Economic circumstances make Iran act decisively

Commentary Materials 7 May 2019 16:53 (UTC +04:00)
Iranians themselves admit that the economic situation in the country continues to deteriorate.
Economic circumstances make Iran act decisively

Baku, Azerbaijan, May 7

By Azer Ahmadbayli – Trend:

Iranians themselves admit that the economic situation in the country continues to deteriorate.

Iranian economy is entering a period of crisis, the Iranian Ministry of Economic Affairs and Finance said in a report evaluating the global economic situation in 2019 and 2020.

Here are some figures taken from Iran’s own sources.

At the end of April, the Chairman of the budgetary Commission of the Iranian Parliament Gholamreza Tajgardoon said that, according to calculations, the latest flood caused damage to Iran in the amount of 300-400 trillion rials (at the official rate $7.14-$9.52 billion, at the free market price - $2.06 - $2.75 billion).

He noted that the government may not be able to compensate for the damage this year, as it will lead to losses in other spheres.

Based on Iran Statistical Center’s data, the country's inflation rate for March-April 2019 made an average 30.6 percent. First, food products are rising in price, which exceeds the average inflation almost twice.

From March 21 to April 22 of this Iranian year (started on March 21, 2019), food products in Iran continued to rise in price. The price of onions increased by 143.3 percent, potatoes - by 59.1 percent, beef by 8.4 percent, oranges - by 25.5 percent, cucumbers by 14.6 percent etc.

Grey financial schemes and capital flight also reinforce the effect of sanctions.

"As a result of foreign currency getting more expensive because of the revenues from exports not returning to the country, Iran’s export value decreased by 6 percent," Mohsen Jalalpour, former head of Iran Chamber of Commerce, Industry, Mine and Agriculture told ISNA.

He mentioned that along with this, both illegal import and export of products increased. Last year, for instance, the value of the products illegally exported from the country amounted to $10 billion.

Iranian automakers have a debt to suppliers of spare parts in the amount of 200 trillion rials ($4.76 billion at official rate, $1.34 billion at the free market rate), Chairman of the Association of automotive spare parts manufacturers in the Kirmanshah region of Iran Babek Karimhan told ISNA News Agency.

In addition, the industry could lose 350-400 thousand jobs as a result of rising raw material prices, currency deficiency and transaction restrictions.

In general, as the inflow of hard currency to Iran decreases, Iranian rial is dropping every day, and the rate of recession of the Iranian economy accelerates. Today, on May 7, the rate of USD on the black market fell to 150,000 rials. Some media outlets see this as the beginning of hyperinflation, and that’s not the worst part.

According to preliminary estimates, in the second month of the Iranian calendar year (starts on April 22), in 24 regions of Iran, agriculture suffered damage in the amount of 100 trillion rials ($2.38 billion at the official rate, $671 million at the free market rate) as a result of cold weather. This was stated by the Director General of the Department of emergency situations and risk reduction in agriculture of the Ministry of agriculture of Iran Mohammed Musavi.

In such circumstances, some high-ranking officials in Tehran suggest that the situation has reached a point where Iran should have a free hand to take any necessary action.

After the U.S. decision to end waivers for buying Iran's oil Saudi Energy Minister Khalid al-Falih said that “we will meet the wishes of our consumers, including those who intend to replace the supply of Iranian oil with that of Saudi. I confirm our intention to satisfy all such requests.”

On May 2, a member of the Energy Commission of the Iranian Parliament, Hedayatollah Khademi told the Parliament’s website: “Despite the fact that Saudi Arabia and the UAE will be unable to replace the sale of Iranian oil in the global market, we perceive their statements as a manifestation of hostility towards Iran. Therefore, in these circumstances, we shouldn’t remain passive.”

He added that in order to fight the sanctions, as well as the intentions of Saudi Arabia and the UAE to substitute volumes of Iranian oil, it is necessary to consider how to disorder or to obstruct the economic security and oil production of the two countries. In this case, he said, it will be possible to hope for the continuation of the sale of [Iranian] oil.

His words can be interpreted differently, but in the first place, Iran-backed Yemeni Houthis come to mind. They can launch a series of ballistic missile attacks on Saudi Arabia and the Emirates as they did in the past. They also repeatedly threatened the passage of tankers through the Bab El Mandeb Strait.

A sectarian factor cannot be excluded - Saudi Arabia is home to many Shia Arabs, who live preferably in oil-producing regions.

And finally, blocking the Strait of Hormuz. So many times the US officials have denied the possibility of war between the US and Iran that Tehran has already believed in it, and can make this move as the last argument, which, in its opinion, will not develop into a war.

Apparently, the US is preparing for such developments.

The US is deploying a carrier strike group and a bomber task force to the Middle East to send a clear message to Iran that any attack on US interests or its allies will be met with “unrelenting force,” US national security adviser John Bolton recently said, via Reuters.

He said the decision was “in response to a number of troubling and escalatory indications and warnings.”

“The United States is not seeking war with the Iranian regime, but we are fully prepared to respond to any attack, whether by proxy, the Islamic Revolutionary Guard Corps or regular Iranian forces,” Bolton said in a statement.