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Transcript of Iran's Economy
By: Wyatt Merrill, Tori Zecchini, Tiffany Hsu
Currently, Iran's economy is struggling. Compared to last year, Iran’s economy has worsened due to higher inflation and unemployment
The inflation rate surpassed 40% in the past 12 months and Iran is on the risk of hyperinflation.
As of February, Iran's unemployment was 11.2%
Rial, the currency or Iran, had depreciated over 50%
Housing costs escalated 100% in March
Price of food prices rose 47% from 2011 to 2012 and continues to rise.
Nation's profit from export of crude oil went down 50%.
Sanctions has also caused Iran's economic struggle. The sanctions isolate Iran from the majority of the world's economy and financial institutions.
Domestic mismanagement is the main reason for Iran's economic fluctuation.
Some of the few mismanagement include problems such as the Islamic Revolutionary Guard Corps accused of large-scale smuggling which sustains a parallel, unregulated, and untaxed economy. And there has also been public dissatisfaction, which led to periodic work stoppages and protests.
The way Iran's government has been trying to address these issues along with the economic issues is ineffective.
An Unfortunate Economic Background of Iran
Iran is a mixed and transitioning economy from a command to a market economy, despite the best efforts of Supreme Leader Khamanei and President Ahmadinejad to privatize Iran.
Pre-Pahlavi Era: Iran used to have an economy solely based on agriculture.
The Pahlavi Era: (1925-1979)
Reza Shah Pahlavi (r. 1925–41) improved the country’s overall infrastructure, implemented educational reform, campaigned against foreign influence, reformed the legal system, and introduced modern industries
Mohammad Reza Shah Pahlavi (r. 1941–79). Between 1954 and 1960 a rapid increase in oil revenues and sustained foreign aid led to greater investment and fast-paced economic growth. Subsequently, inflation increased, the value of the rial depreciated, and a foreign-trade deficit developed. Fiscal and monetary policies implemented to combat these problems led to declines in the rates of nominal economic growth and per capita income by 1961.
Prior to 1979, Iran had undergone significant industrialization and modernization. Monetary assets started flowing out of Iran’s economy during 1978, just before its revolution.
Iranian Revolution - Present (1979- )
Iran’s population had doubled between 1980 to 2000, and agricultural yields continued to decrease (since the 1960s). Iran began to import a majority of its food supply.
Increased sanctions imposed on Iran for its nuclear program have decreased the amount of oil exports from other countries by a half.
Following the end of the Iran-Iraq war in 1988, over 80% of the economy came under the control of the Iranian government. Since then, Iran has tried to develop the country's communication, transportation, manufacturing, health care, education and began integrating its communication and transportation systems with those of neighboring states.
Iran has a great foundation for economic growth and development because it is the world’s second largest petroleum reserves, a young, well-educated population and a well-developed industrial and commercial infrastructure.
Although the country's revolution, war, mismanagement and factional feuds over economic policy holds the country back, Iran still has great economic potential.
A few factors that will help Iran's economy include:
Natural gas and petrochemical exports have doubled over 12 months, according to the Iranian Central Bank’s report in November 2012, and are projected to continue to grow.
Iran's largest international customer, Turkey, transferred US $118 million worth of gold bullion to Iran in February 2013 alone in a barter arrangement. This payment makes up for the majority of Iran's international sanctions.
The Asian nations like the People’s Republic of China, Pakistan, India, and Sri Lanka are dependent committed to importing energy from Iran. Therefore, Iran will continue to export large quantities, earn foreign currency and credit.
US sanctions have actually also helped Iran by forcing Iran to diversify their economy. As a result, Iran draws more revenue from Asian markets.
It was predicted that Iran would cut spending, raise revenue, and prop up state banks with new cash injections in response to the growing national debt in. There doesn't seem that Iran has implemented any long-term fiscal or monetary policies.
