Iran’s long-struggling economy is reaching a crisis point, with the currency in free-fall, a staggering 203 percent annual inflation rate and, starting on Tuesday, the re-impostion of U.S. sanctions that were lifted under the terms of the 2015 nuclear deal.
The Trump administration will reimpose of a number of sanctions on Iran involving trade done with U.S. dollars, gold, and (among other things) the purchase of industrial equipment at midnight on Tuesday.
These sanctions were previously lifted under the Joint Comprehensive Plan of Action (JCPOA) — a multilateral agreement with Iran, the United States, France, the United Kingdom, China, Russia, and Germany — in exchange for Iran limiting the scope of its nuclear energy program. Trump withdrew from the nuclear deal in May.
The harshest sanction — the one hitting Iran’s oil exports — will go into place on November 4. So far, China, which is the number 1 importer of Iranian oil, has said that it will not stop purchasing from Iran.
The Trump administration knows that these sanctions will hurt an economy that was just starting to see signs of improvement since the JCPOA was signed, but where a heady mix of corruption, mismanagement, youth unemployment, and sanctions imposed since 1979 have have hurt the bottom line for all but the wealthiest of Iranians.
“..three months out [after pulling out of the JCPOA], we have a very different picture in front of us. The [Iranian rial] is tanking, unemployment in Iran is rising, and there are widespread protests over social issues and labor unrest,” an unnamed senior administration official told reporters on Monday during a call to answer questions about the sanctions.
Another anonymous senior official said the snap-back of these sanctions “supports the President’s decision to impose significant financial pressure on the Iranian regime, to continue to counter Iran’s blatant and ongoing malign activities, and then ultimately to seek a new agreement that addresses the totality of the Iranian threat.”
The Trump administration has repeatedly claimed that the sanctions aim to ultimately help Iranian people, who have been robbed by their own government:
90 days ago, @POTUS withdrew U.S. from the failed #IranDeal. Today, sanctions on the regime in #Iran were re-imposed to counter its malign activities. The regime must use Iran's resources to help its citizens, not support terror & enrich the leadership. https://t.co/hES0cmwjYc
— Secretary Pompeo (@SecPompeo) August 6, 2018
While there is little argument that Iran’s government has failed to provide for all 80 million of its citizens and has issues with corruption, there is skepticism that the sanctions are intended to help ordinary Iranians, given the history of public statements by officials such as National Security Advisor John Bolton:
#JohnBolton Aug 2017: We should pretend to want to talk to #Iran while knowing that after we violate the #IranDeal, that they won’t talk to us. #JohnBolton today: “#Iran should come to the table.” pic.twitter.com/46dMPuqNtu
— Bahman Kalbasi (@BahmanKalbasi) August 6, 2018
The U.N.’s nuclear watchdog agency has been inspecting Iran’s nuclear facilities for years to ensure compliance with the terms of the JCPOA. Still, the Trump administration insists that Iran’s nuclear program can’t be controlled by the deal.
Iranian authorities are making moves that (at least appears to) target the fiscal mismanagement of the country’s banking system.
Over the weekend, Ahmad Araghchi, a deputy overseeing foreign exchange affairs at the country’s central bank, was dismissed, then arrested along with several others, including traders.
Tehran Times reported that during Araghchi’s year-long tenure, “the U.S. dollar jumped from around 42,000 to over 120,000 rials and then down to around 100,000.” The Iranian rial has dropped 80 percent in value since April, shortly before President Trump announced the return of sanctions.
Araghchi is also the nephew of Iran’s deputy foreign minister, Abbas Araghchi, and his arrest might be the government’s way of signaling that no one is safe at this point.
It remains to be seen if any of these efforts will soothe protesters, who have taken to the streets in several cities around the country, calling for improvement.
— HRANA English (@HRANA_English) August 5, 2018
There are short videos posted on Twitter of people angrily wondering why they are economically suffering, unable to make ends meet, while their government spends money in interventions in Lebanon and Syria.
The Iranian rial was struggling against the U.S. dollar, but really started spiraling after Trump announced that the United States was pulling out of the JCPOA, re-imposing sanctions, and threatening other JCPOA signatories with sanctions should they invest in Iran or engage in trade with the country.
In a sign of things to come, Iranian President Hassan Rouhani fired the governor of the coutnry’s central bank, Valiollah Seif, on July 25, replacing him with Abdoldasser Hemati, who used to run the country’s central insurance agency.
In an official statement, Rouhani said he expected Hemati to “take immediate and complete action to create stability in the economy of the country with the help and cooperation of related organs and organise the monetary and foreign exchange market, as well as follow up the reform and precise implementation of banking system of the country.”
Rouhani is facing a major political challenge in his second term as president. Having been voted into office the first time on promises of economic improvements that have yet to materialize, he is now facing increased threats from the Trump administration and the very real talk of economic collapse.
Over the weekend, President Trump repeated the possibility of meeting (or not) with Iran:
Iran, and it’s economy, is going very bad, and fast! I will meet, or not meet, it doesn’t matter – it is up to them!
— Donald J. Trump (@realDonaldTrump) August 4, 2018
He mentioned this last week as well, saying he would be open to talking to Iran with “no preconditions” (Secretary of State Mike Pompeo immediately clarified that there would, indeed, be many pre-conditions.).
Foreign Minister Javad Zarif told reporters that Iran already met with the United States.
“We negotiated for hours. The longest negotiations [in history] for the US Foreign Minister was the one negotiation that we started at 9:00 pm & ended at 6:00 am the next morning…we negotiated for 9 hours, non-stop,” he said referring to the JCPOA negotiations.
“And then Mr. Trump comes and in an instant signs something and says, ‘That [deal] is all void.’ Can this person be negotiated with?…Does negotiation with you have any value? Is it worth our time?” he asked, clearly exasperated.
Iran has — at least publicly — shown no interest in meeting with the United States as long as it stands in violation of the JCPOA. Even the head of Iran’s Revolutionary Guard (IRGC), Major General Mohammad Ali Jafari, indicated that this was not a possibility, saying that Iran is not North Korea, referring to the the meeting between President Trump and North Korean leader Kim Jong-un in June.
Of course, the IRGC does not make such decisions, but Jafari’s statement is indicative of the lack of crucial support for such a meeting.
If the Trump administration succeeds in its goal of regime change in Iran, re-establishing stability in Iran will be its own challenge in a region with few stable countries.
.@realDonaldTrump signs order snapping sanctions back on #Iran as Natl Security Adviser Bolton denies the goal is regime change and critics say if sanctions topple Iran's government Revolutionary Guard would take over and it would be even worse
— Andrea Mitchell (@mitchellreports) August 6, 2018
The other signatories of the JCPOA do not support the Trump administration’s sanctions. The EU partners tried to get sanctions exceptions from the United States (but were denied) as a means of continuing to invest in Iran, with Russia and China continuing trade and investments for the time being.
“We deeply regret the reimposition of sanctions by the U.S.,” said a joint statement from the countries, according to Reuters.