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Six charts that show how hard US sanctions have hit Iran Six charts that show how hard US sanctions have hit Iran
(7 months later)
Six months of exemptions from US sanctions for countries still buying oil from Iran ended on Thursday. The United States reinstated economic sanctions on Iran after President Donald Trump abandoned a landmark nuclear deal in May 2018.
President Donald Trump reinstated the sanctions last year after abandoning a landmark nuclear accord, which he wants to renegotiate. Mr Trump says he wants to apply "maximum pressure" on the government in Tehran to compel it to renegotiate the accord. But Iran's leaders have remained defiant.
Iran's leaders have remained defiant in the face of the sanctions and vowed to overcome them, but the substantial impact they have had on the country is clear. The substantial impact the sanctions have had on the country is clear, and the economic hardship Iranians are facing helped trigger widespread protests in November 2019 that were brutally quashed by the authorities.
Sliding towards a deep recession The economy has fallen into a deep recession
Iran's economy was badly affected for several years by sanctions imposed by the international community over the country's nuclear programme.Iran's economy was badly affected for several years by sanctions imposed by the international community over the country's nuclear programme.
In 2015, President Hassan Rouhani agreed a deal with the US and five other world powers to limit Iranian nuclear activities in return for the lifting of those sanctions.In 2015, President Hassan Rouhani agreed a deal with the US and five other world powers to limit Iranian nuclear activities in return for the lifting of those sanctions.
The following year, after the deal was implemented, Iran's economy bounced back and GDP grew 12.3%, according to the Central Bank of Iran.The following year, after the deal was implemented, Iran's economy bounced back and GDP grew 12.3%, according to the Central Bank of Iran.
But much of that growth was attributed to the oil and gas industry, and the recoveries of other sectors were not as significant as many Iranians had hoped.But much of that growth was attributed to the oil and gas industry, and the recoveries of other sectors were not as significant as many Iranians had hoped.
Growth fell back to 3.7% in 2017, helping to fuel the economic discontent that led to the biggest anti-government protests in Iran for almost a decade that December.Growth fell back to 3.7% in 2017, helping to fuel the economic discontent that led to the biggest anti-government protests in Iran for almost a decade that December.
The reinstatement of US sanctions last year - particularly those imposed on the energy, shipping and financial sectors in November - caused foreign investment to dry up and hit oil exports. The reinstatement of US sanctions in 2018 - particularly those imposed on the energy, shipping and financial sectors that November - caused foreign investment to dry up and hit oil exports. The sanctions bar US companies from trading with Iran, but also with foreign firms or countries that are dealing with Iran.
The sanctions bar US companies from trading with Iran, but also with foreign firms or countries that are dealing with Iran. In May 2019, Mr Trump ended exemptions from US secondary sanctions - such as exclusion from US markets - for major importers of Iranian oil and tightened restrictions on the Iranian banking sector. He said the decision was "intended to bring Iran's oil exports to zero, denying the regime its principal source of revenue".
As a result Iran's GDP contracted by 3.9% in 2018, according to estimates from the International Monetary Fund (IMF). As a result of the sanctions, Iran's gross domestic product (GDP) contracted an estimated 4.8% in the 2018 and is forecast to shrink another 9.5% in 2019, according to the International Monetary Fund. The unemployment rate meanwhile rose from 14.5% in 2018 to 16.8% in 2019.
The IMF said in late April that it expected the Iranian economy to shrink by 6% in 2019. However, that projection preceded the expiration of the sanctions waivers. The IMF is forecasting zero growth in 2020, which would support Mr Rouhani's assertion in October that Iran has ridden out "the storm" caused by the sanctions.
Oil exports have more than halved Oil exports have plummeted
At the start of 2018, Iran's crude oil production reached 3.8 million barrels per day (bpd), according to data gathered by the Organization of the Petroleum Exporting Countries (Opec). The country was exporting about 2.3 million bpd. At the start of 2018, Iran's crude oil production reached 3.8 million barrels per day (bpd), according to data gathered from secondary sources by the Organization of the Petroleum Exporting Countries (Opec). The country was exporting about 2.3 million bpd.
Most of the oil was bought by eight countries or territories that were granted six-month waivers by the US when sanctions on the Iranian energy sector took effect - China, India, Japan, South Korea, Taiwan, Turkey, Greece and Italy. Most of the oil was bought by eight countries or territories that were granted six-month exemptions by the US when sanctions on the Iranian energy sector took effect - China, India, Japan, South Korea, Taiwan, Turkey, Greece and Italy.
So long as those countries cut their purchases of Iranian oil over that period their banks were permitted to continue to conduct transactions for any purpose with the Central Bank of Iran or with any other Iranian banks without risking US penalties. A condition of the waivers was that the importers reduce their purchases of Iranian oil, and by April 2019 Iran's oil exports had fallen to 1 million bpd on average, according to Bloomberg. That reduced the government's revenue by billions of dollars.
By March 2019, Iran's oil exports had fallen to 1.1 million bpd on average, according to the consulting firm SVB Energy International. Taiwan, Greece and Italy had halted imports altogether, while the two biggest buyers - China and India - had reduced them by 39% and 47% respectively. A US official estimated that Iran's government had lost more than $10bn ($7.7bn) in revenue as a result. Two months later, President Trump decided to allow the exemptions to expire and declared that he "intended to bring Iran's oil exports to zero".
President Trump declared that he "intended to bring Iran's oil exports to zero" when he decided to allow the SRE waivers expire on 2 May. By October 2019, Iran's crude oil production had fallen to 2.1 million bpd on average, according to Opec's data. Bloomberg reported that only 260,000 bpd on average was being exported.
