Already a subscriber?Inflation in Iran makes other cost of living crisis’ look like a picnic. Price growth has been in double digits for nearly six years and averaged 35.8 per cent in February.
But the Islamic Republic’s aggression is only going so far. The attack on Israel was widely briefed in advance, meaningIsrael’s retaliatory attack on Iran on Friday was quickly played down by the Iranian state. Markets seem so convinced that further major escalation is unlikely that the price of Brent crude has dropped nearly 5 per cent since early April.
“We are on the verge of an economic crisis in Iran,” says Mansour Anbarmoo, a lecturer at the Islamic Azad University in Tehran.Iran used to be a prosperous nation. In the years after the 1979 Revolution, it built up a large, well-educated, cosmopolitan middle class. Now, sanctions and high inflation mean much of this wealth has been wiped out.
“The economic outlook for me as a citizen in Iran is very bleak. There is no government plan to solve these problems.” “Living in Tehran, we saw the number of businesses that people who set up when the nuclear deal was signed – anything from shops to export businesses – they basically all closed up over the next couple of years. There had been a period of great optimism and then you could see a chill wind blowing,” says Rob Macaire, former ambassador to Iran from 2018 to 2021.
Real wages fell in every sector between 2017 and 2020. In extractives and health and education, real earnings plunged by 26 per cent and 22 per cent respectively. Increased demand from post-COVID China, higher oil prices and less stringent sanctions enforcement under Biden boosted oil exports. Iranian crude production in March averaged 3.2 million barrels per day, up from a low of 1.9 million in 2020, according to Goldman Sachs.Biden did not lift economic sanctions but he put a coherent offer on the table to do so in exchange for Iran’s nuclear compliance, says Macaire.
Foreign businesses cannot invest because they are not able to look at company accounts, he adds. “Nobody in Iran invests in Iran.” This opaqueness was a major block to international investment even during the years of the JCPOA, Ansari says. Although sanctions were lifted, the US had banned business relations with the IRGC and it was impossible for businesses to navigate this.“There is no Companies House in Iran,” he says. “Nobody knows what is going on. It is very difficult to do your due diligence.”
Source: Financial Digest (financialdigest.net)
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