Sanction Garrot by Trump

On 20 May, the United States announced its decision to postpone the imposition of sanctions on Iranian nuclear projects related to the CAPINP (Comprehensive Action Plan for the Iranian Nuclear Program).

According to Secretary of State Mike Pompeo, companies that continued to work at Iranian nuclear facilities will be invited to curtail their activities within 60 days.

The statement by the Secretary of State also noted that Washington is imposing sanctions on the managing director of the Atomic Energy Organization of Iran, Amjad Sazgar, and an employee of the organization, Majid Aghai.

On the same day, the United States imposed sanctions against nine more Iranian citizens and three organizations associated with law enforcement agencies,  the Al-Quds special forces of the IRGC (Islamic Revolutionary Guard Corps) and the country's penitentiary system involved in unjustified violence against peaceful demonstrators and outside observers, resulting in the deaths of hundreds of protesters, including at least 23 minors.

After the promulgation of the "black list" in Tehran, appeared voices that “US sanctions failed." In particular, one of the defendants on this list, Iranian Interior Minister Abdolreza Fazly, said on May 24 that, "Tehran’s effective countermeasures drove the US to despair in its attempts to create instability, a security deficit and a civil war in Iran.  Supporting the counter-revolutionary elements (meaning forces opposing the Iranian hierocracy. - Ed.), the American media spared no efforts to provoke unrest in Iran, but failed,” the Iranian Interior Minister said.

However, contrary to Fazly's peppy statements, the new sanctions imposed after U.S. President Donald Trump pulled the U.S. out of the deal in May 2018 outperformed previous ones and have a devastating effect on Iran's economy.

Sanction Garrot

According to the first vice president of Iran, Eshak Jahangiri, the dependence of the Iranian budget on oil is not more than 25%. However, this was said before the resumption of sanctions - December 5, 2018. Then, the export of Iranian oil amounted to approximately 245 million barrels per day. In June 2019, due to sanctions, it fell to the lowest levels, and Iran could export only 250-300,000 barrels of crude oil per day, 250,000 barrels of which went to China, which was the largest buyer of Iranian oil.

At the same time, the proceeds from the sale of oil were not transferred to Iran, since they were used to pay off Iran’s debt to China Petrochemical Corp (Sinopec) and China National Petroleum Corp (CNCP) for the development of the Azadegan and Yadavaran fields in the southwestern province of Khuzestan.

The reduction in exports hit Iran’s budget severely, and a decision was made to triple the rise in gas prices, which caused massive protests in November 2019.

In 2020, oil sales fell even further. The latest trade figures published by Chinese customs show a 61% drop in imports from Iran in the first four months of 2020 compared to the same period last year.

In January-April 2019, China was one of the countries that the United States freed from restrictions on the purchase of oil from Iran. China purchased from Iran only about 70 thousand barrels of oil per day, which is one tenth of the volume of purchases before the imposition of US sanctions in 2018.

Recently it became known that China has completely stopped the purchase of Iranian oil.

In addition to China, South Korea, Japan and other countries stopped oil purchases in Iran. This happened after the United States refused to extend the grace period for a number of countries that bought oil from Iran, bypassing sanctions.

It is known that in Iran for many years more than 80% of all foreign exchange earnings and almost half of all budget revenues are provided from oil exports. Nevertheless, despite a catastrophic drop in sales, the IMF (International Monetary Fund) is quite optimistic that the Iranian economy will return to growth in 2021.

In its latest report, World Economic Outlook, entitled “Chapter 1: The Great Block”, the IMF predicts that next year, Iran’s real GDP will increase by 3.1% after falling by -6% in 2020 (according to the fund , Iran's economy contracted by -7.6% in 2019).

Even if the IMF estimates and forecasts are correct, Iran’s economic situation will still be quite bad, because of the low growth rates in the past. Therefore, the GDP of this country in 2021 will be 100.7% of the 2008 level.

