Document: Iran Sanctions

August 7, 2013 4:22 AM - Updated: August 6, 2013 8:52 PM

The following is a July Congressional Research Service on the impact of the ongoing sanctions on Iran, 
Increasingly strict sanctions on Iran—sanctions that primarily target Iran’s key energy sector as well as its ability to access the international financial system—have harmed Iran’s economy, but not to the point where key Iran leaders have been compelled to reach a compromise with the international community on Iran’s nuclear program. The strategic effects of sanctions might be abating as Iran adjusts to them economically and advertises the adverse humanitarian effects. Nevertheless, the June 14, 2013, election of Hassan Rouhani, who ran on a platform of achieving an easing of sanctions, as Iran’s president suggests that sanctions are affecting political outcomes in Iran.

  • Oil exports fund nearly half of Iran’s government expenditures, and Iran’s oil exports have declined to about 1.25 million barrels—a halving from the 2.5 million barrels per day Iran exported during 2011. The causes of the drop have been a European Union embargo on purchases of Iranian crude oil and decisions by other Iranian oil customers to obtain exemptions from U.S. sanctions by substantially reducing purchases of Iranian oil. To date, 20 of Iran’s oil customers maintain such exemptions.
  • The loss of revenues from oil, coupled with the cut-off of Iran from the international banking system, has caused a sharp drop in the value of Iran’s currency, the rial, and caused inflation to increase to well over 50%. Iran’s economy shrank slightly from 2012-2013 and will likely do so again during 2013. There have also been unintended consequences including a shortage of some advanced Western-made medicines.
  • Iran has found some ways to mitigate the economic and political effects of sanctions. Government-linked entities are creating front companies and making increased use of barter trade. Iranian traders are using informal banking exchange mechanisms and, benefitting from the fall in the value of Iran’s currency, increasing non-oil exports. Affluent Iranians are investing in—and driving up prices for—real estate and securities listed on the Tehran stock exchange.

Sam LaGrone

Sam LaGrone

Sam LaGrone is the editor of USNI News. He has covered legislation, acquisition and operations for the Sea Services since 2009 and spent time underway with the U.S. Navy, U.S. Marine Corps and the Canadian Navy.
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