Since 2017, the Trump administration has placed layers of tough sanctions on Iran in an effort to deprive the regime of financial resources and to force it to negotiate a new nuclear deal.
Secretary of State Mike Pompeo said in a recent speech that the administration's strategy of "maximum pressure" aims to cut off 80% of Iran's oil revenues and that "President Rouhani himself said that we have denied the Iranian regime some $200 billion in lost foreign income and investment as a result of our activities."
Yet Iran's economy has not collapsed.
"I think the predictions of a quick economic collapse were too optimistic," says Djavad Salehi-Isfahani, an economics professor at Virginia Tech specializing in the Iranian economy. Despite the Trump administration's crushing sanctions, there is "a misunderstanding of the level of complexity of Iran's economy and how good they are or how experienced they are with resisting sanctions."
To be sure, the increasing sanctions since 2017 have hit Iran's economy hard.
"Unemployment is high; inflation is high. They're running out of foreign exchange," says Salehi-Isfahani. "The economy is not in good shape at all."
But over the past four decades, Iran has had a lot of experience with sanctions and has learned to withstand their impact, he says. And it's no different this time.
Both the World Bank and the International Monetary Fund estimate Iran's gross domestic product is on track to decline by roughly 9% this year. (Iran's own estimates are lower, Salehi-Isfahani says). Compare that with the 1970s and late 1980s, when the U.S. imposed sanctions after Americans were held hostage at the U.S. Embassy in Tehran. At that time, Iran's GDP per capita dropped by 50%, according to Salehi-Isfahani.
The World Bank and IMF estimates of economic decline take into account a sharp drop in Iran's oil exports. Before the U.S. pulled out of the 2015 nuclear deal in May 2018, Iran was exporting about 2 million barrels of crude oil a day. Now it's estimated that Iran exports between 300,000 and 500,000 barrels daily, most of that to China, says Esfandyar Batmanghelidj, the founder of Bourse and Bazaar, an organization that tracks developments in Iran's economy.
But Iran isn't solely reliant on oil, Batmanghelidj notes.
"The Iranian economy is a very diverse economy, and manufacturing is really one of the most important areas," he says. "Currently, manufacturing accounts for about one-fifth of overall employment in the country."
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