Forty years under sanctions: How did Iran survive?

Forty years under sanctions: How did Iran survive?

Ksenia Melnikova.

Because of the military operation in Ukraine, Western countries have imposed tough anti-Russian sanctions. The EU is talking about “total economic war”, predicting the collapse of the financial system. About the same thing was done with Iran at one time, but the country survived. To what extent the example of Tehran can be useful to Moscow, RIA Novosti investigated.
Attack on Tehran
Tehran’s financial war with the West began over 40 years ago. The Islamic Revolution of 1979 overthrew Shah Reza Pahlavi, who was considered an American protege. The Shiite clergy headed by Ayatollah Khomeini came to power. The revolutionaries seized the American embassy and demanded that Washington extradite the former ruler, as well as return the wealth he had taken out.
Purchases of Iranian oil were immediately stopped, deposits in American banks were frozen, and the sale of military products was banned. After the break in diplomatic relations, an embargo was imposed on all exports, including food and medicine.
After that, some sanctions were lifted, others were introduced. The reasons were different – violation of human rights, the development of a nuclear missile program, support for terrorism.
Iran was cut off from S-WIFT, cut off from Western banks, international payment systems (there is still no Visa and Mas-terCard there), and operations with dollars were banned. Den-ied access to technology, investment. The assets of the Central Bank were frozen. Oil production and exp-orts collapsed. If before the Islamic revolution, more than six million barrels per day were extracted from the bowels, then in 2020 – about two. Food and goods rose in price. The economy fell into recession.
After the first round of sanctions in the 1980s, GDP fell by 25 percent, about the same as inflation. And since then, nothing has become cheaper in the country, and wage growth has not kept up with the price tags. The only exception is the short period of 2016-2017, when the economy began to return to global markets.
In 2015, Tehran made a deal with the countries of the “six”: in exchange for curtailing its nuclear program, they promised a gr-adual lifting of restrictions. GDP increased by 13 percent. But Donald Trump, who came to power in the United States, withdrew from these agreements and increased pressure. In total, Washington imposed more than 950 sanctions against Iran, affecting all economic sectors.
The rial depreciated, inf-lation jumped 60 percent, GDP fell six points. There were not enough medicines – even the most necessary ones, which especially aff-ected cancer patients. But the collapse that the White House hoped for did not ha-ppen. The economy coped, and after a couple of years it began to grow. Last year – by 3.1 percent, this year they expect 2.4 percent.
Without access to foreign financial markets and investments in infrastructure, one cannot speak of high rates of development. Nevertheless, Tehran has adapted to life under sanctions, established import substitution and reoriented markets.
Experience for Russia
Iranians, on the wave of high inflation and restrictions on the withdrawal of capital abroad, massively invested in domestic production. Local investors saved companies from bankruptcy, and three years ago the Tehran Stock Exchange became the fastest growing stock market in the world.
Through gray intermediaries from the UAE and Turkey, they set up supplies of new products from Western manufacturers, including iPhones, learned how to send money abroad, and replaced Western services with local counterparts: Cloob instead of Facebook, Aparat instead of YouTube. Russia is now in a similar situation. And the example of Tehran shows that the country, most likely, will not lose access to familiar technologies and goods.
The Iranian scenario with hyperinflation and the collapse of the exchange rate can be avoided. Ten years ago, Iran’s GDP was $600 billion, Russia’s was $1.5 trillion, plus more international reserves and tax revenues, and less dependence on oil.
“Iran has been living under much tougher sanctions for more than forty years. This has slowed down economic growth, the standard of living is not as high as it could be. But they found ways to bypass barriers, provided the population with medicines and food. and Indian partners, besides, Western countries are trying to look for “sanction exceptions” in order to minimize the impact on them,” Farkhad Ibragimov, an expert at the Valdai International Discussion Club, notes.
Access to Western energy markets has been preserved. Over the past eight years, Russia has become more resilient to tough restrictions. Since 2014, some industries have been reoriented towards import substitution, an internal analogue of the SWFT has been created, the Central Bank has withdrawn a significant part of the reserves from Western countries.
“The Iranian experience suggests that all systems that support economic activity should have domestic counterparts – this is how to transfer an industrial facility to backup power. A payment system, social networks, an alternative online store with popular applications, and the like. But full import substitution is impossible “The Iranian resistance economy policy has proven this, so it is important to have a diverse supply chain for both ordinary goods and some technological solutions,” emphasizes Adlan Margoev, researcher at the Center for Middle East Studies at IMI MGIMO.
At the same time, one cannot ignore the fact that Iran and Russia have completely different conditions and economic positions, geographical position, and finally, climate. And the West will not completely repeat itself – it will come up with new ways to hit harder. Iran did not fall into a planned economy – it remained a market economy. According to the human development index, from 2005 to 2019, Tehran rose by 28 lines, taking 70th place in the world, and life expectancy increased by seven years to 77. In addition, the population grew by 22 percent. Literacy among young people is almost absolute.
Oil exports were redirected to China. Beijing has become Tehran’s main trading partner, followed by the United Arab Emirates, followed by India and Turkey. Through the Chinese, the Iranians also gain access to technology. And cryptocurrency has become part of the national financial system, mining brings hundreds of millions of direct income. Over the decades of sanctions, Iran has repeatedly demonstrated that if there is an obstacle, there is also a way to get around it. In addition, the Russian economy, unlike the Iranian one, is so integrated into the world that any blow to it will reverberate on world markets – which is already evident from the rush demand for fuel, wheat and fertilizers.

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