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December 18, 2010

Sanctions – to What Extent Does Iran Feel the Pain?

Iran has claimed on numerous occasions that international sanctions intended to curb its nuclear ambitions are having little to no impact. Few in West believe that this is true, but there does not seem to be much consensus on exactly how well existing sanctions work. Some even say that many of Iran’s hardships are not even due to external factors, but self-imposed through gross economic mismanagement.

Listen to the entire interview with Faridorz Ghadar, CSIS:


VOA’s Susan Yackee spoke on the subject with Center for Strategic and International Studies senior advisor Faridorz Ghadar. He says that sanctions have had their impact on Iran’s economy and environment over the years, but that it is widespread mismanagement and the absence of a meritocracy that have probably proven more devastating for the Islamic Republic.  

“If you compare Iran’s economy in 1980, right after the revolution, to today's, it’s just been a miserable performance,” said Ghadar.

Iran’s oil production seems to be a case in point. According to Ghadar, Tehran’s output in 1978 was on par with Saudi Arabia’s; now it has shrunk to 40 percent. The same can be said of exports in general. Iran’s today are at approximately one-fourth or one-fifth of Saudi Arabia’s, added Ghadar.

The natural gas sector is an equally poor performer. Ghadar pointed out that Iran, as the second-largest gas reserve holder in the world, is unable to meet its own demands and ends up importing much of the fuel from Turkenistan.

As for Iran’s non-oil exports Ghadar said they, too, have significantly declined. Once comparable to Turkey’s, they are today at about one fifteenth of Ankara’s, with Turkey actually outpacing Iran’s non-oil export revenues with income from tourism alone.

According to Ghadar, adding to Iran’s woes are inflation and unemployment; and the country is saddle with a highly educated and highly motivated young labor force that cannot find jobs - largely attributable to economic mismanagement.

Ghadar  admitted that sanctions might be partly to blame, but emphasized that incompetence and corruption are a much larger part of the problem.

As for the effect of sanctions, Ghadar pointed out that they are producing different types of results, even unintended ones. Among them, said he, has been the rise of smuggling - a process that today is not only controlled by the Republican Guard of Iran, but a major source of income for it.

According to Ghadar, another area were sanctions have produced unfortunate results are in the oil technology sector. On the one hand they have put pressure on the government, but on the other they have forced Iran to produce lower-grade gasoline in its existing petro-chemical plants. And that, said Ghadar, has brought with it huge pollution and health issues for Iranians at large.

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