As the United States and European Union (EU) consider new economic measures against Iran, the Islamic Republic is touting its resilience to Western boycotts. According to the government in Tehran, the country has exported more oil than ever in the last six years, despite massive sanctions imposed byformer US president Donald Trump in 2018.
Last month, Iran’s Oil Minister Javad Owji said oil exports had “generated more than $35 billion [€32.8 billion]” in 2023. The British business daily Financial Times quoted him as saying that while Iran’s enemies wanted to stop its exports, “today, we can export oil anywhere we want, and with minimal discounts.”
To Iran’s regime, the billions of dollars in oil revenue are instrumental in maintaining acquiescence at home. Much of the population is suffering the impact of international sanctions, which have led to a depreciation of the national currency, the rial.
Iran’s oil sector may not have suffered under the sanctions, but food prices have gone through the roofImage: Atta Kenare/AFP/Getty Images
Soaring inflation
Iranian inflation reached new heights recently, climbing to about 40% in February. Any exacerbation due to escalating geopolitical tensions will only stoke consumer prices further, Djavad Salehi-Isfahani, an economics professor at the Virginia Polytechnic Institute and State University, told DW.
He also noted that the US dollar had gained about 15% against the Iranian rial in recent weeks, amid expectations of heightened conflict with Israel.
“This exchange rate devaluation very quickly translates into higher prices, because Iran imports a lot of types of commodities, and many of the commodities it produces inside Iran also have an import component,” the Middle East expert said, adding that the country is “bracing for higher inflation.”
According to Salehi-Isfahani, the living standard of Iran’s middle class has also steeply declined in recent years, and is now “back to 20 years ago.”
Is Iran’s economy ready for war?
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Oil: the main moneymaker
According to German data provider Statista, the most important contributor to Iran’s gross domestic product (GDP) in 2022 was the services sector with 47%, followed by industry (40%), and agriculture (12.5%).
Most of the industrial sector’s revenue comes from the oil industry, with more than 90% of crude oil being shipped to China. Western sanctions have had little impact on Iran’s oil trade with Beijing, but Iranian leaders are increasingly concerned that oil installations could become the target of an Israeli military attack.
After the initial shock following Trump’s 2018 sanctions, Iran has returned to 80% of its former export volume. Most experts attribute this to the easing of sanctions since US President Joe Biden took office.
Iran’s oil industry has withstood the shock of the Western oil embargo by finding new markets in the Far EastImage: Maksym Yemelyanov/Zoonar/picture alliance
“Iran’s economy has indeed grown, in part due to the increase in oil exports… the GDP increase amounts to about 5% per year, which is not bad compared to what happened in the region overall after the COVID-19 pandemic,” Salehi-Isfahani said. He added that many financial resources had been invested in expanding the military and other regime-stabilizing measures.
Corruption and lack of transparency
In Iran, significant amounts of state income are said to disappear into the opaque structures of the government in Tehran. The Corruption Perception Index by international organization Transparency International ranks Iran in place 149 of 180 countries.
Iran’s Revolutionary Guard Corps is not only an army within the army, but also a shady business within the economyImage: Sephanews/ZUMA Press/picture alliance
The Islamic Revolutionary Guard Corps (IRGC) — a paramilitary elite force within the armed forces — and numerous religious organizations reportedly control central parts of the economy. They do not pay taxes, nor do they have to submit balance sheets. They are primarily answerable to Iran’s head of state and commander-in-chief, Supreme Leader Ayatollah Ali Khamenei.
Although oil export revenues have increasingly stabilized in recent years, Iran is anything but an economic heavyweight contender. With a population of around 88 million, it is almost ten times larger than Israel, home to 9 million. Yet its GDP in 2022 was significantly lower, ending the year at $413 billion, compared to Israel’s $525 billion.
Protecting the oil industry
Iran’s ability to sustain a war with Israel very much depends on whether new Western sanctions can significantly reduce Iranian oil exports.
In the first three months of the year, Tehran managed to sell an average of 1.56 million barrels (one barrel is about 159 liters, or 35 gallons) of crude oil per day. Almost all of this went to China. According to the data provider Vortexa, this was the highest volume since the third quarter of 2018.
Fernando Ferreira, head of the geopolitical risk service of the Rapidan Energy Group in the US, told Financial Times that “Iranians have mastered the art of sanctions circumvention.”
“If the Biden administration is really going to have an impact, it has to shift the focus to China,” he added.
Salehi-Isfahani thinks that Iran “is not ready” to sustain an extended military conflict, “which is why they have been very careful not to get too involved in the Gaza war. Rather than intending to do harm, the attack they made on Israel was more symbolic.”
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
