Economic impact of iran sanctions on indian econony
Answers
Last spring, President Trump announced his intention to withdraw the United States from the Joint Comprehensive Plan of Action (JCPOA) and to re-impose U.S. sanctions on Iran that had been suspended under the JCPOA agreement. After an initial 90-day wind down period, the first round of sanctions went into effect. Today, the United States fully re-imposed the sanctions on Iran that had been lifted or waived under the JCPOA. The immediate impacts of sanctions on the Iranian economy are apparent–oil production and GDP growth are collapsing, Iran’s currency is weakening, and inflation is picking up. Longer-term impacts remain to be seen, including how partner countries adapt to forceful unilateral action by the United States and the role of the dollar as the world’s preeminent reserve currency. A recent CSIS commentary provides a closer look at oil market implications of the Iran sanctions snap-back.
Q1: How will sanctions impact the Iranian economy?
A1: While Iran is reportedly exploring ways to work around U.S. sanctions, (i.e. selling oil through domestic “private companies” acting as middlemen), these efforts have been insufficient to offset the economic shock from re-imposed sanctions. Many foreign companies have announced their intention to exit the Iranian market or forego new investments, unwilling to risk losing access to the U.S. market and exclusion from the dollar-based financial system. The International Monetary Fund (IMF) forecasts the Iranian economy will contract by 1.5 percent this year and another 3.6 percent in 2019, a sharp reversal from April when it forecasted 4 percent growth for both years. Iranian oil exports have fallen from a peak of 2.7 million barrels per day (b/d) in June to 1.7-1.9 million b/d in September, and is expected to decline further by year-end. Unemployment is also rising, especially among younger workers. Inflation has accelerated since April, with official figures reaching a four-year peak of 31.4 percent in September and outside estimates suggesting still higher rates of inflation. Although Iran’s central bank has intervened to support the rial, the currency has lost over two-thirds of its value in the unofficial market since January 1.
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