Deal or no deal: The Iranian economic crisis at a glance

US sanctions in Iran have elevated the very tensions that Trump’s predecessor, Barack Obama, had tried to ease.
Thursday 19/09/2019
 In this file photo taken on August 18, 2019 an Iranian flag flutters on board the Adrian Darya oil tanker, formerly known as Grace 1, off the coast of Gibraltar. (AP)
In this file photo taken on August 18, 2019 an Iranian flag flutters on board the Adrian Darya oil tanker, formerly known as Grace 1, off the coast of Gibraltar. (AP)

BEIRUT - US President Donald Trump fulfilled one of his major campaign promises in May 2018 when he withdrew the United States from the Iran nuclear agreement and re-established tough economic sanctions on Tehran. The effect of Trump’s threats and sanctions can be seen in the deteriorating state of the Iranian economy.

With a visible drop in oil sales -- from the sale of 2.5 million barrels per day (bpd) to 200,000 bpd -- and the price-per-barrel dropping from $69 in the previous year to $56 -- US sanctions in Iran have elevated the very tensions that Trump’s predecessor, Barack Obama, had tried to ease.

The International Monetary Fund predicted a 6% decrease in Iran’s annual economic revenue, which could result in a 37.2% increase in consumer prices, jeopardising programmes that subsidise the cost of living, from food to retirement in Iran.

Recently, US Under-Secretary for Terrorism and Financial Intelligence Sigal Mandelker visited the Gulf region to warn companies against purchasing from blacklisted Iranian-owned oil tankers, companies and insurance firms that allegedly have ties to Tehran’s al-Quds Force, a unit under Iran’s Islamic Revolutionary Guard Corps that the United States has designated as a foreign terrorist organisation.

In addition, Trump has offered the captains of ships containing Iranian oil million-dollar payouts to head to ports where the United States could impound the shipments. The country’s four main exports, including petrochemicals, industrial metals and precious metals, are vulnerable to the increasing pressures and penalties imposed by the United States.

China and Russia continue to purchase Iranian oil and Russia is financing a railway system that connects various European countries to Iran and Asia. It seems unlikely that the two powerhouses will compromise their relationship with Iran over the US sanctions, which could lead to political turmoil between their spheres of influence.

Though the nuclear agreement’s signatory countries have tried to assuage the situation by proposing alternative payment methods to purchase Iranian oil without the threat of US penalties, it is clear Trump will not be lifting the sanctions until new restrictions and negotiations on Iranian nuclear activity are set, thus leaving the European Union in a position to mitigate the circumstances.

Whether Iran will buckle under the strain of the sanctions and accept new terms for its nuclear activity and its “imperial” association with regional organisations recognised as terror groups by the United States, such as Hezbollah and Hamas, is to be determined. After having lost out on approximately $160 billion from 2012-16 and only as recently as 2016 being granted access to $120 billion of its frozen overseas assets, Iran finds itself in a difficult position.

A meeting soon between Trump and Iranian President Hassan Rohani does not seem likely. Seyyed Abbas Mousavi, a spokesman for the Iranian Foreign Ministry, rejected such a possibility until the United States “stops [its] economic terrorism and returns to [the terms of] the nuclear deal.”

This follows US Secretary of State Mike Pompeo’s statement accusing Iran of “aggression” for its involvement in the September 14 attacks on Saudi-oil facilities -- “an unprecedented attack on the world’s energy supply” -- which Yemen’s Houthi rebels claimed as their doing.

US authorities are building a profile on the attack, with Trump hinting at potential military intervention against Iran and extending Saudi Crown Prince Mohammed bin Salman bin Abdulaziz support, which experts say would result in the short-term increase of oil and gas prices.

In contrast to the US-Iranian history of nuclear activity, which kicked off under Iranian Shah Mohammad Reza Pahlavi, the terms set under the nuclear agreement aimed to ensure the non-military use and development of Iran’s nuclear potential by regulating uranium enrichment, implementing robust monitoring, inspection and verification frameworks and other restrictions.

With Trump citing the violation of such terms as the reason for the US withdrawal from the agreement and EU spokeswoman Maja Kocijancic calling for a reversal of “all activities that are inconsistent with [the agreement’s] commitments,” the United States and Iran are at a crossroads again. What direction will Iran take in response to the sanctions: compliance or rebellion?

This article was provided to The Arab Weekly by the Carnegie Middle East Centre.