Economic Crisis Looms In Iran As Sanctions Bite
In a little over two months, painful U.S. sanctions on Iran’s oil sector will take effect, but the Iranian economy is already showing signs of strain.
Iran’s currency, the rial, has fallen by more than half since the start of the year. There is now a thriving black market for U.S. dollars as the rial continues to plunge.
The turmoil has the government engaging in a bit of a circling firing squad. In July, the head of the central bank was sacked. In early August, the labor minister was ousted and just this past weekend the economy minister was removed.
The reshuffling and purging of top officials suggests that hardliners in Tehran are gaining ground against the government of President Hassan Rouhani, a moderate by comparison. “Rouhani’s failure to respond to the economic crisis with gut and grit has further isolated him,” Ali Vaez, the director of the Iran Project at the International Crisis Group, told the Wall Street Journal. “Even his erstwhile allies in the parliament are deserting what they believe is a sinking ship.”
But even though the economic indicators look poor, Rouhani’s real failure in the eyes of the hardliners has been political. That is, his government made the mistake of trusting the United States when it agreed to the 2015 nuclear deal. The Trump administration’s withdrawal from the pact earlier this year was proof in Tehran that opening up and negotiating with the U.S. on the nuclear program was a miscalculation. Rouhani has been in trouble since then, and the economic pain related to the re-implementation of U.S. sanctions is merely compounding the problem.
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