A police officer patrols in front of banners put up by members of an Iranian opposition group, in front of the ‘Grand Hotel Wien’ during the closed-door nuclear talks with Iran in Vienna on April 27, 2021. (AFP)

May 1, 2021

Iran’s officials thought that the change of government in the United States promised to change Iran’s economic outlook. Most analysts speculated that Joe Biden would return to the Joint Comprehensive Plan of Action (JCPOA), known commonly as the 2015 Iran nuclear deal when he entered the White House, but this did not happen.

The process of a US return to JCPOA, like many optimistic predictions, did not happen, and now Iran’s government is grappling with its corrupted and dead economy.

The questions that form in the public mind are how much will the economic situation improve?

In July 1988, UN Security Council Resolution 598 was issued that brought about a ceasefire in the eight-year Iran-Iraq war. The war that had put Iran’s economy in the worst possible condition came to an end, and the government’s efforts to accelerate economic recovery led to a sharp 66 percent drop in the value of the dollar, and many traders and currency holders whose businesses were tied to the dollar suffered huge losses overnight, so much so that the statistics of the suicide rate were horrific.

In the next agreement between Iran’s regime and the world powers in 2016, the dollar experienced a price reduction of about 15 percent.

Now the question is, which of the experienced patterns will occur in the forthcoming agreement?

The regime’s President Hassan Rouhani announced a few months ago that the dollar will reach 15,000 tomans by the end of 2020. He hoped for the release of the regime’s blocked financial resources in South Korea and Iraq, which did not happen so that the dollar would fluctuate slightly in the region of 24,000 and 25,000 tomans.

The government has also closed this year’s budget with the 11,500 tomans for each US dollar, and it seems that it has seen its optimistic forecast of the results of the lifting of sanctions in the budget. In fact, what the regime’s government intends is a reduction of more than fifty percent in the price of currency, which, although it strengthens the monetary base, but will repeat the tragedy of 1988.

At the end of 2019, Rouhani himself repeatedly invited people to invest in the stock market with great emphasis and unparalleled confidence.

After months of widespread protests against the government, and the people’s miff with parliamentary ballot boxes showed the people’s frustration with the government and a comprehensive invitation to the stock market, leaned desperate people watching their capital lost to the stock market.

The stock market codes increased one hundred percent and a huge amount of capital went to the securities market, and the indices of this market experienced a positive trend, sometimes incalculable, for a few months, then the stock market bubble burst and the indices began to fall and continue to do so.

The stock market continues its negative trend while the regime’s Minister of Economy and Finance recently admitted that the government has compensated its budget deficit by intervening in the stock market.

The capital market as well as Iran’s economy, however, has so far been indifferent to international developments and has continued to decline, regardless of the process taking place in Vienna, which was the hope of the regime.

In a report the regime’s Chamber Research Center wrote:

“Iran’s economy has weakened since US secondary sanctions were imposed due to declining oil exports and investment. In addition, the Covid-19 epidemic has disrupted activities. As a result, the rial will remain weak and inflation will remain high. If the sanctions are gradually lifted, Iran’s economic growth is projected at 4.3 percent in 2021 and 8.2 percent in 2022.”

In addition, Iran’s heavy dependence on hydrocarbons has put the regime’s economy in a very vulnerable position. There are other risks, including numerous trade barriers, monopolies, and legal bans on foreign participation in some areas, strict labor laws, extreme corruption within the regime, and weak rule of law, as well as the dominance of regime’s forces and individuals and officials in important industries such as banking that threaten economic stability. Iran’s operational risk index score has the bad score 42.8 out of 100, which ranks Iran 12th out of 18 Middle Eastern countries, higher than the major war-torn countries such as Yemen, Iraq, and Syria.

A weak banking sector, inefficiency of the legal environment as a challenge for foreign investment, and the strong presence of the government in the economy are among the weaknesses of the country’s economy. These weaknesses have caused the inflation crisis in Iran to continue, regardless of the international situation.

The conclusion is that the regime’s dreams about the JCPOA and changes in the economic situation are just illusions, while the main cause of this situation is not international sanctions, but corruption and theft by the regime, which has left Iran’s economy without a strong base.

Iran Focus

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