Iran’s embrace of Iraq shows US sanctions are working
Iran’s embrace of Iraq shows US sanctions are working
Iran’s state-controlled news outlets and politicians have put significant emphasis on the relationship between Baghdad and Tehran after Iranian President Hassan Rouhani last week made a surprise trip to Iraq — his first visit to the neighboring country since he became president in 2013.
Rouhani’s first visit to Iraq points to several important issues. First of all, the US’ renewed sanctions on Iran have indeed inflicted damage on Tehran’s economy. In order to offset the impact of the sanctions, the Islamic Republic is increasingly desperate to find other countries that are willing to do business deals and boost their economic ties with Tehran.
US President Donald Trump has been ramping up economic sanctions in the last year. Although the Iranian leaders dismiss America’s efforts to pressure Tehran, the sanctions have inflicted significant pain on Iran’s energy, automotive and banking sectors. This has resulted in a noticeable decrease in Iran’s revenues. For example, Iran’s oil revenues and exports have fallen approximately 50 percent since the US leveled primary and secondary sanctions on the Islamic Republic.
Iran’s banking system has yet to find an effective approach to stabilize the country’s currency. The rial has dropped about another 30 percent since the beginning of 2019 and was last week trading at 135,000 rials per US dollar. Meanwhile, the International Monetary Fund believes that Iran’s economy is officially in recession.
What is more troubling for Tehran is that the Trump administration is planning to further tighten its financial chokehold. This means that Iran cannot rely on the estimates it provided for the coming year’s budget, which is already less than half of last year’s. The budget bill that was proposed by Rouhani and passed in 2018 was worth approximately $104 billion, while the budget bill for 2019 was for just $47.5 billion. Most of Iran’s financial needs are dependent on exporting roughly 1.5 million barrels of oil a day, but Tehran’s oil export market is declining and the regime is not allowed to trade using the US dollar.
Read more: Arab News
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