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Opinion

Iran’s Economy Hostage to its Foreign Policy

NEW YORK, Jun 20 2022 (IPS) - The Islamic Republic of Iran faces widespread anti-government protests amid an economic crisis while doing little to ease tensions with the international community as it becomes a nuclear threshold state.

Iran’s continued lack of cooperation and transparency with the International Atomic Energy Agency (IAEA) foreshadows the death of the Iran nuclear deal and poses a potential threat not only to Iran’s future but also to the international community.

Many Iranians fear Tehran’s current course of action exposes the country to a military conflict that would potentially destroy Iran and its economy as it is.

The negotiations to revive the Iran nuclear deal, which would curb Iran’s ability to build an atomic bomb, have floundered since the US refused Iran’s demand to delist the IRGC from the US Foreign Terrorist Organizations‘ list.

The Islamic Republic’s response to the IAEA’s resolution on Wednesday could deal a “fatal blow” to the stalled talks, according to Director-General of the IAEA, Rafael Grossi.

In response to the agency’s request for transparency about uranium traces found at three undeclared sites, Iranian President Ebrahim Raisi rejected the resolution saying, “The Islamic Republic will not take even a single step backward from its positions.”

The regime removed 27 surveillance cameras used by the agency to monitor its nuclear facilities. The action breaks the IAEA’s “continuity of knowledge” about Iran’s nuclear facilities, inviting escalation of the case to the UN Security Council should Iran not cooperate by September.

Tehran’s lack of cooperation has already impacted Iran’s currency value and puts military confrontation on the table in September, possibly sooner, should the Islamic Republic’s leadership not change its course.

With the death of the Iran nuclear deal, Iran will face new economic challenges as it can no longer count on billions of dollars in sanctions relief, as it did in 2015.

The sanctions relief package would have included over $100 billion in oil revenues that are currently held as frozen assets in Chinese, South Korean, and Indian banks. Iran will also miss out on a flood of trade and investment opportunities and cannot count on oil exports as its primary source of income.

Additionally, over four decades of economic isolation, sanctions, and mismanagement have left Iran’s economy vulnerable to the aftermath of Russia’s invasion of Ukraine. When the war broke out, Iran’s inflation stood unprecedented, at 43.3%.

Russia’s prolonged assault on Ukraine exacerbates Iran’s economic decline. Since the war started, 60% of Iran’s annual grain imports from Russia and Ukraine are now at risk. Many ships carrying millions of tons of grains remain stranded in Ukraine’s Black Sea ports by Russia’s blockade.

The war also jeopardizes Iran’s last economic lifeline, revenues from oil exports, which were already heavily sanctioned. Iran now competes with Russia, the world’s second-largest oil exporter, seeking other buyers for their discounted oil, as the United States, the United Kingdom, and the European Union have sanctioned Russian oil imports.

Before the war, China had been Iran’s top oil buyer. However, Iran’s crude oil exports to China have plummeted since Russia launched its offensive in February, along with increased Russian oil exports to China.

The Islamic Republic’s foreign policy and allocation of resources have only hurt Iran’s financial outlook and demonstrate their priorities. Instead of compromising for the betterment of their people, Iranian leaders have cut subsidies for flour-based products amid global wheat shortages to give the IRGC financial room to operate and fund their nuclear, drone, and missile program. The decision to cut subsidies has resulted in a 300% increase in bread prices.

Many Iranians struggled to keep up with soaring prices of essential foodstuffs like cooking oil, chicken, eggs, and rice, even before global food shortages. What frustrates Iranians is that even if Iran changes its foreign policy and gains access to its financial resources, there is still a great deal of doubt that it would improve Iranians’ lives.

The dire economic climate has triggered civil unrest across Iran. Economic protests quickly turned political. Chants like, “Our enemy is here. They are lying that it is the US,” and “clergy, get lost” can be heard amongst other anti-governmental chants.

While lacking the willingness to feed their people, the Supreme Leader of the Islamic Republic, Ali Khamenei, and his network of IRGC generals have shown willingness and capability to crush mass protests using the IRGC security forces, police, and intelligence services.

Iranians’ lack of representation, political freedom, free elections, and media coverage of this failure to provide basic human necessities has forced virtually every corner of society, from students to retirees, to take to the streets, knowingly risking their lives. Sanctioned by the US, impacted by war, abandoned by Khamenei, and crushed by the IRGC, Iranians have nowhere to turn for help.

In addition to the economic woes Iranians face due to Tehran’s mismanagement, they now face a larger threat, a potential military conflict. On Thursday, after Iran rejected the IAEA’s resolution, the US proposed bipartisan legislation to help Israel and the GCC nations improve their air defense to prepare against an evolving Iranian threat. Israel is already conducting air force exercises over the Mediterranean Sea.

Tehran’s hardliner policies and lack of transparency with the IAEA jeopardize the livelihood of Iranians and the international security at large. Iran’s leadership now holds the future of not just their citizens but that of the entire Middle East and other parts of the world should Iran become a nuclear nation.

Suppose Iran fails to comply with the IAEA resolution in September, and Iran is considered a threat. In that case, Iran’s case might move to the UN Security Council, where harsher punishments, or worse, a military conflict, await Iranians.

Whether Iran remains a threshold nuclear state or decides to build atomic bombs, it will eventually invite military action against itself, which will devastate Iran’s economy beyond repair, and leave Iranians’ livelihoods as collateral damage yet again.

Ghazal Vaisi is an Iranian-born international affairs analyst focusing on the evolution of authoritarianism in the modern world. Her writings have appeared in the Middle East Institute, Inter Press Service, IDN-InDepthNews

IPS UN Bureau

 


  
 
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