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Iran Likely To Struggle More In 2020

Iran 2020

Iran had a rough year in 2019 and the New Year is quite likely to bring just as many difficulties to the door of the Islamic republic.

Iran came under increased pressure in the previous 12 months, led by a U.S. campaign of "maximum pressure" that included devastating sanctions that are now in their second year.

In reaction to the pressure, Tehran shifted away from its stated policy of "strategic patience" and pushed back with a series of calibrated actions that included disrupting security in the strategic Strait of Hormuz, the major route for world oil supplies.

Washington's imposition of a full line of sanctions in November 2018 targeted Iran's key economic spheres -- including the banking and oil sectors -- and denied the government its main source of revenue while making international trade increasingly difficult.

In May 2019, Washington upped the ante by ending waivers to the countries that were major buyers of Iranian oil, leading to a significant drop in the country's oil exports to fewer than 500,000 barrels per day. That total has continued to tumble in recent months and brought total oil revenue to a trickle of what it once was.

Dire Straits

The sanctions have driven away foreign investors and have contributed to a precipitous fall in the Iranian currency, the rial, and a major shrinking of the economy -- which the International Monetary Fund predicts will have contracted by a whopping 9.5 percent over the course of 2019.

The dire economic straits within Iran were highlighted in a January speech by President Hassan Rohani, who said Iran was facing its biggest economic challenge since the 1979 Islamic Revolution.

Iran's troubles were sharpened in November by violent protests triggered by a significant state-enforced hike in the price of gasoline. Related: Protect The Oil: Trump’s Top Priority In The Middle East

The outbreak of demonstrations against the price increase spread to at least 100 cities and towns nationwide where many protesters chanted slogans against Iran's top political and religious leaders, poverty, and state corruption while banks, government buildings, and police cars were set alight amid the protesters' rage.

The government responded with full force: at least 308 people were killed, according to Amnesty International, thousands injured, and some 7,000 were detained, according to a lawmaker. Reuters reported anonymous government officials saying some 1,500 people had died during the protests, though that figure could not be confirmed.

Furthermore, the government shut down the Internet for a week in an effort to prevent details and graphic images of the crackdown from reaching the outside world. The action also complicated efforts to organize rallies and for protesters to communicate or share information domestically.

Rand Corporation analyst Ariane Tabatabai told RFE/RL that the crackdown highlighted Tehran's concern over perceived internal and external threats.

"The force with which the protests were suppressed, the violence and fast pace at which the crackdown happened, are indicative of the level of pressure Iran feels at home and abroad and the levels of threat perception."

Tehran's economic and social difficulties are likely to continue in 2020 amid the continuing pressure campaign by the United States, which is constantly tightening the screw, and a frustrated population that observers have warned could take to the streets again.

Will Reserves Keep Economy Afloat In 2020?

Henry Rome, an Iran analyst at the Eurasia Group in Washington, said Iran's economy will remain in a very difficult position in 2020, while noting that a full economic collapse is unlikely.

"Non-oil exports and employment remain robust, and the government is slowly regaining control over inflation and the currency," Rome said. "And the Iranian regime has an ultimate backstop: security forces willing and able to kill their fellow citizens. That very much limits the risk to stability in the near term."

Many ordinary Iranians have been hit hard by the economic downturn. (file photo)

Kenneth Katzman, a senior Iran analyst at the Congressional Research Service, told The Washington Post in September that Iran still has about $100 billion in reserves, adding that under current conditions that would last the Iranians at least another two years.

But Brian Hook, the U.S. special representative for Iran, said in a December interview with The Wall Street Journal that based on classified intelligence Iran has access to only 10 percent of its foreign exchange reserves due to banking sanctions and that as a result it would struggle to stabilize its currency and keep inflation down.

Will Tehran Decide To Talk With Washington?

Despite the heightened tensions between Iran and the administration of U.S. President Donald Trump, the two sides exchanged prisoners for the first time in December when Iran released American graduate student Xiyue Wang and the U.S. freed Iranian scientist Massud Soleimani in a swap in Zurich.

Despite the rare act of cooperation, analysts said the chances for negotiations between U.S. and Iranian officials over the current crisis remain dim.

