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How Iran's Economy Has Withstood Years Of U.S. Sanctions


The Trump administration is applying what it calls maximum pressure on Iran to force it to the negotiating table, and Secretary of State Mike Pompeo says the strategy is working.


MIKE POMPEO: President Rouhani himself said that we've denied the Iranian regime some $200 billion in lost foreign income and investment as a result of our activities.

CORNISH: Despite U.S. sanctions, Iran's economy has not collapsed. NPR's Jackie Northam has more.

JACKIE NORTHAM, BYLINE: To be sure, the layer upon layer of U.S. sanctions have walloped Iran's economy.

DJAVAD SALEHI-ISFAHANI: Unemployment is high. Inflation is high. They're running out of foreign exchange.

NORTHAM: Djavad Salehi-Isfahani is a professor of economics at Virginia Tech, specializing in the Iranian economy. He says Iran has had a lot of experience with sanctions over the past four decades and has learned to withstand their impact. Salehi-Isfahani says it's no different this time.

SALEHI-ISFAHANI: I think the predictions of a quick economic collapse were too optimistic. They showed a misunderstanding of the level of complexity of Iran's economy and how good they are or how experienced they are with resisting sanctions.

NORTHAM: The World Bank and the IMF estimate Iran's GDP is on track to decline by almost 9% this year, not what many economists would call an implosion. And that's taking into account a sharp drop in Iran's oil exports. Before the U.S. pulled out of the nuclear deal in 2018, Iran was exporting about 2 million barrels a day. Now it's between 300,000 and 500,000 barrels of crude daily, most of that to China. But Esfandyar Batmanghelidj, the founder of Bourse & Bazaar, an organization that tracks developments in Iran's economy, says the country isn't solely reliant on oil.

ESFANDYAR BATMANGHELIDJ: The Iranian economy is a very diverse economy, and manufacturing is really one of the most important areas. Currently, manufacturing accounts for about one-fifth of overall employment in the country.

NORTHAM: Batmanghelidj says that includes automobiles, metals and plastics. He says the sanctions make it difficult to access goods needed to make the products. And it's tough to find customers abroad because there's fear the Trump administration will also slap secondary sanctions on any company doing business with Iran. But Suzanne Maloney, an Iran specialist at the Brookings Institution, says Iran can still do a lot of trade with its regional partners.

SUZANNE MALONEY: Because Iran has such well-integrated relationships with countries like Iraq and Afghanistan, some of the Central Asian republics and, of course, Syria, elsewhere across the region, it does have a reach that goes beyond that of the U.S. Treasury Department.

NORTHAM: That would be for some goods not covered by secondary sanctions, such as food or consumer products. Salehi-Isfahani says the domestic production of goods has helped spur some employment in Iran. But he says it's hard to gauge how much patience the Iranian population has. Salehi-Isfahani says, 30 to 40 years ago, Iranians were willing to put up with hardships caused by sanctions. Now you see them protesting.

SALEHI-ISFAHANI: And as we have noticed in the last few months, that tolerance isn't there. To what extent the government can maintain public order in the face of this 10%, 20% decline in living standards, I don't know.

NORTHAM: That will be up to Iranians, who have talked in the past about having a resistance economy, but the pressure from the Trump administration will likely put that to the test.

Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.

Jackie Northam
Jackie Northam is NPR's International Affairs Correspondent. She is a veteran journalist who has spent three decades reporting on conflict, geopolitics, and life across the globe - from the mountains of Afghanistan and the desert sands of Saudi Arabia, to the gritty prison camp at Guantanamo Bay and the pristine beauty of the Arctic.