Does Iran really need the Geneva deal to save its economy? Maybe something else is needed....
Iran’s economic crisis has imposed itself on political developments in the Gulf and the Middle East, through the 10 years of economic sanctions imposed due to its nuclear programme and the policy of challenge embraced by the administration of former president Mahmoud Ahmadinejad that almost led to the collapse of the economy.
After years of sanctions, the new Iranian President Hassan Rouhani has adopted a new diplomatic tack, which is still under test. The sanctions have had severe impacts on Iran’s economy, which led to the collapse of the national currency Toman, while unemployment and inflation rates reached record highs. Over the past decade, people living below the poverty line exceeded 50 per cent of the population, while oil exports declined by 30 per cent as well and its funds abroad were frozen. Financial transactions with the Central Bank of Iran were halted.
Sanctions also covered business activities by the private sector, which hindered business transactions and money transfers, credit cards and ATM services for Iranian banks abroad, leading to a deterioration in the trade and financial sectors as well as leading to serious shortages in certain types of commodities and services required for the economy to grow.
All this led to the economy suffering losses of $172 billion, and this is the reason why President Rouhani said in his first speech in Parliament - disturbed by some radicals - that he has taken office with an empty treasury. “Tackling inflation tops the priorities of the 2014 budget,” Rouhani said in a statement.
Such statements reflect the depth of economic and financial crisis that has prompted Tehran to make concessions in its Geneva talks with the Group 5+1 in Geneva to scrap, or lessen the sanctions as a first step. According to an opinion poll conducted by Zogby International Research, two-thirds of Iranians expressed their primary concern as improving the standards of living. Other issues related to nuclear enrichment and regional problems, such as the situation in Lebanon and Syria and the high cost incurred by Iran there.
At present, what really concerns Rouhani is how to annul economic sanctions so as to save both the economy and the regime. Yet, the issue does not stop at this point, but the lost years during which Iran should have implemented development projects.
It also lies in the billions of dollars spent in Iran’s search of its military nuclear programme. What also contributed to the deepening economic crisis is that oil revenues and state income were used in funding the costly military and nuclear programmes and do not generate economic return. This is apart from supporting organisations loyal to Iran — a move that only benefited the leaders, who multiplied their fortunes at the expense of the Iranian people.
When the President looks over the last 10 years, he will see that his country is lagging behind most countries and it is too late to catch up. He will realise that his administration and subsequent ones need many years to reform the economic and financial imbalances caused by his predecessor’s administration.
Iran is required to fix relations with its economic partners, including the GCC, which supplied Iran with its needs over decades through re-exports and the free movement of capital. The GCC also left its doors wide open to Iranian manpower. Iran has been seen as a tourist destination for Gulf nationals, which benefited both.
Iran is not only in need of a Geneva agreement but a pragmatic economic policy to restore relations with former partners. It needs to make the best use of its enormous natural resources and raise living standards.
It is also required to learn from historical experiences and draw lessons, as clearly revealed in the failure of ideologizing the economy. This is clearly manifested in experiences of the former Eastern Bloc and now seen in North Korea.
The only chance for the Rouhani administration is to put Iran on the right track. His new directions have been widely welcomed by all influential parties in the region.
Iran and the Gulf are in need of development and regional cooperation to protect them against external tensions and environmental damages that affect sustainable development.
By Mohammad Al Asoomi
- Kuwait fights budget deficit: Reexamining government salaries, expatriate labor
- Businessmen tortured in UAE
- State of the Arab World Economy report 2016: diversify, tax, slash subsidies
- Arab investors won't dump the Trump despite anti-Muslim remarks
- UAE economy minister projects high growth despite oil prices