Iran: Domestic economy falters further as citizens wait for sanctions to lift

Iranian citizens are refusing to spend much money these days, in anticipation of imminent sanctions relief that will spur a decrease in domestic prices. Ironically, this is the opposite effect on the economy that everyone had anticipated for Iran, at least in the short term. In particular, the automotive sector has seen far less purchasing month on month since the announcement of the deal in July. Iran’s people are riding high on the expectation that prices will drop with the arrival of quality imported goods. Iranian car sales, steelmaking, and associated industries have seen far fewer profits.

Additionally, plunging oil prices have strained the government’s budget, but has not slowed down spending, as they are hoping for the unfreezing of tens of billions of dollars in assets held in overseas banks that have been inaccessible thanks to sanctions. With economic consumption declining on the hopes that Western firms will enter the Iranian market, everything from retail, gas, capital goods, and food have seen less purchasing.

The main point of contention on the implementation of the nuclear accord on the Iranian side is the sanctions relief schedule, which most Iranian officials were expectant that sanctions would be lifted immediately, while Western lawmakers want sanctions to be lifted incrementally in accordance with steps taken to comply on the nuclear weapons program surveillance and dismantling of centrifuges.

Follow us on Twitter: @SteppeDispatch

News Briefs:

  • The EBRD has urged greater diversification of the Kazakh economy on recommendation from international advisory firm Whiteshield partners, during a presentation given to senior government officials. The study examined factors that led to the original development of export capabilities in Kazakhstan’s major regions, and apart from energy, its cement and metal production capabilities could be expanded, despite its loss of more complex, value-added export products, like scientific instruments.
  • An ex-telecom chief in charge of Russian telecom company Sistema’s Indian subsidiary has been tapped to become CEO of Uzbekistan’s telecom company that was until last week, a subsidiary of Norwegian Vimpelcom. Dimitry Shukov will likely report to Mikhail Gerchuk, general director of VimpelCom’s Eurasia market operations. Last week, Vimpelcom announced it would shed its Central Asia assets into separate companies and exit the market entirely.
  • Credit rating agency Fitch’s premier Russia analyst, Charles Seville, told the German press yesterday that Russian debt is investment grade, and doesn’t see the justification for the “junk” rating Russia was issued by Moody’s and Standard & Poor’s in the past year. Commenting on his own opinion – “Russia has a low level of debt, a strong external balance of trade, state financial assets, and international reserves in the Central Bank and Finance Ministry’s reserve fund.” Despite the maintaining of an investment grade status (just barely), Fitch has issued a negative outlook for any debt securities.
  • President of Afghanistan Ashraf Ghani said in an interview that he hopes to stem the flow of emigration from the country. He said a combination of security and economic measures might result in fewer people leaving the country, but these are mostly platitudes, and given the worsening situation regarding Taliban negotiations along the Pakistan border, violence is unlikely to decrease anytime soon.
  • Chinese expansion into Central and South Asia has been met largely with welcoming arms – particularly in Pakistan, which now forms one of the key countries in the emerging New Silk Road Economic Belt or One Belt, One Road regional foreign policy that has been shaping Xi Jinping’s presidency. The initiative has pledged tens of billions in investments for new roads, pipelines, power stations, rail lines, and ports to create new series of trade routes that link China to South and Central Asia. The focus on Pakistan is access by rail and road to the port of Gwadar, a major international trading hub.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s