Steinitz: Iranian economy 18 months away from collapse

[Falcon29]

Steinitz: Iranian economy 18 months away from collapse | JPost | Israel News

The Iranian economy is 18-months away from collapse, Intelligence Minister Yuval Steinitz said Monday.

Steinitz, speaking at a conference at the Begin-Sadat Center for Strategic Studies, said that over the last 18-24 months the international sanctions have caused about $100 billion damage to the country's economy, which has an annual $450 billion GDP.

In addition, he said, inflation in Iran is currently running at 40% a year, and the unemployment rate is between 25-30%, with the unemployment rate among youth about 40%.

The rial, Iran's currency, has been devalued by 180%, and the country has a negative economic growth of 5.4%. He also said that the sanctions have effectively cut Iran off from the world's financial system, making it very difficult to do business. At this rate, he predicted the Iranian economy will collapse in another year-and-a-half, something that led to the rise of President Hassan Rouhani.

"The pressure works, it is effective," Steinitz said. "If we add to this pressure a credible military threat, the chances will be greatly improved."

Steinitz said the combination of a credible military threat and diplomacy that succeeded in getting Syria to begin dismantling its chemical weapons stockpiles will work against Iran as well. Syria, he said, showed that there was truth in the slogan "the greater the pressure, the greater the chances for diplomacy to succeed."

According to Steinitz, "the constellations came together" in the right way and led Syrian President Bashar Assad to do something no one dreamed even six months that he would do: begin riding Syria of chemical weapons.

This came about, Steinitz said, because of Assad's interest in survival, the US determination to set a red line and stand firmly behind it, a Russian desire to prevent an attack on Syria that could endanger the Assad regime, and a joint US-Russian desire to finally gain a diplomatic achievement after two years of doing little regarding the bloody Syrian Civil War.

While the agreement to dismantle Syria's chemical weapons was not done for Israel, "this is an example of how – despite our own instincts – that geo-political events sometimes redound in Israel's favor."

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[Serpentine]

Since when comments of an Israeli official regarding Iran are reliable?

 

[Falcon29]

Since when comments of an Israeli official regarding Iran are reliable?

I don't consider them reliable, although the sanctions are taking a toll on the economy. What's your opinion on this?

 

[SALMAN F]

The sons of apes and pigs prophets and massangers killers are barking its hurt them to see iran powerful

 

[Surenas]

I don't consider them reliable, although the sanctions are taking a toll on the economy. What's your opinion on this?

According to NYT correspondent in Iran, Thomas Erdbrink, who interviewed Iranian business owners and economists, the economy is indeed about to fall in a relatively short time if there is no change in the sanctions.

 

[Serpentine]

I don't consider them reliable, although the sanctions are taking a toll on the economy. What's your opinion on this?

Yes they have, but the most important reason for this situation was not the sanction regime, but the incompetency of previous government in managing the economy. Sanctions are only a part of the story, many of it has domestic reasons rather than western sanctions.

 

[KingMamba]

@Serpentine at least you guys will get those jeans and music you are devoid of.

 

[Falcon29]

Yes they have, but the most important reason for this situation was not the sanction regime, but the incompetency of previous government in managing the economy. Sanctions are only a part of the story, many of it has domestic reasons rather than western sanctions.

That's interesting, how do you see this new government in handling the economy? What do you and other Iranians want to see changed?

 

[Serpentine]

That's interesting, how do you see this new government in handling the economy? What do you and other Iranians want to see changed?

It's definitely better than previous one, but it's too soon to say what it will or can do.
First they should bring stability to the market, then thinking about improving the economy. Fighting corruption, black market and preventing imports of cheap rubbish from other countries and also, improving domestic production should be among their priorities.

 

[Rostam]

Billions at stake for economic winners and losers of Iran thaw

Iran's President Hassan Rouhani speaks with Asia Society President and CEO Josette Sheeran during an event hosted by the Council on Foreign Relations and the Asia Society in New York, September 26, 2013.

By Andrew Torchia

DUBAI | Mon Oct 7


(Reuters) - After years of being caught in the geopolitical crossfire over Iran's disputed nuclear programme, Iranian businessmen in Dubai are daring to hope that signs of a diplomatic thaw will allow crippling economic sanctions to be lifted.

The wary optimism in Dubai, traditionally a major hub for Iranian commerce, reflects a tantalising prospect for businessmen across the world: that progress toward an agreement on Iran's nuclear plans could allow it to rejoin the global trading and financial system.

This hope was created by the landslide election in June of Iranian President Hassan Rouhani, seen as a moderate, and fed by last month's resumption of high-level contacts between Tehran and Washington.

"We are suggesting to our members that they should prepare for the possible removal of some of the obstacles to trade between the United Arab Emirates and Iran," said Hossein Asrar Haghighi, a founder of Dubai's Iranian Business Council.

Some businessmen are making contingency plans to boost shipments to Iran if tensions ease further. "For example a trader buying a shipment of rice might get ready to increase it by 20 percent, and implement it depending on the situation."

With its population of 75 million, Iran would be the largest economy to rejoin the global system since post-Communist eastern Europe in the early 1990s.

"A young, educated population, a credit-based society with huge unsatisfied demand for everything from refineries and chemical plants to housing and basic infrastructure - the business opportunities are huge," said Emad Mostaque, a strategist who follows Iran at London-based NOAH Capital.

The size of the economic opportunities means political pressure to lift the sanctions could grow rapidly in Western capitals if nuclear talks seem to be going well.

