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James Hamilton

James Hamilton

James is the Editor of Econbrowser – a popular economics blog that Analyses current economic conditions and policy.

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How are the Sanctions Against Iran Progressing?

The boycott of Iran has been more successful than I had anticipated, with Iranian oil production and exports down significantly from a year ago.

And even stronger additional sanctions may soon be agreed upon. The measures appear to be having a significant effect on the Iranian economy, with the IMF reporting an inflation rate of 20-25% and some observers claiming the true figure could be as high as 70%. There are some signs of growing political opposition to the regime.

The goal of the sanctions is to try to pressure Iran to abandon its nuclear enrichment program. There was at least one indicator last week of some progress toward that goal, as statements from Foreign Ministry spokesman Ramin Mehmanparast seemed to signal a modest move forward in negotiations.


Alternative estimates of Iranian oil production. Source: Early Warning.

Related Article: Smash the Rally in Oil

Of course, lower oil production from Iran has not been without cost for the oil-consuming countries. The combined effects of the loss in Iranian production and modest gains elsewhere have left total world oil production essentially flat since the start of the year.

Alternate Estimate of World Oil Production
Alternative estimates of world oil production. Source: Early Warning.

And where will this all end? Based on prices of Intrade contracts, bettors see a 12% chance of a U.S. and/or Israeli air strike against Iran before December 31, a 39% chance before June 30, and a 51% chance before December 31 of 2013.

Price in Cents of Promise to Recieve
Price in cents of promise to receive $1.00 in event of air strike before December 31, 2013. Source: Intrade.

Related Article: Is a Larger Middle East War Inevitable?

Those same Intrade markets, by the way, put a 40% probability on Mitt Romney winning the presidential election.

By. James Hamilton

Source: Econbrowser




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