IMF: Iran Inflation Could Hit 40 Percent

Iran’s economy is expected to shrink for the second consecutive year, said the IMF. (AP)
Iran’s economy is expected to shrink for the second consecutive year, said the IMF. (AP)
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IMF: Iran Inflation Could Hit 40 Percent

Iran’s economy is expected to shrink for the second consecutive year, said the IMF. (AP)
Iran’s economy is expected to shrink for the second consecutive year, said the IMF. (AP)

Iran’s economy is expected to shrink for the second consecutive year and inflation could reach 40 percent, an International Monetary Fund senior official said, as the country copes with the impact of tighter sanctions imposed by the United States.

Washington, which re-imposed sanctions against Iran’s oil exports last November, this month demanded buyers of Iranian oil to stop purchases by May or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers to continue importing limited volumes.

Iran’s economy shrank by 3.9 percent last year, according to IMF estimates, and is expected to shrink by 6 percent in 2019, Jihad Azour, director of the IMF’s Middle East and Central Asia department, told Reuters adding, however, that the projection preceded the latest elimination of waivers.

“Clearly the re-imposition of sanctions and the removal of the waivers will have additional negative impact on the Iranian economy both in terms of growth and in terms of inflation, where inflation could reach 40 percent or even more this year,” he said.

US sanctions against Iran have denied its government more than $10 billion in oil revenue, a US official said earlier this month.

The Iranian currency, the rial, lost more than 60 percent last year, disrupting Iran’s foreign trade and boosting annual inflation.

The Iranian rial official rate is set at 42,000 rials to the US dollar, but its market rate stood at around 144,000 against the US dollar on Sunday, according to foreign exchange website Bonbast.com.

Iran should work to eliminate the gap that currently exists between the market exchange rate and the official exchange rate, said Azour.

“By aligning the market and official rates this will help tame and control inflation and will reduce pressure on the exchange rate.”

The currency’s slide, from levels around 43,000 at the end of last year, has eroded the value of ordinary Iranians’ savings, triggering panic buying of dollars.

The weak currency and galloping inflation have been a complaint of sporadic street protests since late 2017.



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.