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Why China Will Continue To Buy Iranian Crude

Why China Will Continue To Buy Iranian Crude

While the United States sanctions…

Bears Are Back In The Oil Market

Bears Are Back In The Oil Market

In the midst of an…

Rouhani Says Iran’s Economic Problems not Down to Sanctions

On Tuesday, whilst celebrating his first 100 days as President of Iran, Hassan Rouhani announced that the country’s current economic problems could not be entirely blamed on the international sanctions, but are instead a result of “stagflation” created by poor management and reckless wastefulness of the country’s wealth by his predecessor, Mahmoud Ahmadinejad.

Whilst in office from 2005 until August of this year, Ahmadinejad oversaw a period of record high revenue growth due to rising oil prices, however rather than investing wisely to develop his country and create a stable economic environment for the future he wasted much of the capital on subsidies that artificially pumped money into the economy and drove up inflation.

Related article: The Iranian Nuclear Deal and Its Effect on Oil Markets

He also provoked the US on various occasions by threatening to destroy Israel, refused to accept the fact that the Holocaust ever happened, and was unwilling to compromise on his country’s nuclear program; all actions that earned him a lot of enmity and isolated his country from the rest of the world.

Under Ahmadinejad Iran’s economy contracted by 6 percent whilst inflation reached over 40 percent. Rouhani stated that “the stagflation in 1391 was unparalleled.” 1391 is the Iranian year that ended in March.

Rouhani has stated that his government was working hard to bring down inflation. Already it has fallen to 36 percent, and they intend to reduce that to 35 percent by the end of the current Iranian year, which ends in March next year, and then below 25 percent by the year after that.

The government will not try to tackle the expensive government subsidies, which support many Iranian families, until after they have brought the high inflation under control.

Related article: How an Iran-US Deal Would Change the Strategic Landscape

“The government seeks to reform the method for paying subsidies. In the beginning the government will rein in inflation and reform the banking system, then we will get into the second phase of subsidy spending.”

Rouhani managed a landslide victory in the June elections with his promise to help repair relations with the rest of the international community and work to remove the sanctions. So far he has secured an interim deal that will allow as much as $7 billion of relief and an ease in sanctions to help his country.

By. Charles Kennedy of Oilprice.com



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