Tehran, Iran – As economists, politicians, and pundits mull the threat of “swift and severe” United States economic sanctions against Russia should the latter invade Ukraine, one country that has long been in Washington’s crosshairs does not have to ponder what such punitive measures can do – Iran.
Some 655 Iranian entities and individuals were sanctioned under the administration of former US President Barack Obama, according to data compiled by the Center for a New American Security (CNAS). But the most brutal punishment kicked off in 2018, after former US President Donald Trump’s administration unilaterally withdrew from the Iran nuclear deal with world powers and Iran’s banks were cut off from the Society for Worldwide Interbank Financial Telecommunication – SWIFT, the global financial messaging system.
That was just the opening salvo in the Trump administration’s “maximum pressure” campaign that aimed to force Tehran back to the nuclear negotiating table by crippling Iran’s economy.
In 2020 Washington levied more designations against Iranian banks, effectively severing the country’s financial sector from the rest of the global economy. That same year, the Paris-based Financial Action Task Force (FATF) – the global money watchdog – placed Iran on its blacklist.
And those were just the major headline grabbers. The Trump administration targeted Iran’s economy with more than 960 sanctions, according to CNAS – a barrage that continued unabated as Iran’s healthcare system buckled under the most brutal waves of COVID-19 infections seen in the Middle East, and despite myriad appeals by world leaders to offer Tehran a temporary reprieve for humanitarian reasons.
Annual inflation in Iran is running north of 42 percent [File: Majid Asgaripour/WANA (West Asia News Agency) via Reuters]
All of those sanctions are still enforced by the current administration of US President Joe Biden.
Today, no sector of Iran’s economy has been spared by Washington’s punitive measures, which helped propel the country into a two-year recession and continue to impact every aspect of day-to-day life.
Annual inflation is running north of 42 percent, according to Iran’s statistical office. The national currency, the rial, has lost more than half of its value in the past three years. Oil exports fell from roughly 2.5 million barrels per day in 2017 to less than 0.4 million barrels per day in 2020, according to the US Energy Information Administration – though they did start to slightly recover last year.
In a speech to a group of businessmen and manufacturers on Sunday, Supreme Leader Ayatollah Ali Khamenei said the data of the past decade, especially those for economic growth, inflation and foreign direct investments, are “unsatisfactory”.
But Iran’s economy did not totally collapse. It started to return to growth – albeit from a low base – last year, thanks to an easing of cross-border trade, COVID-19 restriction rollbacks, and a sharp rebound in the price of oil.
Having proven more resilient and diversified than some predicted, Iran’s economy grew 2.4 percent in 2020-21, said the World Bank, and is forecast to grow 3.1 percent in 2021-22.
‘Resistance economy’
The administration of President Ebrahim Raisi has set a considerably more ambitious goal. He is targeting a growth rate of 8 percent.
The conservative president aims to achieve that through the “resistance economy” doctrine, which mainly consists of boosting self-sufficiency, and trade ties with regional neighbours as well as China and Russia.
But even as that policy – which includes “nullifying” sanctions in parallel to negotiating efforts in Vienna to lift them – has returned the economy to a degree of growth, challenges remain.
“A continuation of the banking sanctions and Iran’s FATF blacklisting will limit the potential of Iran’s international trade,” says Bijan Khajehpour, managing partner at Eurasian Nexus Partners (EUNEPA).
A continuation of the banking sanctions and Iran’s FATF blacklisting will limit the potential of Iran’s international trade.
Khajehpour told Al Jazeera that if the banking restrictions remain in place, the cost of financial transactions will remain high, making imports and exports more expensive. It would also limit the types of markets and companies Iran is able to engage with.
“Therefore, the Iranian economy won’t prosper, though it may be able to generate low-level growth,” he said.
But to sustain that growth, Iran requires major infrastructure investments that Khajehpour says the country can only afford if sanctions are lifted.
Raisi’s proposed budget for the next Iranian calendar year beginning in late March, which assumes sanctions remain in place, is forecasting a boost in oil income and a 60 percent increase in tax revenues, including from combating rampant tax evasion.
Still, Iran is expected to run a sizable budget deficit – a fiscal imbalance that existed even before Trump’s sanctions.
China and Russia
The bulk of projected oil income is expected to come from China, which remains Iran’s top buyer.
Exact shipment data is unavailable as exports under sanctions are kept secret and the oil is marked as originating from Malaysia, Oman, and the United Arab Emirates.
However, in mid-January, China officially announced its first import of Iranian crude oil since December 2020 in defiance of US sanctions.
And the market is still swinging in Iran’s favour. Last week, oil prices were at their highest level in more than seven years, thanks to tight supplies and concerns over escalating tensions between Russia and the West over Ukraine.
The news came roughly at the same time as the Raisi administration announced its oil exports had increased by 40 percent compared to the final month of President Hassan Rouhani’s administration in August.
Iranians walk down a market street in Tehran, Iran [File: Majid Asgaripour/WANA (West Asia News Agency) via Reuters]
January was also a busy month in terms of Iranian efforts to boost political and economic bilateral ties with China and Russia.
Iran’s Foreign Minister Hossein Amir-Abdollahian said during a trip to Jiangsu, China that a 25-year comprehensive cooperation accord signed in 2020 has entered the implementation stage, although he did not elaborate on what exactly that means.
Meanwhile, Raisi met with Russian President Vladimir Putin in the Kremlin, where the two leaders backed closer ties, and their officials signed a number of agreements that the Iranian side said would have tangible results in the foreseeable future.
‘Too optimistic’
Warmer relations with China and Russia cannot however fully offset the stranglehold of US sanctions, says energy journalist and analyst Hamidreza Shokouhi.
“There are rivalries between Russia and the US – as we see now in Ukraine – and China and the US, and these will naturally have some impacts, but it would be too optimistic to depend on these countries’ abilities to nullify sanctions,” he told Al Jazeera. “The more Iran becomes dependent on these countries, as it has already become to a degree, naturally it increases China and Russia’s maneuvering power on Iran and this is not a good thing for Iran at all.”
In the energy sector, Shokouhi believes that for now, Iran can only depend on China for limited oil sales, and on Russia mainly for a potential development of and investments in energy projects, although sanctions are likely to curb that potential.
Last week, Iran’s Economy Minister Ehsan Khandoozi announced that Russia has agreed to allocate a new line of credit to develop the Sirik power plant in Hormozgan as a result of Raisi’s trip, but he did not disclose details.
The first agreements for developing the power plant were signed after the nuclear deal with world powers was initially clinched in 2015, but the plant has been among several similar energy projects undertaken by Russia and China that remain incomplete.
Neighbours and Vienna talks
According to EUNEPA’s Khajehpour, trade with regional neighbours can continue to contribute to Iran’s economic growth, but there are limits. For example, at times trade can entail barter agreements that are limiting for Iranian firms.
“Nonetheless, experience has shown that companies which enter export markets, even regional ones, are likely to develop other international markets,” he said.
“So, one can view the growing regional trade as a medium-term platform for strengthening Iran’s exports to international markets.”
But both Khajehpour and Shokouhi emphasise that Iran needs the nuclear negotiations in the Austrian capital to be successful if it wishes to unlock its economic growth potential.
“It appears the people and the business community in Iran are all eager for an agreement on the nuclear deal so there can be a sliver of hope for the economy,” said Shokouhi. “If there’s no agreement, I can’t imagine a bright outlook for the economy under these harsh circumstances.”
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.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
