By Amir Taghati
The Iranian regime is in a very precarious position. It is being pressured from numerous angles and the uncertainty about the future, especially in terms of US sanctions, means that it is on shaky ground.
As well as re-imposing the sanctions that were lifted when the 2015 nuclear deal was implemented, the United States has announced that fresh sanctions will be applied.
Iranian regime is used to sanctions. It spent years enduring crippling sanctions, but the regime came to view them as an inconvenience rather than a hindrance because it was always able to find work-arounds. The U.S. administration must therefore ensure that fresh sanctions will be tougher than ever.
Furthermore, it is expected that Iranian regime’s oil export income will dramatically drop when the sanctions are implemented. This is certainly the case in 2012 when sanctions caused the income to drop from $118 billion to $63 billion. Exports dropped again a few years later from $55 billion to $27 billion, but Iranian regime has experienced far worse. In 2002, the exports were just $19 billion. Therefore, the expected income of $78 billion when the sanctions take effect might not be enough and should be more.
Another important factor is the impact of US sanctions on EU business. A number of large European companies have already pulled out of business deals with Iran and others are winding down with the intention of withdrawing. This is because the risk of being caught in the crosshairs of sanctions is too great, with the US being the biggest player in the international banking system. And clearly, the US sanctions will serve as a deterrent to other companies considering dealing with Iran.
The banking situation in Iran is a shambles and most banks do not adhere to international standards. There is no transparency and Rouhani has been unable to make a difference to the issues, especially the increasingly common problem of failed credit institutions that affects millions of families in the country.
Foreign institutions have lost faith in Iranian regime’s banks and it is something that makes Iran’s economy fragile. Because of the history of problems, the people of Iran are hesitant to ever trust them again. It is a vicious circle because the banks can’t recover and subsequent problems arise (the exchange rate crisis, cuts in spending, etc).
This is likely to create big problems in terms of the political situation by undercutting confidence in the country’s currency. It could also exacerbate inflation. But the most worrying problem, for the regime, is the public.
The people of Iran have been consistently protesting over the past few months because of the problems provoked by the corrupt regime that is mismanaging the country’s resources. They are supported by the National Council of Resistance of Iran (NCRI), the main opposition to the regime, which has been advising the international community to take precise and encompassing measures to actually make a difference. On 30th June it will hold its annual gathering in Paris where government officials, politicians, dignitaries and human rights activists will discuss ways in which the situation can be improved.