Allies: United Arab Emirates (UAE), Syria, China, Russia, Brazil, Nigeria, Venezuela, Saudi Arabia, Turkey
Foes: United States, most of the EU
Economic Partners: China, India, Japan, South Korea, Germany, Italy, Venezuala,most Middle Eastern countries (even Iraq)
Iran scores a 43.2 on the Index of Economic freedom, ranking 168 out of 177 countries in 2013.
Economic Alliance Strategy:
Iran has made ties with regimes that share an anti-Western or non-aligned perspective, without regard for their political or ideological orientation. They hope this will help to serve as a counterweight to Western trade.
Iran has intended to undermine international sanctions, sustain its nuclear energy program and thwart Western efforts to isolate Tehran.
Iran has aggressively pursued diplomatic, economic and strategic relations with an wide array of non-Western states. It also expanded activity within regional and international organizations for developing countries.
Petroleum has been the main industry in Iran since the 1920s.
At the peak of the industry in the mid-70’s, Iran was the world’s fourth largest producer of crude oil and the second largest exporter of petroleum.
In 2004, Iran produced 5.1% of the world’s total crude oil, which was the country’s primary source of foreign currency.
In 2006, oil proceeds represented 18.7% of GDP.
The oil and gas industry has been the engine of economic growth in Iran and has directly affected public development projects, the government’s annual budget, and most foreign exchange sources. In 2009, the sector accounted for 60% of total government revenues and 80% of the total annual value of exports and foreign currency earnings.
In 2012, Iran was the second-larger exporter among OPEC, exporting around 1.5 million barrels of crude oil per day.
Officials estimate that Iran’s oil and gas revenues could reach $250 billion by 2015.
Iran plans to invest a total of $500 billion in the oil sector before 2025.
However, this industry is currently under-performing, due to the sanctions in place against Iran.
Because so much of its GDP is based on exports, Iran is not very self reliant.
After international sanctions were tightened in 2010, Iran's oil revenues fell 18% in just two years, while its peers' export revenues increased by 50%. From 2011 to 2012, Iranian exports fell from 2.5 million barrels a day to 1.5 million.
As a result of these sanctions, inflation has skyrocketed and unemployment has hovered around 15-16%.
While sanctions also initially sheltered Iran from the effects of the US recession in 2008, they have done far more harm than good and prove that Iran would be incapable of prospering
The World Map According To Iran
We like most of you...
real importance ...
Thanks for the nuclear– I mean
national defense enhancements!!
Disgraceful Sunnis! Somehow
we still like you...
At least someone agrees
with our nuclear programs!
Thank you for letting us leach off of you.
We are so alike
in that we hate each other
So close, yet so far away...
Why is there oil up here?
Can we still be friends?
Our main source of technology
Thank you come again...
Oil paradise, and Mecca
Fun to toy with...
Not worth our attention
We aren't terrorists!
The Pitiful nations
We aren't terrorists!
More for your rial...
WE ABSOLUTELY LOVE YOU
Tell me, why are we still
trading partners again?
Thanks for all the goodies!
More for your rial...
Other International Trade Relations
Iran is barred from the World Trade Organization, due to its nuclear programs
Iran is apart of the Economic Cooperation Organization (ECO)
Iran, along with its partners Pakistan and Turkey, are attempting to create a common market in Central and Western Asia through ECO, increasing investment in countries like Iraq and Afghanistan, as well as increasing trade with the United Arab Emirates
Iran is also part of the Organization of the Petroleum Exporting Countries (OPEC)
One of the original founding members of the organization
80% of Iran's exports are petroleum-based
Their non-oil exports include pistachios, liquefied propane, methanol, hand-woven carpets and automobiles.
A third of their export and import transactions are conducted through the black market
Other members of ECO
Leaders of Turkey and Syria, with President Ahmadinejad
Central Bank of Iran
President Ahmadinejad with
former President of Venezuela Hugo Chavez