Middle East United States

Iran Is Winning United States’ Foreign Policy Gamble

Written by Steven R. Kopits

President Donald Trump has sixty days to prevent tensions with Iran from spinning out of control.

Dissatisfied with the Iran nuclear deal signed under the Obama administration, Trump terminated U.S. participation in the Joint Comprehensive Plan of Action agreement in 2018 and has since imposed “maximum pressure” sanctions on Iran. Most importantly, these sanctions have seen Iranian crude oil exports fall from around 2.5 million barrels per day (mbpd) to as low as 0.1-0.2 mbpd this past summer. Even during the height of sanctions prior to the nuclear deal, Iran was allowed to export approximately 1.1 mbpd.

“Maximum sanctions” has led to considerable hardship within Iran. Oil exports of 2.5 mbpd bring in 40 percent of Iranian government revenues. On the spending side, Iran’s national budget allocates 15 percent to defense and 85 percent of other programs like pensions, healthcare, subsidies, education and infrastructure. The collapse of oil revenues, combined with the effect of sanctions, has prompted the Iranian government to reduce or defer some outlays, as well as paying the bills by printing money. Officially, inflation has risen to 43 percent, and the cost of food and medicine has soared 40 percent to 60 percent, according to European Union figures. As a result, some Iranians are no longer able to afford fresh food, and many in middle-class neighborhoods in Tehran “have resorted to buying withered cucumbers and rotting tomatoes, grapes, apples and peaches that grocery store salesmen put aside every day at dusk,” reports the Los Angeles Times. Notwithstanding, in an economy facing collapse, housing prices have doubled, according to the Financial Times. This kind of hyperinflation is usually consistent with aggressive money printing by the government in an attempt to pay its bills in the absence of revenues – oil revenues in this case. Iran’s situation is all but untenable.

Tehran’s options are limited. The government of Iranian president Hassan Rouhani is not prepared to accept US conditions, but neither can Iran defeat the U.S. militarily.

Read more at National Interest

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Steven R. Kopits

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