United States Institute of Peace

The Iran Primer

Economic Trends: Month of May

Garrett Nada

            The biggest news in May was reports of increased oil exports to Asia and discoveries of new fields. China’s imports of Iranian crude oil more than doubled in April compared to a year ago. And South Korea’s imports from Iran more than doubled between March and April. The Islamic Republic has been exporting more oil since the interim nuclear deal, which included modest sanctions relief, was implemented in January.
            Iran also hosted its 19th annual International Oil, Gas and Petrochemical Exhibition. Some 600 major energy companies from 32 countries attended the four-day event. State television reported that only 195 companies from 15 nations attended last year’s show. More companies appear to be interested in returning to the Islamic Republic, assuming that Iran and the world’s six major powers can secure a final nuclear deal.
            On May 29, President Hassan Rouhani told bank managers and staff that Iran is gradually coming out its recession. But not all of the economic indicators from Iran were positive in May.
            Iran's Statistical Center announced that youth unemployment reached 24 percent. Labor Minister Ali Rabi'i warned that 1.1 million college students entering the job market will not be able to find work and that another 4.5 million would soon be graduating. And the unemployment rate for women is even worse at 43 percent, according to one of the president's senior advisors.
            Iran’s currency is still on a downward trend, despite President Rouhani's efforts to slow inflation. The rial has reportedly lost about 10 percent of its value since the new Iranian year started on March 21. A new International Monetary Fund (IMF) report warned that government spending “needs to balance supporting domestic demand and helping disinflation.” The IMF projected a modest growth rate of 1.5 percent for 2014. The following is a run-down of the top economic stories with links.
Domestic Developments
Oil and Gas: Iran’s Oil Ministry announced plans to extract 30,000 barrels per day of oil from the Azar oilfield in 2015. The field, shared with Iraq, is thought to contain some 2.5 billion barrels of oil.
Iran discovered five new oil and gas fields, according to Managing Director of the national Iranian Oil Company’s Exploration Department Hormoz Qalavand. He noted that Iran projects discovery of some 400 million barrels of recoverable crude oil per year.
Phase 19 of the massive South Pars gas field could start oil production next year, ahead of schedule. Construction of a coastal refinery and offshore facilities are 75 percent completed. The project aims to produce 50 million square meters of gas on a daily basis. A 2,700-ton platform was also installed as part of Phase 16.
 Currency: The rial has lost about 10 percent of its value since March 21, 2014, Persian New Year. The conversion rate was about 33,000 to the dollar in May.  
Inflation: Point-to-point inflation hit 17.2 percent, a 0.4 percent drop compared to last month, according to government spokesperson Mohammad-Baqer Nobakht.
Unemployment: Minister of Labor Ali Rabei warned that 4.5 million educated Iranians are now unemployed.
Projected Growth: The International Monetary Fund projected real GDP growth rates of 1.5 percent for 2014 and 2.3 percent for 2015.
Tourism: “A tsunami of foreign tourists” is visiting Iran, according to Iranian Cultural Heritage, Handicrafts, and Tourism Organization Director Masoud Soltanifar. He said that most of the four and five-star hotels in Isfahan, Shiraz, Yazd and Kashan have been fully booked by European tourists for the next six months. More than 4 million tourists visited Iran from March 2013 to March 2014, each accounting for $1,200 in revenue.
Administrative regions: Minister of Interior Abdolreza Rahmani Fazli announced the formation of a working group to investigate dividing the country into new regions that would spur development. The position of a regional governor could replace the five or six provincial governors currently in place.  
International News
Oil and Gas: China’s imports of Iranian crude oil more than doubled in April compared to a year ago. The Asian giant imported nearly 800,000 barrels per day.
Foreign buyers of oil owe Iran some $4 billion, according to Mohsen Qamsari, director for international affairs at the National Iranian Oil Company.
South Korea’s oil imports from Iran more than doubled between March and April. South Korea imported 552,884 tonnes in April, up from 274,808 in March. But India cut its crude imports by 42 percent in April from March.
Iran began exporting crude oil to South Africa and Sri Lanka under single shipment contracts, according to the National Iranian Oil Company’s director for international affairs, Mohsen Qamsari.
Oil minister Bijan Namdar Zanganeh’s working group held meetings with Royal Dutch Shell, which owes Iran $2.3 billion. But the two sides did not reach an agreement on collecting the debt.
Tehran hosted its 19th annual International Oil, Gas, Refining and Petrochemical Exhibition, drawing some 600 energy companies from 32 countries. Some 1,200 domestic companies attended the show. The following profile of the show and Iran’s oil industry was aired on state television.
Tehran and Islamabad extended the deadline to complete the multi-billion-dollar gas pipeline from December 2014 to December 2015. The nearly 1,000 mile pipeline would help Pakistan deal with its overwhelming energy needs.
Iran plans to export natural gas to Iran as early as March 2015, or when a new 167-mile pipeline is completed, according to Deputy Oil Minister for International Affairs and Trading Ali Majedi. The pipeline would deliver gas from Assalouyeh, near the South Pars oil and gas field in southern Iran, to Iraqi power plants.
Iraqi: Iran-Iraq trade volume hit $12 billion in 2013 and is projected to reach $20 billion over the next three years, according to Iranian Minister of Economic Affairs and Finance Ali Tayebnia. Iraqi Deputy Prime Minister for Economic Affairs Rose Nuri Shaways led a 23-member delegation to Tehran and signed an agreement to boost bilateral trade and economic cooperation.
Turkey: Turkish Minister of Economy Nihat Zeybekci reported that 3,350 Iranian companies are operating in Turkey. Iranian companies have invested some $101 million in Turkey.
South and Central Asia: Between March 21 and April 21, Iran exported almost 400,000 tons of non-oil goods to seven of its neighbors — Kazakhstan, Kyrgyzstan, Turkmenistan, Tajikistan, Afghanistan, Uzbekistan and Pakistan. The value of the goods totaled some $212 million. Iran’s total non-oil exports worldwide exceeded $2.8 billion.
Food imports: Western banking sanctions have reportedly made importing commercial food cargo to Iran difficult. Hundreds of thousands of grain and sugar have been stuck in transit for several weeks outside ports such as Bandar Abbas and Bandar Imam Khomeini.  
International flights: Deputy Director of Iran’s Airports Abraham Sushtari announced that international flights to Iran increased 18.6 percent in May 2014 compared to May 2013.
Investment: Iran’s head of business development, Afkhami Rudd, discussed advantages of investing in Iran in the following clip from state television.
Tags: Economy

