Iran’s President Rouhani denies the reality of oil price crisis in televised meeting
Iranian President Hassan Rouhani held a televised meeting in which he argued that the Islamic Republic stood to experience fewer negative effects than other OPEC nations in the wake of a sharp decline in oil prices caused by the coronavirus. But Rouhani’s remarks appeared to gloss over the prior impact of US sanctions and domestic mismanagement, both of which have left the Iranian economy so badly damaged that global downturns are less likely to register as a significant change.
Rouhani did seem to acknowledge that sanctions had diminished the country’s ability to sell oil to foreign buyers, but he promptly suggested that this had actually been beneficial insofar as it reduced reliance on those exports. “The more countries rely on oil, the greater they suffer,” he said. “But as our reliance on oil income has decreased, willingly or unwillingly, either by our own will or by the imposition of the enemy, our losses will certainly be less.”
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Such remarks are reminiscent of Supreme Leader Ali Khamenei’s longstanding strategy for weathering periods of economic sanctions. He has used the term “resistance economy” to describe a situation in which domestic production compensates for the expected impact on GDP of foreign trade.
However, the positive effects of this strategy have been limited, at best. Even before US sanctions were re-imposed after US President Donald Trump’s withdrawal from the 2015 Iran nuclear deal, the country was suffering from a severe crisis of inflation and double-digit unemployment, with youth unemployment reaching beyond 50 percent in some areas.
These conditions have only worsened since over the past two years, though critics of the regime have generally attributed ordinary Iranians’ hardships not to the sanctions but to hardline authorities’ unwillingness to direct spending away from malign activities such as the support of regional terrorist groups, and toward domestic issues.
These critics arguably include a majority of the Iranian people. In addition to countless localized protests, the Islamic Republic has experienced two nationwide uprisings – one in January 2018 and one in November 2019 – both of which were sparked by grievances over the government’s mishandling of the economy.
Last November’s uprising was sparked by the announcement of sharp increases in the government-set prices for gasoline, which threatened to greatly increase the economic hardship for a society already suffering from extremely high levels of poverty. Protesters responded by storming government buildings and state-owned banks, as well as by reviving slogans from the prior uprising which called on the regime to, for instance, “forget about Syria [and] think of us.”
It has been estimated that the Islamic Republic has spent upwards of ten billion dollars per year on the Syrian Civil War. And there is no indication that that spending was reduced in response to the return of US sanctions, or to the global Covid-19 pandemic, which may have killed more than 30,000 Iranians so far, while leaving countless others with drastically reduced incomes and little to no government assistance.
On Monday, Iran’s Foreign Minister Javad Zarif visited Syrian President Bashar al-Assad in Damascus, where the two men were photographed sitting across from each other wearing protective masks. The meeting reportedly served as an outlet for the Iranian regime’s ongoing efforts to compel the US government to lift sanctions on both countries in the midst of the epidemic, even as Tehran refuses direct offers of medical aid and issues public statements emphasizing that it will never ask Washington for help.
This defiance and the demand for sanctions relief are clearly at odds, and this tension was apparent in Rouhani’s remarks on Wednesday. As he has done on numerous prior occasions, the president attempted to simultaneously downplay the impact of US sanctions and to portray the Islamic Republic as having been greatly victimized by those same sanctions.
Meanwhile, financial experts rejected Rouhani’s efforts to claim that the sanctions had actually put the Iranian regime in a better place with regard to the impact of reduced oil prices. Reuters noted that although Iran’s national budget has reduced the share of revenue that are expected to come from oil sales, that budget was still based on the assumption that the country would sell one million barrels per day, at 50 dollars per barrel. The Covid-19 crisis has cut the market price of Brent crude to only 20 dollars per barrel, and Iran is not expected to sell more than half a million barrels per day.
Although this clearly undercuts Rouhani’s optimistic outlook, the effects on ordinary Iranian citizens depend on how much of the nation’s oil revenue had actually been reaching them before the crash. And according to participants in last November’s anti-government protests, that portion was vanishingly small.