October 16, 2013 | Quote

Iran Sanctions: How Much are They Really Hurting?

As world powers meet with Iran in Geneva today, their main bargaining chip is an easing of sanctions, the most painful of which have cut Iran off from the global financial system and put a chokehold on its oil exports. 

Most observers say that the punishing sanctions have brought the Iranian economy to its knees, and that dire conditions were the catalyst for Iran’s rapid push for a nuclear agreement since the June election of moderate cleric Hassan Rouhani as president.

But there are others who argue that Iran is coming from a much stronger economic position than world powers are acknowledging, and scoff at the growing chorus warning of a collapse. The new leadership sees much to gain from making concessions to regain access to the global financial system – something that will play well among Iranians who want to return to business as usual.

“Iran’s economy is obviously doing very badly,” says Djavad Salehi Isfahani, a prominent Iranian economist and nonresident fellow at the Brookings Institution who teaches economics at Virginia Tech. But “[t]he real question is whether it is in a desperate situation or not.”

A recent report from the Foundation for the Defense of Democracies and Roubini Global Economics estimates that Iran can afford only three more months of critical imports, and influential American voices are sounding the alarm for an impending humanitarian crisis.

According to the joint report from the Foundation for the Defense of Democracies and Roubini Global Economics – which has helped draft sanctions legislation and whose stated aim is to”prevent Iran’s leaders from acquiring nuclear weapons, continuing to support terrorist acts, and oppressing their own people” – Iran’s foreign exchange reserves are dwindling precipitously. The report says they have dropped from $100 billion in 2011 to $80 billion by July 2013, a figure that continues to dwindle. Only $20 billion of that is fully accessible.

A worrying timeline

The fundamental question, said report co-author Mark Dubowitz, is whether “Iranian nuclear physics are beating Western economic pressure and diplomacy” – whether Iran is building up its nuclear capabilities faster than sanctions and negotiations can hobble its progress.

According to him, nuclear physics is winning.

Despite the rapid draining of Iran's reserves, Mr. Dubowitz estimated that Iran has enough cash on hand “to painfully hobble through” for at least a year – which is all the time it needs to build a nuclear weapon, from the day of making the decision to do so to the day it is completed.

Read the full article here.


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