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.”
OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
