Shatha Khalil *
Iran’s economic power begins with a countdown
Iran has witnessed a wave of angry popular protests in light of the suffocating economic crisis experienced by the Iranian interior, the sharp devaluation of the local currency, the increase in poverty and unemployment, and the overall deterioration of the economy.
Iran is facing economic pressure from US sanctions imposed on May 8, 2018. President Donald Trump announced the withdrawal from the nuclear agreement, the re- economic sanctions against Tehran and the companies and entities it deals with, the suspension of Iranian oil exports to zero, and the Saud and Emirates are ready to pump millions of barrels of oil to counter any imbalance in markets .
A US State Department official said the United States had asked states to halt all imports of Iranian oil from November, and ruled out Washington granting any exceptions.
US Treasury Secretary Steve Menuchin revealed on May 9, 2018 that sanctions would be re-imposed from 90 to 180 days.
He explained that the United States will resume its efforts to limit the Iranian oil exports after 180 days, and during the period, the US State Department will conduct consultations with foreign countries to reduce purchases of Iranian oil, pointing out the countries expressed willingness to increase production, to maintain the amount of supply that it does not lead to the rise in prices , as Iran produces about 4 million barrels of oil a day. If America can reduce Iran’s oil production to the level that prevailed before the imposition of sanctions about 800 thousand barrels per day, it will inevitably exacerbate the economic crisis within the Iranian state because of its inability to meet the Internal needs.
Manouchein stresses That the United States will impose restrictions after 90 days on the sale of the US currency to Iran, buy gold and other precious metals from Iran, buy steel and aluminum, invest in Iranian bonds, and deals with Iranian automakers. Export licenses will also be withdrawn from civil airlines, Including Boeing and Airbus.
Manouchein added that as of August 6, the ban on the import of Iranian carpets and foodstuffs would be imposed. After 180 days, sanctions would be imposed on Iranian ports, ships and shipyards. Restrictions would be imposed on financial transfers between foreign financial institutions, the Central Bank of Iran and insurance services.
With the tightening of sanctions on Iran by depriving it of the export of crude oil, the conflict between the world’s oil poles is intensifying. Trump asked Saudi Arabia to raise its oil production and increase supplies to compensate for the decline in Iranian exports. This led Iran to threaten to raise the ceiling of confrontation as the Iranian president Hassan Rowhani expressed his apparent resentment at the American pressures , threatening to prevent the export of oil in the region if his country is prevented from doing so noting that this action will lead to the loss of Tehran’s most important financial resource, and the chief financier of the State Treasury at a time of internal turmoil caused by the living and economic difficulties under the US sanctions, which could serve to inflame the Iranian street against the government and the regime, and thus open the way to the possibility of either making concessions by the Iranian regime in the regional files, redrafting the nuclear agreement, or tightening sanctions until regime and government change in Iran.
“The Americans who want to stop Iranian oil exports in full do not understand the meaning of this statement, because there is no point in not exporting Iranian oil while the oil of the region is being exported describing it as false assumption ,” Rouhani said on July 2, 2018, during his visit to Switzerland.
Rowhani defied the United States to cut Iranian oil revenues, stressing that Tehran was making efforts to avoid being affected by US sanctions.
The former economic adviser to the Iranian government, Mohammed Hussein Ansari, that Tehran has influence in the Gulf, Syria and Yemen, and said: “All this region will be unstable,” and Tehran will use the Strait of Hormuz as a pressure paper on oil exports from the Gulf countries, to create an international oil crisis that lead to the increase of Demand, and prices rise, because of sanctions on the one hand and Iranian threats to the region’s oil on the other.
Iran’s Revolutionary Guards have threatened to prevent oil from crossing the Strait of Hormuz in Gulf waters if it is prevented from exporting its oil. Revolutionary Guards leader Brigadier General Ismail Kuthari said the United States and its allies in the region must realize that they can not preserve their interests while threatening the interests of others taking in to consideration that the strategic Strait of Hormuz passes through about 20% of the world’s oil.
These conflicting positions raise serious questions about what will happen if Iran goes to the military option after being stuck in the corner while depriving it of the most important economic resource of the state treasury.
As Iranian resources are weak, observers wonder about how Iran is financing foreign militias in Iraq, Syria, Yemen and Lebanon, which it maintains and supports for the possibility of exploiting it to interfere in its regional environment. Others say the financial sanctions will drain the funding of these militias from Iran’s financial resources.
They also wonder about the role of the armed factions in Iraq, the militias and prominent pro-Iranian political figures: Will the crisis and the confrontation between Iran and America turn into a military clash on the Iraqi scene?
Experts question the possibility that the Europeans alone will protect Iran and preventing a wave of sanctions that the United States to impose not only on Iran but on all those who rebel against it, weakening Iran and making it unable to face sanctions and engaging in war with most countries that import oil from the Middle East. .
The crisis and internal suffering of the Iranian people from the collapse of the national currency weaken the pillars of the state and its basis threatening of the collapse of the economy, especially with the popular claims that have begun to raise the ceiling of threats calling to withdraw from Iraq and Syria and stop funding militias in Lebanon and Yemen, the matter that raises a shock within the authorities because there is a popular challenge to the option of exporting the revolution initiated by Ayatollah Khomeini and continued by the current leader Ali Khamenei, prompting conservatives to be more strict against the Iranian street.
Amidst the war of rhetoric and threats, the region appears to be on the verge of a new round of escalation that may not be limited to Iran’s rhetoric towards Saudi Arabia, but rather an increase in military pressure in wars fought directly or through its proxies in Yemen, Syria and possibly Afghanistan.
Economic Studies Unit
Rawabet Center for Research and Strategic Studies