Iran May Accept Nuclear Deal to Strengthen Economy

Analysts predict Iran may agree to a deal with the West over the nation’s nuclear ambitions in order to get the economy back on track. All parties could come to a deal in the next few days.

Analysts predict Iran may agree to a deal with the West over the nation’s nuclear ambitions in order to get the economy back on track. All parties could come to a deal in the next few days.

Even though the Iranian economy would greatly benefit from a sanctions lift, the country is currently doing better economically than before. For instance, auto manufacturing shot up 58 percent during the Iranian fiscal year, including a 71 percent spike in pistachio exports. Attribute the bounce in the auto sector to President Hassan Rouhani’s policy of opening negotiations with the West. In return, there has been easing of some sanctions in regards to the oil industry and auto sector. If most of the sanctions lift, the Iranian economy can grow at a range of five to eight percent a year. Overall, the economy is recovering after a sharp decline in growth during 2012 and 2013, and inflation is beginning to wane.

Outside Pressure Comes to Bear

Iran may be doing better than before, but the sanctions are having a direct impact on the economy. High unemployment plagues the nation, especially among young people, and there is little to no investment from abroad. Corruption is an issue as well because certain factions conduct shadowy deals to get around the sanctions.

Further, other analysts point to Iran’s funding of such as allies as Hezbollah in Lebanon, the Houthi rebels in Yemen and President Bashar al-Assad of Syria as reasons why the nation’s finances are draining. Low oil prices are another factor that is crippling the economy. Reports indicate that, with a deal, Iranians could begin exporting additional, and the country’s oil minister predicts exports will rise by one million barrels a day in the next few months. Iran could also gain access to $100 billion in oil revenue currently frozen outside of Tehran.

Iran’s Decay from Within

Sanctions are not the only reason why Iran’s economy is tanking. During his eight-year tenure, President Mahmoud Ahmadinejad spent most of the oil money on such things as low-cost housing and energy subsidies. Furthermore, the president pressured the central bank to fund bad projects, and he forced banks to print more money, causing a 45-percent rise in inflation.

Since new President Rouhani gained the position in 2013, he reversed most of his predecessor’s policies, including the cutting energy subsidies, and he slowed down the money supply. This caused a drop in inflation percent, and young people suffering from unemployment are so far content with the new president. Many members of the Iran Revolutionary Guard nearing retirement and concerned about an unstable economy are also satisfied with Rouhani’s stabilization policies.