Henry Rome said U.S.-Iranian negotiations are possible but unlikely in 2020.

"While Trump remains keen to talk to Tehran, he is unwilling to pay Iran's price of admission -- upfront sanctions relief and no initial 'photo op.' Tehran is loath to begin talks with a president who could shortly lose reelection and in the immediate aftermath of the violent protests, which the regime has blamed, in part, on the United States," Rome told RFE/RL. Related: IEA: An Oil Glut Is Looming

Tabatabai predicts more strain between the two countries well before any negotiations take place.

"For now, if nothing major happens, I think we may see another period of heightened tension before we see negotiations due to Iran's threat perception and the belief that Iran must create leverage before it returns to talks," Tabatabai said.

Will The Nuclear Deal Survive In 2020?

In recent months, Iran has gradually reduced its commitments under the historic 2015 nuclear deal -- the Joint Comprehensive Plan of Action (JCPOA) -- that it negotiated with six world powers to give Tehran relief from international sanctions in exchange for curbs on its controversial nuclear program.

The United States exited the JCPOA unilaterally in 2018 before reimposing crippling sanctions on Iran.

Iran's moves to expand its nuclear activities -- aimed at pressuring the European signatories to the agreement to help Tehran bypass U.S. sanctions and benefit economically from the deal -- have led to concern about the future of the accord.


Iranian President Hassan Rohani at the Bushehr nuclear power plant (file photo)

Analysts say Iran is likely to take more serious steps away from its commitments under the JCPOA that could endanger the deal even further.

"Iran has played it close to the chest in recent months, not giving us too many hints as to what these [actions] may entail. But if the [current] pattern is any indication, we are likely looking at more troubling steps from a nonproliferation perspective," said Tabatabai.

Henry Rome said the 2015 agreement is likely to limp along in 2020.

"I think it's unlikely the deal fully falls apart, because both Iran and Europe see a skeleton deal as useful; for Europe it provides a framework for future talks if a Democrat [candidate] wins [the U.S. presidential election] in 2020, and Iran can continue to claim compliance with at least some components [of the JCPOA]."

Parliamentary Elections During Deep Crisis Of Legitimacy

The parliamentary elections scheduled for February 21 will be another challenge for Iran, which needs a high turnout to boast it has public support at a time of intense internal and external pressure.

But a crisis of legitimacy -- the most serious since the 2009 crackdown on peaceful protesters challenging a disputed presidential election -- could lead to a lower turnout than usual that would damage the clerical establishment even further.

For now, there hasn't been any major call for a boycott, but on social media sites some Iranians have asked whether it makes sense to vote for an establishment that does not shy away from killing its citizens.

"When people lose their lives while protesting, we cannot participate in the elections and buy legitimacy for a system that has killed [people]," Bahareh Hedayat, a prominent student activist and women's rights activist who spent several years in prison, said on Twitter on December 6.

Abdollah Ramezanzadeh, a former spokesman for the government of reformist ex-President Mohammad Khatami, said in a tweet on December 6 that "the country has reached such a stage that only free elections will return it to the right path."

He said trying to run as a candidate in the elections was "meaningless" due to the vetting process by the powerful hard-line Guardians Council, which has a stellar record in all previous elections of banning pro-reform and independent candidates from running.


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  • Mamdouh Salameh on January 02 2020 said:
    This is more disinformation from Radio Free Europe (RFE) /Radio Liberty journalists as the claim attributed to Iranian President Rohani that US sanctions have cost Iran $200 bn.

    While Iran’s economy will continue to face difficulties arising from the sanctions, non-oil exports and employment remain robust and the government is slowly regaining control over inflation and the currency according to Henry Ford, an Iran analyst at the Eurasia Group in Washington. Iran is reported to have about $100 billion in reserves which under current conditions would last the Iranians at least another two years.

    And while there are small indications that President Trump could be inching towards a new nuclear deal with Iran emanating from the high-level exchange of prisoners that took place in Switzerland a month ago, Iran will never accept any negotiations without a lifting of US sanctions against it first.

    Tehran will not negotiate with a president who is known to say something today and renege on it the following day.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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