But there would also be losers from an economic reopening of Iran. Some businessmen have prospered during its isolation - including some within Iran itself, who used political connections to profit from policies resisting the sanctions. They may lobby against the country's rehabilitation.

SHORTFALL

The web of U.S. and European sanctions against Iran has slashed its oil exports by more than half since 2011, at an estimated annual cost of over $40 billion, and cut its access to equipment needed to keep its energy industry running. The country has largely been frozen out of the global banking system; many shipping lines have stopped serving Iran.

Since U.S. sanctions allow Washington to take action against third-country firms - effectively forcing them to choose between doing business in Iran and the United States - much foreign trade, and most foreign investment, has halted.

Tehran does not release timely, reliable data giving a full picture of the economic damage. But the central bank says gross fixed capital formation, adjusted for inflation, plunged 19.4 percent from a year earlier in the nine months to last December 20.

This implies a massive shortfall of public and private investment during that period alone worth roughly $35 billion at the free-market rial/dollar exchange rate. Foreign companies would hope to supply much of the shortfall - in the form of factories, machinery, buildings and infrastructure - if they were permitted to resume normal trade and investment with Iran.

Western governments will be reluctant to lift any sanctions against Iran until they get evidence that Tehran is moving towards opening its nuclear programme to inspection.

But Haghighi said a reduction in diplomatic tensions could help business even before sanctions were eased, as the threat of Western military action against Tehran receded.

He noted that after losing two-thirds of its value against the dollar over 18 months - a depreciation which saddled businessmen with massive uncertainty and currency losses - the Iranian rial had regained some strength and then stabilised in the free market since Rouhani's election.

"It's easier for traders to do deals if they think they won't be losers tomorrow because of a fall in the currency."

U.S. officials have hinted that if diplomatic progress is made, they may ease sanctions partially and gradually to advance the talks further, instead of waiting for a final nuclear deal.

Under Secretary of State Wendy Sherman called last week for "specific steps by Iran that address core issues", adding that in return Tehran would expect "some relief" from the sanctions.

In this scenario, relatively minor sanctions might first be eased or suspended - for example, sales of Internet communications gear and software to Iran - while Washington kept its big guns, such as the banking measures, until a final deal.

Mostaque predicted the European Union, where courts have ruled sanctions against some Iranian firms are not justified, could start to ease up first. Right-wingers in the U.S. Congress will slow Washington's removal of sanctions, he said.

Iranian-born economist Mehrdad Emadi, of the Betamatrix consultancy in London, said Western oil firms might conceivably start to return to Iran within a year, while other firms such as banks and car makers would take longer, perhaps 12-18 months.

"Do not underestimate the self-interest of the West. The first ones into Iran can expect huge rewards," he said.

French car makers could be among the biggest winners if they can rebuild their ties in the country. Peugeot's decision to halt sales to Iran under sanctions pressure last year cost it nearly 10 percent of its global vehicle deliveries; in July this year, Renault took a 512 million euro ($696 million) writedown because of damage to its Iran business.

Pre-sanctions winners in Iran will not necessarily be post-sanctions winners, however.

Peugeot would face a challenge reviving its sales of partially assembled "knock-down" vehicles to Iran. A company spokesman said it had disbanded teams working on the project and he expected parts suppliers would have done the same.

WINNERS AND LOSERS

Dubai, 150 km (100 miles) across the Gulf from Iran, would probably be a big winner from an easing of sanctions. Its non-oil trade with Iran has shrunk by over a third in the past 18 months, totalling $2.9 billion in the first half of 2013.

The emirate, where about 10 percent of the population of 2.1 million is ethnic Iranian, could expect to become the main staging post for a return of foreign capital to Iran.

Dubai's Iranian Business Council has shrunk to about 200 members from 600 as the sanctions have caused businessmen to move to countries such as Turkey and Malaysia, Haghighi said. Some of these would now return.

Some other countries in the region could suffer, at least initially. The shipping and banking sanctions have caused more of Iran's foreign trade to pass through Iraq and Pakistan; those countries could lose some of that business.

Saudi Arabia has filled much of the gap left by the cut in Iranian oil sales, producing a record 10.19 million barrels per day of oil in August. It would almost certainly have to scale back its output if Iran's sales returned to normal.

The complex picture of winners and losers would be repeated within Iran.

The middle class, restricted in their access to foreign currency because of government controls put in place to resist the sanctions, could benefit quickly. They would find it easier to travel and study abroad, and to buy imported luxuries.

But it could take many months or years to reopen factories and rebuild infrastructure, so many poorer Iranians might see little immediate change. And a sizeable group of businessmen who have made money off the sanctions would suffer.

The government tightened its grip on business during the sanctions years, rationing foreign currency at preferential rates, guiding investment and getting involved in foreign trade.

Politically connected people - a large number of them former officers in Iran's Revolutionary Guard, said Emadi - made money from this system. They may now have an interest in opposing action that could lead to an early end to sanctions.

"Those people have had access to monopoly contracts, foreign exchange. They are going to lose a lot," said Emadi. "And political power is concentrated in that group."


Billions at stake for economic winners and losers of Iran thaw | Reuters

 

[Archdemon]

So sanctions work, great!

 

[Yzd Khalifa]

So sanctions work, great!

Against civilans.

Since when comments of an Israeli official regarding Iran are reliable?

JP is filled with BS. Give us your take please?

 

[kaykay]

Never gonna happen. Lols

 

[Yzd Khalifa]

Never gonna happen. Lols

But why is that?

 

[Yzd Khalifa]

Double post.