After the hierocracy came to power in Iran because of the Islamic Revolution in 1979, and the value of the national currency only decreased for a number of reasons.  In May 2018, U.S. President Donald Trump, announcing the unilateral U.S. withdrawal from the FDP and the resumption of stringent sanctions against Tehran, further plunged Iran's rial rate.

Its market rate now fluctuates within 150 thousand per dollar, and the official one set by the Iranian authorities is 42 850 thousand. However, the majority of the population cannot buy dollars from it - a deficit.

On May 4, the Mejlis (parliament) of Iran approved a bill on renaming and denomination. According to the document, the national currency of the country will no longer be called rial, but fog, as it was before the monetary reform of 1932. (one tuman then equaled 10 cranes, and 1 crane - 1000 dinars.)

However, it is doubtful that giving up four zeros on a banknote of 10,000 riyals and renaming it into fog will provide the desired relief for the population.

In order to conduct a denomination, it is necessary that the crisis be over. That is, the economic situation in the country should stabilize. Only in these conditions can denomination be carried out. Meanwhile, according to the information contained in the Iranian media, after the repeated introduction of American sanctions, the decline in production, according to various estimates, ranges from 5% to 15%. According to official figures, the inflation rate in 2020 is projected to be 31%, and unemployment - 17.4 percent.

In a situation where there is little trust in the financial policy of the state, denomination can become an extremely dangerous enterprise. Economists advise holding it at more or less stable macroeconomic indicators, which cannot be said about Iran.

Denomination should be accompanied by an increase in exports, which gives the state the opportunity to receive a significant amount of national currency. However, Iran’s ability to increase its export when crude is the main export commodity, and even under the conditions of sanctions, is extremely doubtful.

On the other hand, denomination is characterized by higher prices for imported products, and it high enough in Iran.

Do not forget about the high costs in Iran because of the COVID-19 pandemic. Not surprisingly, the Iranian authorities are trying to save the economy, regardless of the risk to human health. The economic crisis experienced by Iran, no doubt, paves the way for further acts of civil disobedience and protest.

Worm of disbelief

Relations between the Iranian authorities and the people are seriously spoiled. The authorities have lost the trust of people. In the past, the government had to adjust its statements too often, and because of this, society ignored official information.

The culmination of a manifestation of discontent and distrust of the authorities by the people was the November events. On the streets of many cities chanted slogans calling for the overthrow of Iran's Supreme Leader Ayatollah Ali Khamenei. In recent months, Iranians' mistrust to the authorities has increased even more.

At first (in early January), a Ukrainian passenger plane was mistakenly shot down by the Iranian military, and Tehran admitted it only three days after the tragedy.

The information that a coronavirus was found in the holy city of Qum was kept secret for a long time. According to sources in Iran, the authorities failed to convince clerics in Qum that the situation was in danger. No quarantine was introduced in the city, since the hierocracy would regard it as "insult to Shiite saints buried there."

The number of demonstrators who died during the riots in November is still unknown, when the regime disproportionately and brutally used force to deal with protests and demonstrations. The regime survived, but its legitimacy and ability to hold power was severely damaged, undermining its ability to fight future protests. The events of November 2019 undoubtedly set the stage for a repetition of these events in the not so distant future - it is unlikely that anyone in Iran will now seriously take the arguments according to which the authorities protect Islam and the country from foreign enemies.

Foreign policy prospects

In the context of the upcoming US presidential election, the Iranian establishment now faces a difficult task to determine whether it is worth interacting with the Trump administration or not, and if so, how.

Iran’s leadership is divided on the issue of communication with Trump. Many people think it is worth the wait until the US presidential election in 2020, after which it would be possible to sit at the negotiating table with the less rigid and anti-Iranian administration of the democrats.

Others fear that if Trump wins the election, he will be in a more favorable negotiating position than ever, so he will become much less open to concessions than now when he is personally interested in achieving a foreign victory. Moreover, in a year the economic conditions in Iran may turn out to be even more difficult, which will further weaken negotiating position of Tehran.

However, they both lose sight of the fact that the United States imposes sanctions against Iran not only and not so much because it threatens someone, but because there is a regime in Iran with which Washington does not want to coexist.