However, it is not clear how much further Iranian oil sales will drop. However, analysts have said the figure may not reflect actual deliveries due to reported activities by Iran and its customers to conceal purchases or avoid tracking of tankers.
China has insisted that its trade with Iran is perfectly legal and that the US has no jurisdiction to interfere. Turkey has said it cannot cut ties with a neighbour. Iranian tankers have been accused of flouting international rules by turning off their Automatic Identification System (AIS) transponders. Iran is also said to frequently conduct ship-to-ship transfers to move oil and oil products.
Iran could also export oil to cover humanitarian needs and might be able to evade the sanctions by exporting oil covertly - something analysts suspect it already does. The plummeting oil sales have also led to a significant fall in Iran's foreign exchange earnings. The IMF estimates that Iran's reserves of foreign currency have been reduced to $86bn - 20% below their level in 2013.
The value of the rial has plummeted A senior US official, Brian Hook, said in December 2019 that he believed Iran had access to only 10% of those reserves because of restrictions on its financial sector, and that as a result it would struggle to prop up its currency and prevent inflation.
President Rouhani kept the Iranian currency stable for almost four years. But it has lost almost 60% of its value against the US dollar on the unofficial market since the US sanctions were reinstated, according to foreign exchange websites. Iran's government itself forecasts that oil export revenues will be reduced by 70% in the next Iranian fiscal year.
The fixed official rate of 42,000 rials to the dollar is used for a limited range of transactions, so most Iranians rely on currency traders. Bonbast.com reported that traders were offering 143,000 rials to the dollar on 30 April. The rial has halved in value
The rial's slide has been attributed to Iran's economic problems and a high demand for foreign currency among ordinary Iranians who have seen the value of their savings eroded and worried that the situation will get worse. President Rouhani kept the Iranian currency stable for almost four years. But it has lost 50% of its value against the US dollar on the unofficial market since the US abandoned the nuclear deal, according to foreign exchange websites.
The rial has regained some of its value since September 2018, when the Central Bank of Iran released more dollars into the market and authorities cracked down on currency dealers as prices reached a record low of 190,000 to the dollar. The fixed official rate of 42,000 rials to the dollar is used for a limited range of transactions, so most Iranians rely on currency traders. Bonbast.com reported that traders were offering 13,650 rials to the dollar in early December 2019.
The rial's slide has been attributed to Iran's economic problems and a high demand for foreign currency among ordinary Iranians who have seen the value of their savings eroded and their purchasing power cut sharply.
The rial has regained some of its value since September 2018, when the Central Bank of Iran released more dollars into the market and authorities cracked down on currency dealers as prices reached a record low of 176,000 to the dollar.
Iran's currency woes have also led to shortages of imported goods and products that are made with raw materials from abroad, most notably babies' nappies.Iran's currency woes have also led to shortages of imported goods and products that are made with raw materials from abroad, most notably babies' nappies.
Living costs have risen dramaticallyLiving costs have risen dramatically
President Rouhani managed to get inflation down to 9% in 2017. But the IMF estimates that it soared to 31% in 2018 and predicts that it could reach 37% or more this year if oil exports continue to fall. President Rouhani managed to get inflation down to 9% in 2017. But the IMF estimated that it soared to 30.5% in 2018 and projected that it would reach 35.7% in 2019.
The plunging value of the rial has affected not only the prices of imported goods but also of locally produced staples. In the past 12 months, the cost of red meat and poultry has increased by 57%, milk, cheese and eggs by 37%, and vegetables by 47%, according to the Statistical Centre of Iran. The World Bank has said that inflation in Iran has been especially high for food items, with meat products 116% more expensive year-on-year in April 2019, and that the rural population has been disproportionally affected.
The price rises have led to long queues at government-subsidised grocery shops, particularly for rationed meat. In an attempt to lower prices, the government has banned livestock exports, flown in hundreds of thousands of cows and sheep from abroad. But analysts say some Iranian farmers are selling meat in neighbouring countries to obtain foreign hard currency. The Statistical Centre of Iran reported that the Consumer Price Index (CPI) 12-month rate of inflation for households stood at 42% in late October 2019. Food and beverage prices were up by 61% year-on-year and the price of tobacco was up by 80%.
There is also a plan to introduce electronic coupons to help the poorest people obtain meat and other essential goods. An estimated 3% of Iranians - some 2.4 million people - were living on less than $1.90 (£1.46) a day in 2016. The price rises led to long queues at government-subsidised grocery shops, particularly for rationed meat. In an attempt to lower prices, the government banned livestock exports, flew in hundreds of thousands of cows and sheep from abroad.
The poor have also been hit hard by almost 20% increases in the costs of housing and medical services in the past year. In November 2019, the government unexpectedly announced it was cutting petrol subsidies. It said the price of petrol would rise by 50% to 15,000 rials a litre ($0.12; £0.09 at the unofficial market exchange rate), and that drivers of private cars would be allowed to purchase only 60 litres each month before the price rose to 30,000 rials.
The IMF's Jihad Azour told Reuters news agency last week that Iran could help tame inflation by working to eliminate the gap between the rial's official and unofficial exchange rates. Mr Rouhani said the $2.5bn in savings would allow the government to provide additional help to 18 million families. But the price rises caused widespread anger, and hundreds of thousands of people took to the streets across Iran.
A crackdown by security forces left at least 208 people dead and thousands injured, according to Amnesty International. The government dismissed such figures as "utter lies".
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