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These 6 charts show how sanctions are crushing Iran’s economy – CNBC

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General view of an Iran flag on January 12, 2019 in Abu Dhabi, United Arab Emirates.
Matthew Ashton – AMA | Getty Images

Iran’s economy is crumbling after years of U.S. sanctions — and Tehran insists Washington must suspend those restrictions before the two sides can return to nuclear talks.

Both countries have indicated interest in returning to the negotiating table, but neither the U.S. nor Iran wants to give in to the other.

Iran appears to have calculated that it can withstand the economic pressure that accumulates as it takes a harder position against the Biden administration.
Matthew Bey
Senior global analyst, Stratfor

Iran signed the nuclear deal — officially known as the Joint Comprehensive Plan of Action (JCPOA) — with the U.S., China, France, Russia, the U.K. and Germany in 2015.

But former U.S. President Donald Trump withdrew from the agreement in 2018 and imposed sanctions under a “maximum pressure” policy to force the regime back to negotiations.

Here are six charts that show how Iran’s economy is struggling.

Iran’s economy shrinks

Iran’s economy contracted an estimated 4.99% in 2020, steadily shrinking since 2017.

In comparison, the Islamic Republic enjoyed a sharp economic growth of 12.5% in 2016 after the nuclear deal was signed. However, that reprieve was short-lived.

“It’s impossible to know precisely what the numbers would be had there been no sanctions,” said Abrams, former U.S. special representative for Iran during the Trump administration who is nowa senior fellow for Middle Eastern studies at the Council on Foreign Relations (CFR). “But I think it’s pretty clear that the sanctions have had an impact on the Iranian economy and on the government budget.”

The International Monetary Fund sees Iran’s gross domestic product growing 3% in 2021.

Oil production and exports hurt

The sanctions lowered Iran’s ability to sell oil and prevented them from repatriating money from energy sales, Abrams said.

“There are billions of dollars sitting in banks in Iraq and China and South Korea … that Iran cannot get its hands on due to the sanctions,” he said.

According to IMF estimates, the Islamic Republic’s oil exports are expected to continue falling in 2021.

World trade with Iran falls

Exports and imports both fell sharply after the sanctions were reimposed. Besides oil, Iran’s industrial metals, a large source of the country’s export revenue, were also sanctioned.

IMF estimates suggest Iran fell into a trade deficit of $3.45 billion in 2020. The country had a trade surplus of $6.11 billion in 2019, according to the IMF.

Inflation spikes

The Iranian currency has dropped steadily since early 2018, but Matthew Bey, a senior global analyst at Stratfor, said the rial has “somewhat stabilized.”

Still, its value on the unofficial market stands at more than 250,000 rials per dollar — that’s far from the central bank’s official rate of 42,000 rials per dollar that’s used for most imported goods.

A weaker currency makes imports more expensive for locals, and high inflation means the cost of living is rising at a time when the people are already struggling with a weak economy and job market.

Weak job market

High unemployment rates are set to increase even further given Iran’s economic struggles.

An estimated 12.4% of the population is expected to be out of work in 2021, according to IMF projections.

Widening fiscal deficit

Iran’s government is spending beyond its means, and has seen a widening fiscal deficit. While this is not always a bad thing, it could restrict the country’s ability to improve economic activity and recover from the coronavirus pandemic.

“I’m sure that the national budget is of some interest (to Iran’s Supreme Leader Ayatollah Ali Khamenei) because he would want money for the Revolutionary Guards, for Hezbollah, for the Shia militias in Iraq and for various other expenses that they have,” said Abrams from CFR.

However, he pointed out that the usual concerns of a civil government — such as national income, average family income, rate of inflation, or jobless rate — may not be important to the religious leaders.

Road to a U.S.-Iran deal?

An agreement between the U.S. and Iran is not impossible — but only if each side softens its current stance, according to Bey.

The United States, Bey said, would have to accept that sanctions relief is a necessary step toward getting Iran to comply with the JCPOA. On the other hand, Iran has to recognize that if it doesn’t take “substantial steps,” the Biden administration cannot fully suspend sanctions.

Once you’ve gone back to the JCPOA, you have lifted most of the significant economic sanctions. Therefore, you have eliminated most of your leverage to get Iran to agree to these additional things…
Elliott Abrams
Council on Foreign Relations

Abrams, on the other hand, said there’s a “very significant problem” in the Biden administration’s Iran policy, which is to revive the nuclear deal before negotiating a broader agreement that includes Iran’s missile program and its support for militias in the region.

“But once you’ve gone back to the JCPOA, you have lifted most of the significant economic sanctions,” he said. “Therefore, you have eliminated most of your leverage to get Iran to agree to these additional things that it does not want … to agree to and I don’t see why it would agree at that point,” he added.

Stratfor’s Bey pointed out that Tehran has insisted on sanctions being lifted before talks begin.

“Iran appears to have calculated that it can withstand the economic pressure that accumulates as it takes a harder position against the Biden administration,” Bey said.

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World Bank sees ‘significant’ inflation risk from high energy prices

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 Energy Prices are expected to inch up in 2022 after surging more than 80% in 2021, fueling significant near-term risks to global inflation in many developing countries, the World Bank said in its latest Commodity Markets Outlook on Thursday.

The multilateral development bank said energy prices should start to decline in the second half of 2022 as supply constraints ease, with non-energy prices such as agriculture and metals also expected to ease after strong gains in 2021.

“The surge in energy prices poses significant near-term risks to global inflation and, if sustained, could also weigh on growth in energy-importing countries,” said Ayhan Kose, chief economist and director of the World Bank’s Prospects Group, which produces the Outlook report.

