The Impact of Sanctions on Iran

In 2012, Iran’s banks were expelled from the SWIFT banking transaction system and were isolated from the international banking system. In addition, assets worth tens of billions of dollars were frozen.

As major Western foreign investments slowed, it was primarily the private sector that suffered. However, despite this drop in foreign investment from Western nations, the U.N. Conference on Trade and Development estimated that direct foreign investment in Iran is on the rise, reaching $5 billion in 2012, funded primarily by Chinese, Russian and Turkish companies. Nevertheless, unemployment has risen sharply in recent years, especially among women, who tend to be more well-educated than their male peers.

While Iran holds the fourth largest oil reserves worldwide, its oil production was hurt in two ways. First, overall oil exports were capped at one million barrels per day (Mbd) over the last years. Second, prices dropped from an all-time high of $120 at the end of 2014 to $50 currently. All of this has badly damaged the Iranian economy.

Furthermore, in 2012 and 2013, Iran’s GDP contracted (-7% in 2012 and -4% in 2013) and inflation rose to 35% in 2013.

The government’s key constituencies – the Revolutionary Guards, the military and supreme leader Ayatollah Ali Khamenei’s inner circle – control large segments of the economy. The high level of corruption prevalent in Iran has allowed these groups to benefit despite Western sanctions.

It should be noted however that the government managed to keep the overall poverty rate in Iran below one percent, which is a remarkable achievement under the given circumstances.

Read the article in full at BESA.