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Turning Sanctions to Iran’s Own Advantage: Opportunity vs. Crisis

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Nour Rida

When the US began a series of sanctions against the Islamic Republic of Iran in the 1980s, Iran replied with a multiple track strategy, turning sanctions to the country’s own advantage by strengthening its indigenous production capabilities and its sovereignty. Today, and after a few months from Trump’s tearing up the nuclear deal, Iran’s currency sees a sharp decline in value and suffers economic woes. Iran is not the only country to suffer from US sanctions, however, the most vicious and longest of US economic wars has been against Iran; a nation which has been under US pressure for decades for not complying with America’s dictates. Today, according to some analysts, Iran can turn the sanctions and US economic war into an opportunity to stand in a stronger position and try its best to carry out reforms in the country.

Meanwhile, the US with a national debt of $21 trillion (which has been growing at a rate of a trillion dollars per year) has been targeting nations over the years, including China, Russia, Iran, Venezuela, Pakistan, Turkey, Cuba, Sudan, Zimbabwe, Myanmar, the Democratic Republic of Congo, North Korea as well as others. With such aggressive foreign policies, the US, according to some analysts, seems to bring a sooner than expected end to the dollar hegemony with its unwavering commitment to remain as a supreme power. With new emerging powers, mainly China and Russia, the US might create a dollarless market in the future that is out of its reach.

Iran political winner in n-deal

Iran recently plunged into harsh economic woes, especially after Trump’s harebrained attitude towards Iran and the nuclear deal. However, such an economic incline cannot be attributed only to the US ending of the deal and the new sanctions, but rather because of other reasons that combined altogether leading to this situation.

According to Political economist Dr. Elaheh Nourigholamizadeh, the US’s withdrawal from the deal is nothing but a continuation of the same previous US regime’s sanctions and aggressive policies towards Iran. The analyst said their effects on Iran’s economy are pretty negative. However, she explained that “economically speaking, although the JCPOA was a step for protecting Iran’s economy against sanctions, the deal, from the beginning has not defined a clear strategy or certain policies for countering the negative effects of US sanctions imposed on the Islamic Republic of Iran or for bringing prosperity to the country.”

 Accordingly, Nourigholamzadeh told al-Ahed news that even before the temporary relief of the nuclear sanctions, many countries were still skeptical about investing in Iran or signing economic agreements with the country.

“For example, as we see in the airlines sector as well as the banking and financial sectors, these all remained under sanctions. In many cases, these sanctions in the banking and financial sectors even increased. From the beginning, the JCPOA was more of a political, legal and technical deal rather than an economic one.”

So the deal was not meant to bring about real change on the economic level. However, the analyst pointed out that “politically speaking, we cannot say that Iran did not have any gains from the deal. The Western viewpoint on Iran as an allegedly nuclear threat and their rhetoric on the matter has changed. Iran being allegedly a threat to world order is also not part of their narrative anymore.”

 Nourigholamzadeh underscored that “Nowadays, the West talks about Iran’s compliance of the terms and conditions of the nuclear deal and the IAEA on the one hand, and about the US’s unilateral and unethical position on a deal which is internationally respected.”

The deal has also shown the US’s inconsistency and deception on the international arena, she reminded.

“It must be considered that from the beginning, the US’s behavior has shown that the JCPOA is not supposed to resolve Iran’s economic problems and its withdrawal from the deal reveals the untrustworthy nature of the US and its hostility against the Iranian nation,” the scholar pointed out.

Many European officials see the Trump administration’s foreign policy as a dangerous “mix of unilateralism and isolationism” that he combined into “unisolationism.”

Measures for a better economy

To talk about the measures that Iran could take to manage its actual situation, the economist said these measures can be divided into two aspects, domestic and international.

“Domestically speaking, Iran must pay more attention to its economic affairs. It should be focused on improving and reforming the economic management of the country, strengthening its economic infrastructure and supporting its national producers, especially in sectors such as agriculture and manufacturing.”

According to the expert on economic affairs, the country has to provide opportunities for the proper use of its human assets, who are mainly educated, talented and skilled. Importantly they could encourage the economic activities of the country.

“Internationally speaking, I think that Iran should not let the unfair regime of sanctions hurt its international position and its bilateral or multilateral relations with other countries of the world, because Iran believes in an economically interdependent world and that countries need each other in order to satisfy their economic needs,” Nourigholamzadeh further explained.

“Therefore; I think that Iran should increase its economic relations with new emerging economies such as Russia and China. It also needs to improve its relation with regional economic partners such as Turkey, Qatar and India. I also think that Iran should pay more attention to the point that it needs to decrease its economic dependency on oil and the result of this kind of thinking is focusing more on non-oil exports and diversification as well as adopting policies that could help Iran’s economy such as having other ways than oil to increase its internationally presence in economic sectors,” the economist told al-Ahed news, pointing out that these measures in fact are in line with the resistance economic policies that Imam Khamenei had introduced.