“The sharp rebound in commodity prices is turning out to be more pronounced than previously projected. Recent volatility in prices may complicate policy choices as countries recover from last year’s global recession.”

The International Monetary Fund, in a separate blog https://blogs.imf.org/2021/10/21/surging-energy-prices-may-not-ease-until-next-year, said it expected energy prices to revert to “more normal levels” early next year when heating demand ebbs and supplies adjust. But it warned that uncertainty remained high and small demand shocks could trigger fresh price spikes.

The World Bank noted that some commodity prices rose to or exceeded levels in 2021 not seen since a spike a decade earlier.

Natural gas and coal prices, for instance, reached record highs amid supply constraints and rebounding demand for electricity, although they are expected to decline in 2022 as demand eases and supply improves, the bank said.

It warned that further price spikes could occur in the near-term given current low inventories and persistent supply bottlenecks. Other risk factors included extreme weather events, the uneven COVID-19 recovery and the threat of more outbreaks, along with supply-chain disruptions and environmental policies.

Higher food prices were also driving up food-price inflation and raising questions about food security in several developing countries, it said.

The bank projected crude oil prices would reach $74/bbl in 2022, buoyed by strengthening demand from a projected $70/bbl in 2021, before easing to $65/bbl in 2023.

The use of crude oil as a substitute for natural gas presented a major upside risk to the demand outlook, although higher energy prices may start to weigh on global growth.

The bank forecast a 5% drop in metals prices in 2022 after a 48% increase in 2021. It said agricultural prices were expected to decline modestly next year after jumping 22% this year.

It warned that changing weather patterns due to climate change also posed a growing risk to energy markets, potentially affecting both demand and supply.

It said countries could benefit by accelerating installation of renewable energy sources and by cutting their dependency on fossil fuels.

(Reporting by Andrea Shalal; editing by Diane Craft)

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Global Climate Policy Acceleration Means Sink-or-Swim Decade for Canada's Economy: Report – Canada NewsWire

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OTTAWA, ON, Oct. 21, 2021 /CNW Telbec/ – Canada’s economy faces a “sink-or-swim” decade, according to the first study to assess Canada’s economic prospects in the face of accelerating global market shifts responding to climate change.

Sink or Swim: Transforming Canada’s economy for a global low-carbon future is a major new report from the Canadian Institute for Climate Choices, Canada’s independent climate policy research institute. The report assesses Canada’s economic prospects in response to the global low-carbon transition and offers recommendations for successfully navigating that transition.

Countries responsible for over 70 per cent of global GDP and over 70 per cent of global oil demand have committed to reaching net zero emissions by mid-century. Trillions of dollars in global investment will move away from high-carbon sectors. The impact of these global shifts will be profound, shifting trade patterns, reshaping demand, and upending businesses that are too slow to adapt.

To better understand the risks and opportunities of this transition for Canada, Sink or Swim stress tests publicly traded companies under different scenarios. Without major investment, the report finds, many exporters and multinationals will see significant profit loss in the coming decades. The stakes are high for Canada, with almost 70 per cent of goods exports and over 800,000 jobs in transition-vulnerable sectors, including oil and gas, mining, heavy industry, and auto manufacturing.

To succeed in this global transition, the report concludes, Canada must use climate policy, company disclosure, and targeted public investment to mobilize private finance and improve the resilience of Canada’s workforce and impacted communities.

QUOTES

“Our analysis shows that global policy and market changes will have a profound impact on Canada’s economy and workforce. To stay competitive, Canada needs to rapidly scale up new, transition-consistent sources of growth—and successfully transform existing ones. Moving too slowly is now a greater competitive risk than moving too quickly.”

—Rachel Samson, Clean Growth Research Director, Climate Choices

“The global transition means Canada must transform its economy in the face of new market realities. With smart, certain policy and innovation across the private sector, there is a path to strong economic growth, gains in well-being, and lower emissions.”

—Don Drummond, Stauffer-Dunning Fellow and Adjunct Professor at the School of Policy Studies at Queen’s University and fellow-in-residence at the C.D. Howe Institute

“Major Canadian investors understand the pressures our economy will be facing as a result of accelerating global market shifts, and we’re issuing a strong call for increased climate accountability and transparency in the corporate sector.”
—Dustyn Lanz, CEO, Responsible Investment Association

“The Aluminum Association of Canada supports a holistic view of Canada’s trajectory towards net zero emissions. A multifaceted approach with room for everyone will support a transition to a prosperous and sustainable economy.”
—Jean Simard, President and Chief Executive Officer of the Aluminium Association of Canada

“Canadian businesses and investors need clarity on which economic activities are consistent with the transition to a low-carbon future. Without that clarity, there is a risk that finance will flow in the wrong directions and miss areas of great opportunity. The analysis in this report will support the development of practical taxonomies that can be used for transition-consistent investment decisions and financial products.”
—Barbara Zvan, CEO & President, University Pension Plan and member of Canada’s former Expert Panel on Sustainable Finance. UPP is a participating organization of the Sustainable Finance Action Council

RESOURCES

ABOUT CLIMATE CHOICES

The Canadian Institute for Climate Choices is Canada’s independent climate policy research institute, providing evidence-based policy analysis and advice to decision makers across the country.

SOURCE Canadian Institute for Climate Choices

For further information: Catharine Tunnacliffe, Director of Communications, (226) 212-9883

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Economy

Fed survey finds economy facing supply chain, other drags – GuelphMercury.com

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Fed survey finds economy facing supply chain, other drags  GuelphMercury.com



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