Dubai - In November last year, the Trump administration imposed America’s “toughest ever” sanctions against Iran, dealing a debilitating blow to the oil-rich country. All sanctions removed under the 2015 nuclear deal were reinstated, especially those targeting oil exports, shipping, and banking – sectors that are central to the Iranian economy.
Washington’s stated aim for the sanctions was to stop Tehran’s “malign” activities, including its support for armed non-state actors in the region, and target its cyber-warfare capabilities and ballistic missiles programme.
In April, the US tightened the screws further, ending sanctions exemptions that had been provided in November for countries still buying oil from Iran – China, India, Greece, Italy, Japan, Taiwan, South Korea and Turkey.
Naysan Rafati, an Iran analyst with the Brussels-based International Crisis Group told Gulf News the economic impact of US sanctions has been significant, and ending the sanctions exemptions will likely increase Iran’s financial malaise by depriving it further of a key source of revenue. “But the policy impact is less assured – Tehran seems intent on riding out the storm rather than conceding to the US,” he added.
The Trump administration hopes the sanctions will bring Iranian oil exports to zero, to force it to renegotiate the 2015 nuclear deal signed under President Barack Obama. Such a renegotiated deal, if it comes to pass, will incorporate not only the country’s nuclear programme but also its ballistic missiles capabilities and aspects of its regional policies, like support for armed groups and interference in the affairs of neighbouring states.
How has Iran been impacted domestically?
That the sanctions are having a painful impact can be seen in the latest IMF forecast on Iran, which noted the country’s economy, the second largest in the region behind Saudi Arabia, will shrink by 6 per cent this year after contracting by 3.9 per cent in 2018. Importantly, the aforesaid prediction was made before the US tightened up measures against Iran’s oil industry. The IMF has said inflation could reach 40 per cent this year. One of the reasons for the inflation is the collapse in the Iranian currency, the rial, which lost more than 60 per cent last year. This severely hit Iran’s foreign trade. The official rate is set at 42,000 rials to the dollar, but its market rate stood at around 144,000 on April 28; the rial’s value has fallen 60 per cent in the past year. This has had a tremendous impact on ordinary Iranians’ savings. If a family, for instance, had savings of 10 million rials last year, it would only be the equivalent of just $70 on the market today.
Rafati warned that if the oil sanctions really do manage to drive Iran’s economy into dire straits, “the leadership could well decide to retaliate against the ‘maximum pressure’ campaign, either by stepping up nuclear activities that were capped under the Joint Comprehensive Plan of Action [Iran nuclear deal] or by escalating its regional activities against the US or its allies”.
What have US sanctions done to oil prices?
Oil prices fell on April 29, extending a slump from the previous week that ended months of rallying. This came after President Donald Trump urged Opec to raise production to offset the impact of Iran sanctions. “Gasoline prices are coming down. I called up Opec, I said you’ve got to bring them down. You’ve got to bring them down,” Trump told reporters. He later tweeted: “Spoke to Saudi Arabia and others about increasing oil flow. All are in agreement.”
How have Iran’s regional operations been affected?
Reports have surfaced recently of Iran-sponsored Hezbollah has asked its supporters to step up donations. Its donation boxes are not new, but they have popped up in far greater numbers all over Lebanon. The militant group has reduced its social welfare operations, and payment to its members.
In Syria, people are feeling the affects of economic sanctions imposed on its ally Iran. There have been widespread fuel shortages in Damascus and other government-controlled areas, forcing people to wait for hours in lines stretching several kilometres to get few litres of petrol. The sanctions also mean that Tehran’s ability to fund the reconstruction effort in Syria will be severely curtailed.