Iran V: Sanctions
Competition
AHC
March 16
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, 2012 It should be stressed that all of these data reflect the status of a troubled and vulnerable economy before the new round of sanction began to have an impact, but that any estimate of the impact of sanctions must be based on data that are so weak and unreliable that they at most can be quantitative opinions.
Other Views of the Impact of Sanctions It is also important to note that some sources describe less serious impacts. An IMF statement issued on June 13, 2011 did question how much impact international sanctions were then harming Iran’s economy. The statement was based on a May 28 to June 9 visit, and indicated that Iran’s GDP was growing at a rate of about 3.5%, and that the government had brought inflation down from 25% in 2008 to about 12% in 2010/2011. The IMF also credited the government’s privatization program with positive economic effects. Hassan Hakimian, an economic expert and director of the Middle East Institute at the London School of Oriental and African Studies (SOAS) argued, however, that, “the IMF is on the optimistic side and comes across as rather rash in its judgment. Most independent observers believe that it's too soon to draw such conclusions” Additionally, Hakimian noted, official data about Iran's economy such as inflation and unemployment rates are often disputed both internally and externally.160 He seems to have been proved correct. The newer IMF data quoted earlier are substantially less favorable for Iran than the June report, as are the CIA data. Similarly, polls indicated that Iranians still seemed to have faith in their economy before the new round of sanctions in late 2011. Tehran's stock market had seen a huge increase in trade, and there was no clear sign of a significant capital flight.161 Also, Iran had sizable hard-currency reserves to absorb shocks, and the isolation of its banking sector helped to protect the country from the worst of the global financial crisis.162 Many then believed that the economic effects of international sanctions may be able to be tolerated by the regime as long as world oil prices remain high, at nearly $100 per barrel in June 2011.163 It is also difficult to predict the political impact of the new sanctions. Reza Marashi, a former Iran Desk Officer at the US Department of State argued in 2011 that the negative effects of existing sanctions had been serious, but had not affected the regime as much as might be expected: Sanctions exacerbate this dependence on the government. By raising the costs of doing business in Iran, sanctions slow economic development and decrease employment options for the middle class. When fewer companies invest in Iran, there are fewer jobs for skilled middle-class workers; fewer opportunities to develop professional skills; and less socially conscious investments while the government prioritizes differently to combat foreign pressure. Alternative options for Iran's middle class are increasingly narrow: unemployment, emigration, or becoming state employees. As a result, many middle-class Iranians not employed by the government live on unsustainable sources of income such as second jobs and remittances from family abroad. Survival for the middle class is at best unstable, and the conservative factions in
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The Guardian UK, “IMF report on Iran’s economic success draws skepticism”, Saeed Kamali Dehghan, June 17, 2011. http://www.guardian.co.uk/world/2011/jun/17/imf-report-iran-economic-success 161 The Washington Post, “Sanctions begin to compound Iran’s severe economic problems”, Thomas Erdbrink, October 5, 2010. http://www.washingtonpost.com/wp-dyn/content/article/2010/10/05/AR2010100505972.html 162 The Wall Street Journal, “Iran's Economy Feels Sting of Sanctions,” Fassihi, Farnaz, October 12, 2010. http://online.wsj.com/article/SB10001424052748703735804575535920875779114.html
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