The Iranian economy and regional dominance continues to grow even after the United States and other Western countries imposed sanctions on the nation. The economic sanctions were re-imposed during the Trump administration, which was a move to weaken the nation’s bargaining power in the nuclear deal. The nation’s trade with the western countries was thwarted due to the sanctions. The most affected sectors were energy and commodity markets, as the nation could not make any deals with the West. Iran, however, still shows economic dominance in the Middle East (Dizaji, 2018). They started negotiating with other countries including Iraq and Afghanistan to promote regional trade. The Middle Eastern nations were in support of Iran becoming a nuclear power as it would provide alternative sources of energy and ensure that Western control would be mined. Therefore, they were ready to accept trade deals proposed by Iran amid threats from the Trump administration that would cut down military and financial support (Mashayekhi, 2019). Economies such as Iraq continue to conduct trade activities with Iran. The withdrawal of the US from the earlier “Joint Comprehensive Plan of Action”, which had been signed during Obama’s administration, did little to affect the Iranian economy.
In 2019, the sanctions have put pressure on some of the sectors of the economy. One of the most affected areas is oil exports. The year has seen a low level of exports as the nation struggles to sell to the West. The sales have been on a downfall, a situation that occurred only during the Iran-Iraqi war when Iraqi jets bombed the oil fields. With the absence of the oil-related sanctions, Iran’s crude oil exports were about 2.5 million barrels per day. By 2019, however, the exports have reduced to about 300,000 barrels each day (Cimino-Isacs & Katzman, 2019). The pressure has seen a massive loss in income for the economy. There are other commodities that the country got from the US and the European Union including machinery and medicines. The sanctions have reduced the access of such goods, requiring Iran to make deals with nations in the East such as China and Japan (Cimino-Isacs & Katzman, 2019). Trade has shifted significantly from Western countries to the Far East. Despite Trump’s threat to cut off any nation that continues to trade with Iran, some countries have taken advantage of the situation and started trading. The nation has been on an upward trend in growth and is one of the strongest economies in the Middle East.
There are various reasons why some countries such as Iraq and Yemen, continue trading with Iran. One of the prominent factors is that Iran presents a viable opportunity as a trading partner due to the amount of money involved. The nation is more stable than its neighbours in terms of economic growth, which guarantee s that any trading partner will reap maximum benefits (Bigdeli, 2018). The second reason is that the sanctions have left a gap in Iran’s imports. It is obliged to look for another source for the commodities. Iraq has been left as a middle conduit for Western goods. It imports them and then sells them at a profit to Iran. The third reason is that Iran has been a supportive partner for the neighbors, especially during conflicts. In Iraq, Iranian troops were critical in stopping the spread of the Islamic State (Aghlmand et al., 2018). They sent armed militia from the Iran-Iraqi border, which was crucial in weakening the Islamic State. In Yemen, Iran was also successful in assisting during the war with Saudi Arabia. Iran offered support to the Yemeni forces and at times using their jets to bomb Saudi-dominated regions. During the sanctions, the two countries have continued being loyal trading partners.
Despite the efforts by Saudi Arabia to expand its influence into Iraq, Iran continues to show its dominance as Iraq is the second leading retailer of its non-oil supplies. It is further strengthened by the political ties of the “Fatah Alliance” which is acknowledged as the second prominent party as per the 12th May elections hence giving Iran a substantial claim in Iraq affairs. The election saw the growing influence of Iran in the Iraqi population, which gave it the leverage to make trade deals (Bigdeli, 2018). Tehran continues to be a formidable power in Iraq’s political decisions. The partnership created during the elections empowered Iran to make deals due to the loyal parliamentary force. It should be noted that prior to the polls, Iran was pursuing its objective of controlling Iraq’s trade and industry strategies. After the sanctions, it became a reliable partner in all matters.
The sanctions compelled Tehran to look for better ways of managing the losses associated with revenue. As outlined by Cimino-Isacs and Katzman (2019), the borders have since been re-opened to boost trade and ensure that transport is smooth and security is tight. After the sanctions, trade with Iraq grew to approximately 14 percent in less than a year. It shows that Iran was quick to make decisions that would see it recover the lost revenue. Therefore, Iran’s economy continues being stable regardless of the failing trade with the West (Mashayekhi, 2019). The nation was prosperous in identifying other trading partners besides the US and the European Union hence reducing the over-reliance on oil exports as the primary source of income. This diversity has seen it establish its trade and has also played a momentous role in trade expansion.
- Aghlmand, S., Rahimi, B., Farrokh-Eslamlou, H., Nabilou, B., & Yusefzadehe, H. (2018). Determinants of Iran’s Bilateral Intra-Industry Trade in Pharmaceutical Industry. Iran J Pharm Res.17(2): 822–828.
- Bigdeli, S. Z. (2018). Iran’s Accession to the World Trade Organization: An Impediment or a Catalyst for Development? Industrial, Trade, and Employment Policies in Iran, 177-210
- Cimino-Isaacs, D., & Katzman, K. (2019). Iran’s Expanding Economic Relations with Asia. Current Politics and Economics of the Middle East. Hauppauge 10(2), 149-152.
- Dizaji, F. S. (2018). Trade openness, political institutions, and military spending (evidence from lifting Iran’s sanctions). International Economics 57(6), 2013-2041
- Mashayekhi, M. (2019). Iran’s Trade Policies: Connecting to the Markets. Industrial, Trade, and Employment Policies in Iran, 141-175