Signatories of the Joint Comprehensive Plan of Action (JCPOA) “must comply with the terms of the agreement to the same extent as Tehran does”, Iranian President Hassan Rouhani said on July 3, IRIB reported. In a direct hit at the US, the Iranian president was suggesting a total abrogation of the JCPOA by Tehran if the US continues to renege on its end of the deal after it unilaterally pulled out in May last year and has placed increasingly tougher sanctions on Tehran in recent months.
Iran's enriched uranium stockpile has passed the 300-kilogram limit under the 2015 nuclear deal, an "informed source" said on July 1.This latest admission now brings Tehran technically in breach of its obligations, if the United Nation's latterly confirms the amount.
Stressing his point about the US reneging on its promises, "Tehran waited a whole year so that the remaining participants in the transaction fulfilled their part of the obligations,” Rouhani said.
On July 7, Iran set due to take a more serious step to breach the deal by upping uranium enrichment purity levels over the 3.67% limit set in the accord. There could merely be a symbolic increase to 3.68%, but if the levels continue to move up the Europeans would be anxious that the breakout time—the period it would take Iran to enrich enough uranium for a nuclear bomb—could fall below a year.
The president also called on the so-called EU3 (Britain, France and Germany) to ensure the implementation of the nuclear deal after the Europeans repeatedly dragged their feet with implementation of their euro-denominated Instex payment system. The payment system is designed to allow European companies to continue to trade but insulate themselves from possible retaliation by the US, which has reimposed sanctions on Iran. The three were prompted to make the payment to the Special Purpose Vehicle (SPV) following Iran’s demand that if they did not, Tehran would break the 2015 nuclear agreement.
Tehran will be watching to see if the EU announces some Instex transactions before a July 7 deadline it has set for breaching more important parts of the nuclear accord. All initial trade on Instex is likely to involve humanitarian goods not subject to US sanctions, but the symbolic worth of launching the mechanism may bother Washington.
The impact of US sanctions on Iran’s economy is projected to peak this year, with growth resuming in 2020, according to the June issue of the World Bank’s twice-yearly Global Economic Prospects report. Iran was thrown back into recession last year by the Trump administration’s decision to reapply sanctions, suffering an economic contraction of 1.9%, following 2016 growth of 13.4% and 2017 growth of 3.8%. The World Bank’s latest forecast is for Iranian GDP to contract 4.5% in 2019, but to grow 0.9% in 2020.
Some international economists put Iran’s inflation rate a good deal higher than what is portrayed by the country’s official statisticians. Iran’s annual inflation rate rose sharply from about 10% in mid-2018 to about 52% in April 2019.
The Central Bank of Iran (CBI) on July 2 updated the official exchange rates. Several currencies weakened against the Iranian rial (IRR). Under the changed list of official rates, the US dollar remained at IRR42,000. Iranian officials have moved away from actively using the currency in the country’s daily dealings, avoiding US sanctions.
Iran should work to eliminate the gap that currently exists between the Iranian rial (IRR) market exchange rates and official exchange rate, according to the IMF, which will help tame and control inflation and reduce pressure on the exchange rate. The IRR is around two-thirds weaker against the dollar on the unofficial market compared to where it stood before it became clear early last year that the US was switching its Iran policy back to a sanctions-led approach.
Meanwhile, Iranian lawmakers have ratified a joint free-trade agreement struck between Iran and the Russian-led Eurasian Economic Union (EEU) on June 10. Iran sees access to Russia and the other markets in the EEU—Armenia, Belarus, Kazakhstan and Kyrgyzstan—as a major move in expanding its trading area to the north, with US sanctions continuing to take chunks out of its trade with other countries. The bill allows the government to authorise trading when other representative governments that are part of the bloc clear the FTA.
Turkey on August 18 introduced another shock rate cut. The USD/Turkish lira (TRY) pair, which had been testing the 18-level for around a month, crashed through the 18/$ threshold towards 18.15.
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