Iran Sanctions, and the Effect it has on Iranians

In a country full of economic repression, Iranians are struggling to hold onto their businesses, homes, and are now forced to avoid buying certain items, because of the exorbitant prices. On May 8th, 2018, the United States decided to back out of the 2015 Joint Comprehensive Plan of Action (JCPOA), the agreement between six world powers and Iran to limit Iran’s nuclear activity. The US thought that it did not do enough to limit Iran’s missile programs, or Iran’s support for armed groups in the Middle East. Because of this, Iran has recently been under harsh sanctions, preventing the trade of oil, among other things, severely impacting Iran’s economy. 

When the United States backed out of the JCPOA, a few weeks later, they released 12 demands for a new agreement, and in August 2018, it started imposing its first round of sanctions. In November of that year, the sanctions expanded to target the oil sector, and in May 2019, more sanctions were imposed that prohibited trade with US dollars. All these sanctions have contributed to make Iran’s economy unstable, even though Iran has been in a resistance economy for years. Before the JCPOA, Iran was under harsh sanctions from the United Nations. When the JCPOA was signed, all the sanctions were removed, and Iran could freely sell their oil to anywhere in the world. Iran’s economy was thriving for a few years, until Donald Trump decided to back out of the deal. The United States threatened to sanction any country or company who decides to continue doing business with Iran, which caused Iran’s main source of industry, oil exports, to go from 2.5 million to 350,000 barrels per day. This cost Iran over $50 billion in lost revenue according to the Congressional Research Service.

As a consequence of Iran’s oil industry suffering, Iran’s economy has been negatively affected. The rial, Iran’s currency, lost nearly 60% of its value in 2018. The rial ranged from an average of 35,000 rials to the dollar, to a low of 180,000 rials, making $1 worth $4 USD. Further, according to the Congressional Research Service, the reinstatement of sanctions caused Iran’s GDP to decline 2% from March 2018-2019, and is projected to decline another 6% in the next year. The inflation rate has peaked to 37%, while the unemployment rate is at 12%, and the sanctions have caused many banks from around the world to cut ties with Iran, or continue with limited transactions.

The sanctions have greatly impacted people’s lives. Iranians are battling to make ends meat. The prices of meat and sugar have surged so high, that most Iranians cannot afford these luxuries. Citizens of Iran must now buy things in bulk, in order to avoid future shortages. Medicine is also something that many Iranians can now not afford, having increased 40-60% in price. Iranians have also had to sell their homes, and downgrade, seeing that house prices have doubled, and many people can no longer afford their rent. The sanctions are not just affecting people living in Iran, but Iranian diplomats living abroad in NYC. These diplomats are now being confined to a 50km radius, and when Foreign Minister Mohammad Javad Zarif visited the USA, he was only permitted to travel to four buildings: the UN, the Iranian UN mission, JFK airport, and the Iranian UN ambassador’s residence. 

The government of Iran responded to the United States backing out of the JCPOA by threatening to close the Strait of Hormuz, a body of water where ⅓ of the world’s oil passes through. Iran has made this threat before and did not follow through, but if they were to follow through with this threat, it would be catastrophic for the oil industry, as it would make oil exports extremely difficult. Iran has also shot down a US drone in mid-June, claiming that it was in Iran territory, but the US claims it was in international waters. Iran has also declared the US a “state sponsor of terrorism” after the United States declared Iran’s Military a terrorist group. Additionally, on June 17th, 2019, Iran announced it will continue to use high-grade uranium, thereby violating the JCPOA. The Iranian government has also tried to help citizens back home in Iran, by implementing regulated prices for certain goods, to try and balance the economy. Unfortunately, these goods run out very quickly, and the same goods on the free market can be 4x the cost.

Iran is going through a period of the toughest sanctions imposed yet, but Iranians have lived through this before, and to some extent, are accustomed to it. Inflation, unemployment, and other challenges the citizens of Iran face are temporary, and the rial has already adjusted back to the average. Iran has been working with other countries to find a loophole to avoid US sanctions and continue selling their oil.