Iran deserves to be independent

Commenting on the leader of the Islamic Republic Imam Ali Khamenei’s clear message when he said that Iran will not go to war with the US and will not sit for talks either, the analyst said “Iran has nothing to do with an untrustworthy power like the US. As long as it tries to dictate Iran and denies the inalienable rights of its people in terms of growing their economy in a way they deserve, the message is clear; the US should not interfere in the domestic affairs of the Islamic Republic of Iran.”

She assured that “historically speaking, Iran has not initiated any war against any other country in the world and has respected the sovereignty of all nations of the world. Iran has been going on with these anti-war policies so it does not intend to do so. Iran will also not sit for talks with a country that has become famous for deceit and untrustworthiness.”

Harmonizing economic behavior, internal economic policies

Furthermore, Dr. Nourigholamzadeh told al-Ahed news that despite the fact that the sanctions and outside pressure does have an effect on the situation in Iran, however she underscored that currency devaluation is not a new problem in Iran that could be attributed to new economic phenomena or new economic reasons. “I think this is not the perfect place for economic theories, however, I think that impossible trinity or unholy trinity, which means it is impossible for a country to have free exchange rate, free capital flow and sovereign monetary policy at the same time is a concept we should keep in mind.”

To explain it in simple terms, Dr. Elaheh said that when the economy is free, the main reason for currency fluctuation is the difference between domestic interest rate and foreign interest rate; this means that when the people of a country try to maintain their economic power purchase (the international power purchase), they assess the difference between domestic interest rate and foreign interest rate and prefer to buy assets that are more profitable to them.

“Indeed, in case of the Islamic Republic of Iran, Iranians prefer to buy foreign assets because they find it more profitable. Also, unfortunately in the country the principle of foreign asset available to the people is fine money, in this case dollars and euros. So, Iranians see the currency fluctuations a chance to buy dollars or euros in order to maintain their international power purchase, which in turn increases currency devaluation.”

Touching on the economic situation and currency devaluation, the economist clarified that despite the US unfair sanctions, there are many different economic reasons to the problem.

 Nevertheless, she pointed out that “the main answer to why is the economy in such shape would be that there are many factors such as sanctions in first place, people economic mal behavior and economic mismanagement of the country which is mainly dependent on oil combined together to create Iran’s actual economic situation.”

 The best solution, she concluded, “is not to rely solely on one factor (by that meaning oil), it is rather better to find a way to harmonize people’s economic behavior with internal economic policies, or finding a way to manage the negative economic effects imposed by sanctions. By that, she assured that internal policies on economics should be reformed, which has already began to see light in Iran.

Iran’s parliament has voted to remove Minister of Economic Affairs and Finance Masoud Karbasian from office. A total of 137 MPs voted for Karbasian's removal while 121 voted in favor of him remaining in office. He followed Ali Rabiei, Iran’s former minister of labor and social welfare, who was voted out by the parliament early August. MPs sought impeachment for the minister over a range of issues that included the inability to manage the country’s economic affairs, failure to implement policies for bolstering resistance economy, lack of proper supervision of financial transactions and the inability to promote economic transparency.

Dollar decline inevitable

Finally, touching on the end of a dollar era, the analyst said that despite the fact that some systematic issues slow down this declining process (since almost 65 per cent of world monetary reserves held in central banking systems are in dollars and almost 40 per cent of world debt is issued in dollars), however the decline of the dollar and its market is inevitable in the future.

“First of all, the dollar is in competition with Euro and Yuan in international markets, and there are increasing cross-border and financial activities of new emerging powers like China and Russia.”

“Second of all, the end of dollar domination is an enduring process, when talking about the end of dollar domination, we talk about alternatives such as precious metals and natural resources since these are considered as national wealth. But there are details that need to be discussed in terms of these factors. For example, although the US has a significant gold reserves, however we do not live anymore in the cold war era, which means there is no communist trade anymore and actually many countries such as Germany are repatriating their gold reserves and this shows there is an economic shift in the world system,” she explained.

 “Now when we talk about oil and gas, Iran and Venezuela are the main suppliers of oil but they have sanctions imposed on them by the US. When we talk about natural gas, it is Russia that is the main supplier of natural gas and its main market is the EU, but the US intends to bring EU in support to its sanctions against Russia which in turn affects Russian gas export to the EU,” Dr. Nouri elaborated.

She highlighted that these systematic factors of US hegemonic attitude serve as a hindrance to the end of dollar domination. However, its attitude ironically also serves to isolate it on the international level and this might help in the acceleration of the dollar declination.  So the dollar dominant position is declining, but the present systematic obstacles slow the process down.

Dr. Elaheh finally concluded that “the arrogant attitude of the US has also contributed in making major world players wary of the future with a US having hands in every state actor across the globe, and emerging economies such as China and Russia are trying their best to provide an alternative to the dollar in global banking and financial market.”

Source: Al-Ahed News