May 3, 2019
As the US administration’s decision to suspend exemptions on Iran’s oil imports comes into force, sanctions against Iran are entering a new phase.
Tehran is trying hard to find alternatives and ways to circumvent the escalating sanctions.
Iranian Foreign Minister Mohammad Javad Zarif took advantage of his diplomatic presence in New York last week to criticize President Donald Trump’s policies. He tried to depict the current situation as a major clash not only between the US Republicans and Democrats but within the administration itself.
According to a study at the Institute for the Defense of Democracies, Iran’s economy was severely affected by this pressure policy. The study is based on figures from Iran’s statistical center on the country’s inflation rate, which reached 30.6 percent this year, with an annual increase of 51.4 percent from last year after Trump’s decision to withdraw from the nuclear agreement.
According to the study, in April 2018, the last full month before the US withdrawal from the nuclear deal, Iran’s average annual inflation rate was 8 percent, a figure that has only slightly changed for more than two years.
The latest figures showed that the cost of food rose rapidly, by 85.2 percent from April last year, with prices of certain materials increasing drastically, while consumer support policies or favorable exchange rates were not sufficient to restrain the prices hike due to corruption, according to the study of the Institute for the Defense of Democracies.
The International Monetary Fund (IMF) expects the current recession to worsen this year, leading to a 6 percent contraction in GDP. Inflation is likely to rise as Tehran’s oil revenues drop and foreign reserves fall.
Meanwhile, government data show that Asian companies – which have been Iran’s lifeline after the imposition of the US sanctions – have drastically reduced their trade with Tehran.
Among the Asian companies reviewing their dealings with Iran are banks, oil companies and tech giants including Huawei, Lenovo, LG, and Samsung.
Tehran’s hope on China and other Asian countries faded when European companies began to pull out of its economy before US sanctions were reinstated last fall.
Before the nuclear deal, China overtook Europe as a major supplier of industrial equipment to Iran.
With the designation of Al-Quds Force as a terrorist organization and the suspension of exemptions on Iranian oil imports for some countries, Iran’s main sources of payment – the direct exchange of oil for goods and services – were halted. This means that any company that imports oil from Iran after the expiration of the exemptions on May 2 may be banned from the US banking system.
Washington had allowed eight countries, including China, India, and South Korea, to buy Iranian oil as long as they are committed to reducing their imports.
India said it would probably abide by the US sanctions, but China’s Foreign Ministry said Beijing “consistently opposes unilateral sanctions.”
While experts expect China to continue to buy some Iranian oil, many Chinese companies are limiting their dealings with Iran.