Tensions between the U.S.
and Iran are on the rise.
Iran has filed a complaint with the United Nations over what it says
was a U.S.
violation of its airspace.
The U.S.
claims Iran shot down a drone in international airspace.
Announcement from Iran today that it has breached another
limit set by the 2015 nuclear deal.
Iran now pushing back on President Trump's assertion that
the United States shot down an Iranian drone.
Iran has released new footage they say shows their
forces taking over a British tanker.
Iran is claiming that it has arrested
17 Iranian nationals who are
acting as spies for the CIA.
A big factor behind all of this is the Iranian
economy. Decades of U.S.
sanctions have decimated it.
And in 2019.
Iran appears more and more desperate.
Here's why.
When it comes to trade policy, sanctions are the most used
tool in the U.S.'s tool
box. Stephanie Segal, a senior fellow
at the Center for Strategic National Studies, explains.
They're there as part of the toolkit to
incentivize certain behaviors.
One criticism is that they've used, been used
more in a punitive sense.
So rather than incentivizing kind of forward looking
action, they've been used to punish
past behaviors and
there are particular concerns about that because
the reason that our sanctions policy can
be so potent is because we
have the dollar at the center of the
international system.
The U.S.
first started imposing oil sanctions in
1979 to respond to growing terrorism
concerns from the country.
From the mid-1980s through the 1990s, the U.S.
continued imposing sanctions that focused on
U.S.-Iranian imports and entities that did
business with the country.
We actually don't have much of a bilateral
economic relationship with Iran.
So the only way that we can actually use
an economic tool to influence
Iran's behavior is through third
countries.
Then in August 2003, the International
Atomic Energy Agency found traces of enriched
uranium at one of Iran's nuclear power plants.
To the United States and its allies, it looked like
Iran was inching closer to producing nuclear
weapons. In June 2005, President
Bush signed Executive Order
13382, which froze assets
and transactions of individuals involved with growing the
supply of weapons of mass destruction in
Iran, North Korea and Syria.
The United States and other allies tried to negotiate with
Iran to limit the amount of uranium produced,
but Iran insisted its actions were peaceful.
Five years later, President Obama enacted the
Comprehensive Iran Sanctions Accountability and Divestment Act.
It expanded on sanctions from the Clinton and Bush
administrations to who could face sanctions, new
restrictions for financial institutions and eliminate
exemptions on Iranian imports.
Our concept at the time was you
start small, you start with the really toxic stuff, the
nuclear weapons program and missile programs, and then
you use that as a way of essentially building a wedge
between Iran and the rest of the international community, you could
use to develop other sanctions tools in the future.
That's Richard Nephew.
He was in charge of developing and executing the
U.S.-Iran sanctions strategy from
2011 to 2013.
The U.S.
continued to focus sanctions on Iran's service-based
industries, but it realized it had to switch
tactics to have a bigger impact on Iran's economy.
Initially, we really took what the Iranians gave us. They
exposed themselves to a broader range of sanctions and
targets by attempting to evade the sanctions
in place.
But over time, we started
to see that momentum and
the impact of those sanctions was lessening.
We started going after what you would call the
tendons of Iran's international business
activity, things like transportation, things like
insurance, all those sorts of services you need to be
part of the modern global economy.
Nephew also advised the Obama White House on the
2015 nuclear deal or Joint
Comprehensive Plan of Action.
The deal would lift secondary sanctions on Iran and
help boost the country's economy.
The U.S.,
China, France, Germany, Iran,
Russia and the U.K.
agreed on the plan in July 2015.
But in May 2018, President Trump announced
that the U.S.
would be pulling out of the 2015 nuclear
deal.
We had the JCPOA, not a
perfect document, it allowed a
number of exceptions.
Iran continued to test fire new missiles.
There were time limits on Iranian
commitments under the JCPOA that would
expire after an extensive period of time.
By November 2018, President Trump
reinstated sanctions on Iran's most important
economic sectors like energy and shipping, but
granted six-month waivers to eight countries that purchase
Iranian oil.
The sanctions have really hurt Iran's GDP over the years.
The IMF predicts that Iran's GDP in
2019 will shrink by six percent.
Iran's GDP per capita on 2018 was
5037 U.S.
dollars. That's less than a tenth of the US's.
The U.S.
aimed to target Iran's oil industry.
But everyday Iranians have felt the effects of the
sanctions. In February 2019, the
World Bank reported Iran's inflation rate had grown
42 percent from the previous 12 months,
driving food prices up almost 63
percent. It's also leading to shortages
in food and medicine.
There are no restrictions on the U.S.
export of foods and medicines to Iran.
Financial institutions don't know exactly who
they're dealing with in Iran and are
worried that they may be dealing with
a sanction entity or
institution or a company or person
that would make the provider of
the food and medicine liable to U.S.
sanctions for violating the policy.
Companies remain hesitant to invest in Iran amid the
prospect of more U.S.
sanctions. That's making it harder and harder for Iran
to keep up with oil powerhouse Saudi Arabia.
Iran needs capital for its aging oil
infrastructure.
The Iranian government still relies on oil sales to help
fund its government, but it's been trying to wean itself off.
In 2009, about 60 percent of government revenue came
from the petroleum sector.
For Iran's 2019 budget, about 30 percent
of revenue is expected.
When the U.S.
expanded sanctions in 1995,
Iran was exporting almost six percent of the world's
petroleum. As of 2018, that number has been
cut down to less than three percent.
And it could be even less.
Iran has stopped reporting its production numbers to the
Organization of the Petroleum Exporting
Countries. Out of all the OPEC
countries, Iran still holds the third largest
oil reserves.
The United States, though, now produces more oil than
any other country, pumping out almost 11 million
barrels of crude oil per day in 2018.
In comparison, Iran produced 3.5
million barrels.
Iran appears to be hurtling toward a tipping point.
Will it become another North Korea using a nuclear weapons
program and aggression as bargaining chips on the world
stage? Or could it become the next
Venezuela, a once oil rich country
now in political and economic turmoil.
In Venezuela, corruption crippled the country's energy
industry and without money to finance the maintenance of
it, investors left in droves.
Venezuela's economy has collapsed, and now it's seeing a
political struggle between its current president and a
U.S. backed opposition leader.
Iran's political situation remains static
despite the immense pressure on its economy.
One of the things that's affecting the Iranian economy right
now is this kind of stillborn effort at
reform. And it's something that President Rouhani
still wishes to engage in.
A lot of his senior advisers and cabinet people wish to engage in,
but they haven't gotten as much traction as they could and they want
to get, especially with international investment.
The World Bank predicts that Iran's economy will
shrink by more than 2 percent in the next two years.
Iran faces a dwindling number of options and the
clock is ticking.
