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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2708

Worsening Iran’s Economic Troubles: Middle East on the brink of getting its next flash point

Hemantha Abeywardena writes from London…

Iranian economic situation is already dire and unless a miracle takes place, it may go out of the frying pan into the fire next week, when President Trump will impose a wave of sanctions.

Although, he offered the olive branch to his Iranian counterpart last week for unconditional talks, the Iranian response was not very encouraging. Perhaps, the Iranians may have realized that a combination of a well-publicised handshake with President Trump and a discussion that follows, was not going to produce anything meaningful, as the latter knows exactly what he wants.

Since the long standing allies of the United States could not change his position on anything, Iranians may have felt that they could not change his stance either.

As Iranians brace themselves for the return of sanctions that crippled its economy prior to the nuclear deal that Iran entered into with the US, the EU, Russia and China, sporadic demonstrations have been reported across the country – an ominous sign for the powerful clergy.

The protestors are up against the rampant corruption and the high cost of living. In addition, the rate of unemployment is over 12% and it is estimated that the same among women is twice as much.
The imposition of the sanction again on Tuesday next week is not the end of the Iranian troubles; in fact, it is just the beginning.

The sanctions will block the purchase of US dollars, its trade in gold and precious metals and its dealings with metals, coal and industrial-related software; in addition, there will be curbs on US imports from Iran such as carpets and foodstuff; at the moment, 1 US$ is worth 44220.49 Iranian rial.

The US has, meanwhile, warned the other countries that they must stop oil imports from Iran by 4TH November this year or face the consequences. The major European companies have already taken steps to scale back their operations in Iran, fearing being blacklisted in the US.

With the imposition of the sanctions, by the end of this year, Iran will lose two thirds of its oil exports – a massive blow for its economy. The loss of oil input by such an amount will have ramifications beyond Iran as well, next year.
Meanwhile, Iran threatened to block the Strait of Hormuz in the event of it being blocked from exporting oil, while its regional rivals can do the same. This is where the likelihood of a military confrontation is going to be high, if Iran carries out its threat.

Such a move by Iran will inevitably prompt the US to take some measures to deal with the situation that could potentially arise. If Iran avoids a direct confrontation with the US, it still could mine the seas, exactly as it did during the war with Iraq, when Sadaam Hussain was in power.

Since 20% of the global oil supply goes through this vital region, a military conflict, direct or not, will have serious consequences across the world.

As a show of force, Iranians have started war games in the Strait of Hormuz, involving a flotilla of small boats. The US did not find it amusing.

Although, the US does not encourage a regime change in Iran, the administration hopes that would be the case, when the new sanctions start to bite.

As the economic woes pile up, Hassan Rouhani, the beleaguered Iranian president, has been forced to walk the tight rope by the evolving situation, both at home and abroad.

Metaphorically speaking, in order to survive a movement of this kind, the daredevil needs a long pole.

Unfortunately, as far as the elected Iranian president is concerned, the circumstances are trimming down the very pole at both ends, depriving him of his right to have a safety net below.

- Asian Tribune -

Worsening Iran’s Economic Troubles: Middle East on the brink of getting its next flash point
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