Iran’s Economy on Verge of Collapse after Sanctions

Iranians walk in front of a currency exchange shop in the Iranian capital Tehran on August 8, 2018. ATTA KENARE / AFP
Iranians walk in front of a currency exchange shop in the Iranian capital Tehran on August 8, 2018. ATTA KENARE / AFP
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Iran’s Economy on Verge of Collapse after Sanctions

Iranians walk in front of a currency exchange shop in the Iranian capital Tehran on August 8, 2018. ATTA KENARE / AFP
Iranians walk in front of a currency exchange shop in the Iranian capital Tehran on August 8, 2018. ATTA KENARE / AFP

Iranian government efforts to confront the country’s worsening economic crisis have backfired and things are likely to get worse after the US reimposed sanctions on the country following its withdrawal from the 2015 nuclear deal between Tehran and world powers.

The government sought to stabilize the currency by pegging it at a set rate to the dollar but this measure ended up speeding the rial’s decline, Bloomberg said.

The rial’s value has gone down down 70 percent since May.

In the runup to the Aug. 7 resumption of US sanctions, President Hassan Rouhani got stern directives from a few corners of Iran.

Supreme Leader Ali Khamenei urged him to deal with corruption. The Revolutionary Guards commander told him to focus on Iran’s slumping currency, while a sizable chunk of Parliament summoned Rouhani to harangue him about the sinking economy. None of them, however, had any advice on how to ease the growing sense of despair and outrage in the streets, reported Bloomberg.

Over the past few weeks, there has been a 50 percent rise in the price of some food items, triggering scattered protests.

Fawaz al-Elmi, an expert in international trade, told Asharq Al-Awsat that Iran will likely “face the worst of scenarios.”

“The US sanctions will have severe repercussions on the Iranian economy,” he said, adding that 105 international companies have withdrawn from the Iranian market and the riyal has lost another 12 percent of its value since the sanctions have gone into effect on Tuesday.

Only three years after the nuclear deal was signed, though, instead of enjoying the fruits of the accord, Rouhani has to explain what went wrong—and how he’s going to fix it

To some observers, Rouhani’s attempts to deal with the situation have been reactionary and not part of a coherent strategy. “They’re dealing with crises as they happen,” Saeed Laylaz, a pro-reform economist who has advised the government, told Bloomberg.

“The people have lost their trust, and they are craving efficiency. They don’t care if it comes from men with beards (religious figures in Iran) or neckties.”

Rouhani has governed as a moderate. He now finds himself on precarious middle ground. To the right, he faces pressure from conservative clerics who were critical of the nuclear deal to begin with. On the left, he’s blamed for not doing enough to reform the political or economic system during the two years the deal was in effect. Progress was made—oil exports surged, for example—but job creation couldn’t meet demand in a country where more than 60 percent of the population is under 30.



Iran Turns to Moscow and Beijing to Thwart ‘Snapback’ Sanctions Threat

Sergei Lavrov and Wang Yi met in Beijing on July 13 (Reuters)
Sergei Lavrov and Wang Yi met in Beijing on July 13 (Reuters)
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Iran Turns to Moscow and Beijing to Thwart ‘Snapback’ Sanctions Threat

Sergei Lavrov and Wang Yi met in Beijing on July 13 (Reuters)
Sergei Lavrov and Wang Yi met in Beijing on July 13 (Reuters)

Iran is turning to Russia and China in a bid to head off the potential reimposition of international sanctions, amid escalating tensions over its nuclear program.

Iranian Foreign Minister Abbas Araghchi has held talks with his Chinese and Russian counterparts to discuss the future of the nuclear accord and the possibility that the European troika could trigger the “snapback” mechanism.

Iranian state media reported on Monday that Araghchi arrived in Beijing at the head of an official delegation to attend a meeting of the Shanghai Cooperation Organization’s foreign ministers. The trip comes as debate intensifies within Iran over the stances of Moscow and Beijing, particularly in the aftermath of the recent conflict between Iran and Israel.

Speaking at a press conference, Foreign Ministry spokesman Ismail Baghaei stressed that Gulf security remains a priority for China.

“Araghchi’s visit follows an official invitation from the Chinese Foreign Minister,” he said, adding that the Iranian diplomat will hold bilateral meetings Tuesday on the sidelines of the gathering.

Baghaei emphasized Tehran’s ongoing coordination with both Russia and China, who are parties to the nuclear deal.

“Russia and China have consistently expressed their readiness to play a constructive role in the process related to Iran’s nuclear file, and this continues,” he noted. “We have longstanding, friendly relations with both countries and a strategic partnership.”

Addressing reports that Moscow has privately urged Tehran to halt uranium enrichment, Baghaei said: “We have not received any specific proposal from Russia on this matter.”

In Beijing, China’s Foreign Ministry confirmed that Foreign Minister Wang Yi discussed Iran’s nuclear issue with his Russian counterpart, Sergei Lavrov, alongside other bilateral and international topics.

Meanwhile, Moscow on Sunday denounced a report claiming President Vladimir Putin had urged Iran to accept a deal with the United States that would bar it from enriching uranium. Russia’s Foreign Ministry dismissed the claim as “defamation” aimed at inflaming tensions over the Iranian nuclear program.

According to the American outlet Axios, sources familiar with the issue said Putin recently pressed Iran to agree to “zero enrichment.”

But Russia rebuffed the report as baseless, insisting its position is well known: "Invariably and repeatedly, we have emphasized the necessity of resolving the crisis concerning Iran's nuclear program exclusively through political and diplomatic means, and expressed our willingness to help find mutually acceptable solutions," the ministry statement read.

It added that Moscow stands ready to help broker mutually acceptable solutions.

Since the start of Russia’s invasion of Ukraine in 2022, Moscow has strengthened its ties with Tehran. While publicly backing Iran’s right to enrich uranium, Putin has reportedly adopted a tougher line behind closed doors following the 12-day conflict between Israel and Iran.

According to European and Israeli officials, Moscow has encouraged Tehran to accept a “zero enrichment” compromise and shared this position with Israeli authorities. “We know this is what Putin told the Iranians,” a senior Israeli official confirmed.

Last week, Putin is said to have relayed his stance in calls with US President Donald Trump and French President Emmanuel Macron.