Iran’s economy expanded by 3.7% during the 2017-2018 Persian calendar year (ended March 20), according to a report released by the Central Bank of Iran (CBI) on June 16. Further revisions of expected GDP growth in Iran, a country with a population of 80mn, can be expected as the impact of the sanctions, and the secondary sanctions directed at foreign companies who opt to continue doing business with Iran, becomes clear. The US is intent on throttling Iran’s economy to achieve its ends.
Since Donald Trump unilaterally withdrew the US from the multilateral pact in early May, Iran and the other signatories—the UK, France, Germany, Russia and China—have set out to salvage it. But the efforts of London, Paris and Berlin have, in particular, underwhelmed the Iranians who on November 5 will face a second salvo of heavy sanctions from Washington. Crucially, those sanctions will target Iran’s lifeline oil exports.
The first set of US sanctions, which were introduced in early August, target Iran's auto industry, trade in gold and other precious metals, issuance of sovereign debt, purchases of US dollars and other global trade. The second set of sanctions will be aimed at Iran's banking sector and oil industry, with Washington demanding that all countries stop importing Iranian crude oil. Oil export revenues are indispensable to Iran’s economy and Tehran has threatened to block the Strait of Hormuz in response to Trump’s move against its oil sales.
Iran’s Supreme Leader Ayatollah Ali Khamenei has called on the Iranian government to work "day and night" to resolve the country's growing economic difficulties. Rouhani on August 28 answered a summon from parliament to explain shortcomings blamed on him and his ministers.
The Iranian rial has lost more than half its value against the dollar in recent months, some external reports claim inflation has risen past 200% and many big foreign companies that were present in Iran, including European enterprises, have made for the exit. Most would have been clearly exposed to US secondary sanctions if they had stayed given connections to US financial markets, including capital raising activities, and assets. For instance, the latest big names to state that they are suspending operations in Iran include French energy major Total, German auto giant Daimler, British Airways and Air France. The Trump administration claims that more than 50 foreign companies have withdrawn from Iran since the sanctions were announced.
Iran retains firm hopes that at least China and India—the two biggest markets for its vital oil exports—will pay little heed to the US sanctions. Though the other major power signatories to the deal still back the nuclear accord, noting that Iran has always remained in full compliance with it, they have so far done little to shield their companies from the penalties. Iran, of course, will have little incentive to stay in the nuclear deal if the EU does not deliver it the economic incentives to do so.
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