By Bahram Khodabandeh
April 21, 2021
On Tuesday the third round of talks on reviving the Joint Comprehensive Plan of Action (JCPOA) ended in Vienna, with the various parties admitting they have a difficult task ahead.
Concurrent with the new round of talks, economists have engaged in various debates about the likely impact of the revival of the JCPOA on Iran’s economy. Some compare the projected recovery to the first days after the signing of the JCPOA in 2015, while others are less optimistic.
This report is a hypothetical examination of what might have happened to Iran’s economy, had the Islamic Republic abandoned its dream of acquiring nuclear capabilities. That is to say, what is the damage that has been done to Iran by nuclear enrichment?
The Islamic Republic of Iran’s nuclear experiment began 19 years ago in the summer of 2002, with a revelation by the National Resistance Council of Iran.
The ensuing crisis over the past two decades, especially after the imposition of stringent sanctions by the US in 2012, has caused significant damage to the economic, social and political fabric of the country.
It is impossible to accurately measure the damage caused by Iran’s two decades of bullishness over this matter. Any attempt at an objective assessment of the socio-political harm done would fall flat. Even to attempt a calculation of the economic impact is highly complex and tenuous, but nonetheless, it might be possible to arrive at a very rough estimate of the latter.
Let us imagine that Iran had resolved the issue before the sanctions in the early 2010s by shutting down its nuclear enrichment facilities, and continued the path of development based on the pattern of the early 2000s or those of neighboring countries. In this case, what might the state of Iran and the Iranian people be now?
To answer this question, we consider three possible scenarios. In the first, we assume Iran followed the same pattern of economic growth of the 2000s in the 2010s. In the second, we assume Iran was growing at the same rate as Turkey. In the third, we assume that Iran’s economy, like that of Saudi Arabia, continued to be bolstered by oil exports.
In all three cases we use IMF data to see what the economic situations of Iran, Turkey and Saudi Arabia have been in the past two decades. To avoid errors related to converting the exchange rate, we use the statistics on Iran’s GDP based on the national currencies of countries at a fixed level.
Scenario 1: If Iran Continued the Economic Growth Level of the 2000s
Based on our rough calculations here, the insistence on nuclear energy cost each Iranian in the 2010s about 179 million tomans, or to $7,160 (where one dollar is equivalent to 25,000 tomans) in accumulated damage.
Statistics from the International Monetary Fund show that Iran’s economy grew by about 1.5 times between 2000 and 2009. But Iran’s 10-year economic growth after 2009 has been zero; that is to say, Iran’s GDP in 2019 is precisely equal to that of 2010.
If the nuclear crisis had not occurred, and the economic growth trend of the 2000s had continued in the 2010s, the current GDP of Iran ought to be about 300 trillion tomans (at the 2011 exchange rate) more than it is today.
Taking inflation into account, we can assume the added value to Iran’s GDP in that time would have been at least 1.5 trillion tomans, or about $60 billion at the current exchange rate: or an effective $714 for each Iranian citizen.
Second Scenario: If the Iranian Economy was Sanctions-Free and Similar to Turkey’s
Iran’s economic growth rate in the early 2000s was slightly higher than that of Turkey. However, by the beginning of the 2010s and with the escalation of the nuclear crisis and imposition of sanctions, Iran had fallen far behind its neighbor and rival.
The International Monetary Fund’s data shows that between 2010 and 2019, Turkey’s GDP grew 1.6 times, while Iran’s growth remained at zero.
Had Iran been engaging in free trade with the wider world, and not proceeded under the burden of sanctions, and assuming its growth rate was the same as Turkey’s, the volume of Iran’s GDP in 2019 should have been about 359 trillion tomans (at the 2011 exchange rate) more than today. If we consider inflation, the current value of Iran’s economy should then be 1.8 trillion tomans more than today.
In other words, based on a would-be comparative growth rate to Turkey, the accumulated losses of the nuclear crisis to the Iranian economy exceeded 1.8 trillion tomans – about $72 billion – or $857 for each Iranian.
Third scenario; if the Iranian economy moved forward without sanctions, like Saudi Arabia.
Iran’s economic growth rate in the 2000s was about 15 percent higher than that of Saudi Arabia. But in the 2010s, while the Saudi economy grew to 1.3 times its starting size, the 10-year growth of Iran’s economy was zero.
If the nuclear energy crisis had been resolved at the beginning of the 2010s and Iran had instead enjoyed a growth rate similar to that of Saudi Arabia, GDP in 2019 would have been about 850 trillion tomans, having experienced growth of 170 trillion tomans. As such, the average accumulated damage per Iranian based on this measure exceeds $404.