanctions, the restrictions on Iran's exports of oil and petroleum products and the bans on its purchase of aircraft would be eased in the country's interest.

Meanwhile, another recent report, released by the Research Center of Iran's Chamber of Commerce on Iran's economic risk and its 10-year forecasts, said: "Iran's economy has weakened due to declining oil exports and investment following the imposition of secondary U.S. sanctions."

Additionally, Iran's business environment has partially deteriorated since Trump re-imposed sanctions in 2018, and Iran's heavy dependence on hydrocarbons has put its economy in a very vulnerable position, according to the report.

The International Monetary Fund (IMF) report in April showed that with the introduction of secondary sanctions on Iran's oil exports and financial sector three years ago, Iran's economic growth fell to minus 6 percent in 2018 and to minus 6.8 percent in 2019, after a 3.8-percent growth in 2017 when Iran started to benefit from the JCPOA agreement and removal of sanctions.

Under the U.S. economic pressure, Iran's local currency has also lost over 50 percent of its value since 2018 and based on a report by Iran's Census Center in May, its unemployment rate rose to around 10 percent in 2019 and 2020.

According to data released by the Statistical Center of Iran in May, Iran's inflation rate in the 12-month period ending on March 20, 2021 increased by 36.4 percent from the same period of the previous year, and the IMF projected the inflation rate at 39 percent for the current year.

The IMF expects that in case of the removal of sanctions, Iran's exports will increase and Iran will also have access to assets that had previously been frozen.

Besides, the Institute of International Finance has announced that Iran's economy could expand by 6.9 percent in 2022 and 6 percent in 2023 if the U.S. sanctions on Iran's exports are removed.