By Jubin Katiraie
Iran’s First Vice President is pleased to announce that ‘the Iranian economy was collapsing but …’ is not over yet.
It would have been no surprise if this situation had been expressed by the opposition, but the regime’s economy is in such a dire situation that they are happy to announce that they are not being toppled.
During a meeting on 17 December, Eshaq Jahangiri said the United States has failed to bring Iran’s oil sales to zero, despite maximum pressure via sanctions against the Iranian government.
“Sometimes, in response to what is being said about the Iranian economy, people said that “he” has no idea what is going on. In response to these people, we have to say that the Iranian economy was collapsing, but it is still standing.” (Eghtesad Online, 17 December 2019)
The happiness of Jahangiri that Iran’s theocratic government is still standing is understandable. Acknowledging the deteriorating state of Iran’s economy and the economic suffocation because of the sanctions, he described the sanctions as more of a ‘psychological shock’ that had little effect on the Iranian economy, but minutes later, forgetting his earlier remarks, added the Iranian economy was collapsing, but it didn’t.
The second issue that Jahangiri brought up was that he complained about countries that he said were so far friends and closest to the regime but they did not dare buy oil from Iran: “I never thought that an independent country like India would follow the will of the US and would not buy oil from Iran. (ISNA, 17 December 2019)
“The Americans sanctioned the infrastructure and areas that were decisive in the Iranian economy; they sanctioned the oil but failed to bring the country’s oil exports to zero, but with the pressure they put on, even the friendliest countries that were closest to us do not dare buy oil from us.” (ISNA, 17 December 2019)
Of course, Jahangiri acknowledged that the regime was still bypassing the sanctions and exporting some of its oil but declined to provide statistics. However, according to various sources, oil sales this year should have been less than 500,000 barrels per day, and even some foreign sources and media have said that it was less than 230,000 barrels per day.
Jahangiri said: “Unfortunately we cannot provide some statistics because of security reasons …” (Eghtesad News, 17 December 2019)
Iran’s Oil Minister Bijan Zanganeh said: “Information about exporting, as regards we are at war, is war information, and anyone who wants to publish it must be in cahoots [with the enemy] because it is harming national interests.”
A view of the regime’s collapsed economy
Jahangiri added to his happiness, by presenting overwhelming statistics and claiming that Iran has $100 billion of trade exchanges – claims that are not in line with the realities of the Iranian economy.
“Iran’s non-oil exports to Europe after the US sanctions came under different conditions, and Iran sought to replace neighboring countries with its export targets. As a result, of the $44.309 billion exported in the year 2018, about $24 billion was to the 15 neighboring countries, which means that more than 54 percent of our exports were to neighboring countries,” the regime’s official news agency said.
The status of Iran’s imports from neighboring countries is different to that of its exports, because in 2017 out of a total of $42.612 billion of imports, $ 11.541 billion of total imports, was originated from neighboring countries, which means only 27% of Iran’s imports per year, has been done from the neighboring countries. ” (Iran-France Chamber of Commerce, 12 December 2019)
In terms of the volume of exports, which about $9 billion are related to exports of non-oil goods to Iraq, it made Iraq the largest importer of goods from Iran. In other words, 29% of the Iraqi market is belonging to the Iranian regime. While Iraq is exporting just $59 million with a weight of 73.5 thousand tons to Iran.
It can be understood that Iraq is a lifeline for the regime at this time which explains why the regime’s mercenaries in Iraq are killing the Iraqi youth to prevent a change in the Iraqi political structure.
A staggering budget deficit
A prime example of the criticality of the Iranian economy is the provision of an uncomplete budget for the next year, with much talk about the fact that the numbers included in the budget bill are unreal.
Based on what is already known, the projected revenue will not be achieved, and the government of Hassan Rouhani will be forced to leave the budget and scrutinize and reduce the budget. While in 2019 they reduced the budget from 448.310 billion tomans to 30 percent of that.
“The financial climate will be worse next year, and the government of Hassan Rouhani will inevitably cut from the subsidiary and welfare of the people. Just as the budget bill, for salaries of employees and retirees, is set to increase by 15%, official statistics estimate inflation to be 40%, and according to the Civil Service Management law, salaries of employees and retirees in line with the official rate of inflation should be increased,” State-run website Farhikhtegan reported on 21 November 2019.
In November, the International Monetary Fund (IMF) said in a report that Iran needed to sell its oil with the price of $194.60 to offset its budget deficit for the next year.
It is virtually impossible to achieve such a sales ceiling in this situation, and secondly, the amount of oil sold by the regime by trafficking is well below the market rate and is not able to find a buyer which will take any risks in this regard.
The truth is that no one in this regime can unknot this economic deadlock in the regime not least given the undeveloped and medieval nature of the dictatorship.
It can be predicted that the regime will have to move to raise energy prices or close new tariffs to financing its funds. The anticipated tax revenue in the 2020 budget, given the exemptions that include the institutions and economic foundations affiliated with the regime, will be the main economic challenge for Rouhani in 2020.