The fact that Iran is so easily affected by global sanctions is because it is not a major player in world economy and can be eliminated by its rivals and abandoned by its partners with no significant trouble, an analyst said.
“The sanctions showed to what extent our economy is vulnerable … We have acted weakly in international trade and foreign business,” Ali Mousavi Khalkhali, editor-in-chief of Iranian Diplomacy news website, wrote in a recent article.
After years of negotiation, Iran managed to obtain relief from international sanctions by agreeing to curb its nuclear activities in 2015, under a multinational deal called the Joint Comprehensive Plan of Action.
Not having fully enjoyed the benefits of the agreement yet, the United States withdrew from JCPOA and reimposed stricter sanctions last year to pressure Tehran into making further concessions.
In his article, Mousavi pointed out that Iran’s small share in global economy has seriously limited its ability to withstand harsh financial measures.
Iran’s economy, he explained, is highly dependent on oil exports, but it has failed to play a substantial role in the global market so that its absence could pose a challenge to the world.
Before the recent set of American sanctions was imposed, Iran exported around 2.68 million barrels of oil per day, which figure is now below 1 million bpd.
Missed Leverage
“If, in the oil industry, we had increased our exports to a higher amount and played a more influential role … it would have been much more difficult to impose oil sanctions,” he wrote.
Mousavi noted that Washington, on the other hand, has invested so heavily on its oil industry that it managed to beat the world’s biggest producers, Russia and Saudi Arabia, in 2018.
“If, in the oil industry, we had increased our exports to a higher amount and played a more influential role … it would have been much more difficult to impose oil sanctions,” an analyst says
“A share of Iran’s oil market was captured by American petroleum companies after the restoration of sanctions.”
The analyst said Iran also underestimated Iraq’s production capacities until it became a serious rival by producing nearly 5 million bpd this year.
“Our position in OPEC [the Organization of Petroleum Exporting Countries] has become so weak that when crude output limits were to be defined, Russia as our political ally first made agreements with Saudi Arabia instead of lobbying with us,” he said.
Russia, a non-OPEC member, and Saudi Arabia reportedly struck a private deal last September to raise oil output to cool rising prices caused by lower Iranian production at the time.
According to Mousavi, Iran’s trade transactions with nearby regions has also been poor.
The total trade volume between Iran and the European Union was around $20 billion before Washington’s exit from JCPOA, most of which was for oil sales to EU member states.
With the return of sanctions, the figure has reached nearly zero with EU oil clients such as Greece even refusing to use American waivers to continue buying Iranian crude.
“Our economic relations with northern neighbors, the Caucasus and Central Asia that have a great potential for trade with Iran, is even smaller,” he wrote.
Iran’s economic presence in Tajikistan, Uzbekistan, Turkmenistan and Kazakhstan hardly reaches 10% of their international trade, according to Mousavi, while Turkey exports around $15 billion worth of clothing alone to Central Asia and Caucasus.
Turkey’s Resilience
The analyst pointed out that Turkey, like Iran, experienced a drop in the value of its national currency last summer due to political disputes with the US, but received support from the global community thanks to its economic clout.
"As experts warned that an economic collapse in Turkey would provoke a crisis in the whole Europe’s economy, the EU members began to heavily lobby for Ankara in Washington," he explained.
“This is while all the EU’s efforts to make up for the economic damage of the US pullout from JCPOA have only resulted, after months of delay, in the nonbinding creation of INSTEX [Instrument in Support of Trade Exchanges] which is not clear to what extent they are ready to invest in.”
INSTEX is a special purpose vehicle to facilitate legitimate trade with Iran by sidestepping sanctions and is part of the EU’s commitment under JCPOA to ensure Iran continues to benefit from the deal.
