Iran V: Sanctions
Competition
AHC
March 16
47
, 2012
Outside Views of the Overall Economic Impact of Sanctions There are no reliable data as yet that can portray the full impact of the new energy and banking sanctions that the US and EU created during December 20-11-March 2012. The data on Iran in the World Bank web pages on Iran are often dated and many go back to 2009 and 2010. 151 They do reflect real progress in many human development indicators, including the rather ironic fact that twice as many women now graduate from university in Iran as men. The World Bank also states, however, that: Economic growth increased by 3.5 percent in 2009/10 while prudent macroeconomic policies reduced inflation to about 10 percent and ensured a fiscal surplus. The initial impact of the removal of the substantial energy and food subsidies in December 2010 did not suppress Iran’s economic performance despite stricter economic sanctions. Nevertheless, growth is projected to decline to 2.5 percent and inflation to increase to above 20 percent due to the impact of the substantial increase in energy prices. The Government has launched a major reform of its indirect subsidy system, which, if successful would markedly improve the efficiency of expenditures and economic activities. The overall subsidies were estimated to cost 27 percent of GDP in 2007/2008 (approximately US$77.2 billion). The Government has opted for a direct cash transfer program while substantially increasing the prices of petroleum products, water, electricity, bread and a number of other products. Preliminary estimates suggest that the government’s comprehensive cash transfer program accompanying the ongoing subsidy reform has reduced poverty and regional income disparities significantly. The fourth round of international sanctions in 2010 have increased the cost of doing business, limited access to foreign direct investments and foreign technologies, and exacerbated international trade and financial transactions. The United Nations Security Council (UNSC) sanctions include a ban on financing and exports related to Iran’s nuclear and military programs. Additional sanctions beyond those called for by the UNSC pose constraints on some international financial transactions, particularly in the Euro and the U.S. dollar.152
The data on the IMF web page do include estimates through 2011 and they reported only 3.5% real GDP growth in 2010 and a drop to 2.5% growth in 2011 in spite of high oil prices and export revenues. The IMF also reported a 22.5% annual rise in consumer prices in 2011 – a doubling over the 2010 rate and enough to serious erode the value of incomes and saving, the ability to pay for imports, and potentially to fund key aspects of life like marriage, housing, educational expenses, and business expansion and investment.153 (The World Bank estimates an average inflation rate of 22.1% during 1993-2002 and rates ranging from 25.4% to 12.4% during 2003-2010.154 The CIA World Factbook does provide more detail on the aspects of the Iranian economy that help reflect the potential impact of steadily tighter sanctions. It notes that Iran is a highly populated country with a total population of some 78 million, a growth rate of 1.25%, and a median age of only 26.8 (25% of the population is 14 years of age or younger). It not only estimates urbanization at 71%, it makes estimates by city that show how critically dependent the The economic overview ends in 2009. See “Iran, Islamic Rep. at a Glance,” http://devdata.worldbank.org/AAG/irn_aag.pdf. 152 IMF, January 18, 2011, http://www.imf.org/external/country/irn/index.htm. 153 Ibid 154 IMF, World Economic Outlook 2011, http://www.imf.org/external/pubs/ft/weo/2011/02/pdf/text.pdf, pp. 184, 190. 151
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