Iran is best known for oil and gas production. It contains 10 percent of the world’s oil reserves which is why Iran is considered the energy superpower. They have the fifth largest value of natural resources at US$27.3 trillion in 2016.
Before 1979, Iran developed at a quick pace but slowed by 1978 after the eruption of the Iran–Iraq War. That war with Iraq cost some $500 billion. After the war in 1988, the government tried to develop the country’s infrastructure and especially the energy sectors (including its prospective nuclear power facilities).
By early 2000, Iran spent money on research and development. It ranked first in scientific growth in the world in 2011. According to The Economist, Iran ranked 39th in a list of industrialized nations.
Sanctions on Iran
But due to its ambition of being called a nuclear state, international sanctions were imposed on Iran which damaged the country’s economy by reducing oil exports to half. Politics, national policy and currency stability posed difficulty in doing business in Iran. Most of Iran’s financial resources are directed at trading, smuggling instead of production and manufacturing.
The United States also ended its economic and diplomatic ties with Iran, banning Iranian oil imports. Also, the U.S. Government prohibited U.S. (and non-U.S.) companies from investing and trading with Iran. The UN Security Council(UNSC) imposed sanctions against selected companies linked to the nuclear program, there further increasing the country’s economic isolation.
Sanctions disallow nuclear, missile and military exports to Iran and investments in oil, gas and petrochemicals, exports of
refined petroleum products.
In 2015, Iran signed a deal to get rid of the sanctions under a multilateral agreement to limit and monitor the country’s nuclear activities but in 2018, under President Donald Trump, the U.S. withdrew from the agreement and said it would re-impose sanctions it had suspended. By the end of the year, the sanctions will tighten on Iran’s oil exports, the backbone of its economy.
What happened ?
With the earlier U.S. sanctions resuming, the Iranian currency rial went down. Panicked businesses and individuals snapped up the insufficient dollars, forcing the central bank to impose capital controls. The move brought inflation. Also, the nuclear deal had failed to deliver the returns Iranians had hoped for. Economic grievances sparked anti-government movements in which at least 21 people died.
U.S. sanctions on financial transactions with Iran have never been lifted, making it difficult for international companies to do business there.
The re-imposed U.S. sanctions will worsen the investment by punishing multinationals doing business in Iran.