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Can Iran's economy survive a possible war?

20.04.2024 18:00 2 min reading
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Can Iran's economy survive a possible war?

Amid discussions of potential economic measures against Iran by the United States and the European Union (EU), Tehran said it was resilient to Western boycotts, citing record oil exports despite significant sanctions imposed by former US President Donald Trump. Trump in 2018

Iran's oil minister, Javad Ouji, reported that oil exports in 2023 have brought in more than $35 billion, demonstrating Iran's ability to maneuver in the face of adversity. However, the population is struggling with the effects of international sanctions, as evidenced by the sharp rise in inflation, which reached approximately 40% in February. Javad Salehi-Isfahani, a professor of economics, attributes this to the recent 15% appreciation of the US dollar against the Iranian rial as a result of escalating geopolitical tensions.

Despite the challenges, Iran's oil sector remains stable and contributes significantly to the country's GDP. In 2022, the services sector dominates GDP, followed by industry and agriculture. Interestingly, the oil industry accounts for a significant portion of industry revenue, with China being the main importer. Despite concerns about potential Israeli attacks on oil installations, Iran has managed to maintain oil trade with Beijing.

Since Trump's sanctions in 2018, Iran has resumed 80% of its previous oil export volume, thanks in part to the easing of sanctions under the administration of President Joe Biden.

Iran's economy has demonstrated resilience, with GDP growth of approximately 5% annually, despite regional challenges exacerbated by the Covid pandemic. However, corruption and lack of transparency create significant obstacles, with government revenues allegedly disappearing in opaque government structures.

Iran's readiness for a potential military escalation with Israel remains uncertain. Although Tehran maintains oil exports, continued conflict could strain the economy. Salehi-Isfahani suggests that Iran's cautious approach to avoid becoming embroiled in the Gaza war shows its reluctance to engage in a full-scale military confrontation, preferring instead symbolic gestures.

In summary, Iran's economy, supported by oil exports, is facing challenges in the face of international sanctions and domestic problems. Although its resilience is evident, the country's ability to withstand prolonged conflict remains uncertain.

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