Iran’s economy is not doing well and the decline in indexes and trade proves this claim.
Trade with neighboring countries is not balanced, as many countries refrain from improving economic relations with Iran. Monetary tool is the main instrument for increasing exports or trade surplus, which has been dented by sanctions on the banking sector. When the smooth exchange of goods is hampered, membership in the Eurasian Economic Union or the Shanghai Cooperation Organization cannot help. On the other hand, high production cost, resulting from double-digit, long-lasting inflation and sanctions, is a big hurdle in the way of improving foreign trade, economist Hadi Haqshenas said in an article for the Persian daily Ta’adol. A translation of the text follows:
Neighboring countries need some Iranian products; for example, Turkey needs Iran’s natural gas. Afghanistan and Iraq need our technical and engineering services, construction materials and agricultural products. Obstacles do not stop them from finding an alternative solution. In fact, Turkey does not wait for Iran to solve its problems with the world and then export energy to that country.
The next example is the Iran–Pakistan gas pipeline, also known as the Peace Pipeline. As the project has been put on hold for years now, Qatar will take Iran’s place because Iran is grappling with countless problems and doesn’t have proper banking, commercial and political relations with the world.
We need to bear in mind that countries make decisions based on their own needs and interests. Iraq and Afghanistan used to import a significant amount of goods from Iran, but have now backtracked on trade with Iran due to sanctions, complications over the Financial Action Task Force, etc. Therefore, improving trade, both with the neighboring countries and other countries, is contingent upon having access to banking tools.
A country cannot be on the FATF blacklist and at the same time register an acceptable trade balance with different countries. The statements of the members of Iran Chamber of Commerce, Industries, Mines and Agriculture show that Iran’s non-adherence to FATF conventions is posing serious challenges for the economy, which are besides the problems created by sanctions. Therefore, if Iran’s economy intends to tap into all its capacities, it needs to avail itself of financial, monetary and communication tools.
Today, Turkey’s foreign trade has been interrupted by its 80% inflation and its insistence on keeping the interest rate low, despite the fact that it has apparently no problem with the world. Now, compare Turkey with Iran’s economy, where we have sanctions and FATF complications, plus mismanagement woes. These are sufficient to disrupt commercial ties with other countries.
Economy is an interconnected chain; when the sale of oil becomes difficult, sanctions are instituted and banking transactions are disrupted, the economy and particularly trade will be affected. Sanctions also undermine the export of petroleum products such as petrochemicals.
All in all, double-digit, long-lasting inflation and the lack of modern economic enterprises, as well as low productivity, have created problems for Iran’s economy. If left unsolved, these problems will have grave consequences.