Obama at West Point : On Iran Diplomacy

      On May 28, President Barack Obama cited progress in diplomacy with Iran as an example of strong American leadership in his address to West Point military academy graduates. “It has been our willingness to work through multilateral channels that kept the world on our side” during nuclear talks, he said. The following are excerpts from his speech.

            Skeptics often downplay the effectiveness of multilateral action. For them, working through international institutions, or respecting international law, is a sign of weakness. I think they’re wrong. Let me offer just two examples why.
            In Ukraine, Russia’s recent actions recall the days when Soviet tanks rolled into Eastern Europe. But this isn’t the Cold War. Our ability to shape world opinion helped isolate Russia right away. Because of American leadership, the world immediately condemned Russian actions. Europe and the G-7 joined with us to impose sanctions. NATO reinforced our commitment to Eastern European allies. The IMF is helping to stabilize Ukraine’s economy. OSCE monitors brought the eyes of the world to unstable parts of Ukraine. This mobilization of world opinion and institutions served as a counterweight to Russian propaganda, Russian troops on the border, and armed militias. This weekend, Ukrainians voted by the millions; yesterday, I spoke to their next President. We don’t know how the situation will play out, and there will be grave challenges. But standing with our allies on behalf of international order has given a chance for the Ukrainian people to choose their future. 
            Similarly, despite frequent warnings from the United States, Israel, and others, the Iranian nuclear program steadily advanced for years. But at the beginning of my presidency, we built a coalition that imposed sanctions on the Iranian economy, while extending the hand of diplomacy to the Iranian government. Now, we have an opportunity to resolve our differences peacefully. The odds of success are still long, and we reserve all options to prevent Iran from obtaining a nuclear weapon. But for the first time in a decade, we have a very real chance of achieving a breakthrough agreement – one that is more effective and durable than what would be achieved through the use of force. And throughout these negotiations, it has been our willingness to work through multilateral channels that kept the world on our side.
            This is American leadership. This is American strength. In each case, we built coalitions to respond to a specific challenge. Now we need to do more to strengthen the institutions that can anticipate and prevent them from spreading.

Singing Amy Winehouse in Tehran

Robin Wright (for The New Yorker)

      For decades, both before and after his 1979 revolution, Ayatollah Khomeini railed against “Westoxication”—the poisoning of Iran’s Islamic society by Western culture. The new theocracy banned everything from music and dancing to modern art. Tehran’s National Museum of Contemporary Art crated away Picassos, Pollocks, Warhols, and Mirós worth billions. Even chess, a game with local roots, was banned. The Islamic Republic has been consumed ever since with its own clash of cultures.

            But female singers still face the toughest taboos. “Women’s voices should not be heard by men other than members of their own families,” Khomeini decreed. But when I was in Tehran, the fat woman literally sang in Iran—and Western pop songs, no less. To cheers and whistles in Tehran’s elegant opera house, Ghazal Shakeri belted out “Back to Black,” a provocative Amy Winehouse song. The lyrics had to be modified, but only a bit. Instead of “kept his dick with,” Shakeri sang “kept his lips with.” The performance was one of a dozen Western numbers incorporated into “The Last Days of Esfand,” an Iranian musical about a female psychiatrist treating a troubled young criminal. The two leads, Shakeri and a man named Ashkan Khatibi, sang several duets, including Abba’s rousing “The Winner Takes It All,” a poignant version of “Autumn Leaves,” and a spirited “Those Were the Days, My Friend,” which includes lines about raising “a glass or two” and singing and dancing forever. They were accompanied by three female backup singers (left).

Click here for the full article in The New Yorker.

Photo credit: Robin Wright

Javad Zarif on Iran’s Nuclear Negotiations

Robin Wright (for the The New Yorker)

      Iran and the six powers must address points of contention on virtually every aspect of a nuclear deal, from the future of suspect facilities to accounting for past programs, but Foreign Minister Mohammad Javad Zarif has been noticeably upbeat about prospects for a breakthrough. I asked him how difficult it would be to reach an agreement. The red lines—particularly between Washington and Tehran—often seem insurmountable.
      “It’s going to be both hard and easy,” he said. “Easy, because ostensibly we have a convergence of views on the objectives. We don’t want nuclear weapons, and they say the objective is to insure Iran does not have nuclear weapons. So, if that is the objective, in my view it’s already achieved. We just have to find mechanisms for agreeing on the process.”
Click here for the full article in The New Yorker.

Photo credit: Robin Wright

Kerry on Amir Hekmati’s Detention

            On May 26, Secretary of State John Kerry released a statement marking the 1,000th day of U.S. citizen Amir Hekmati’s detention in Iran. Iranian authorities arrested Hekmati—a dual U.S.-Iranian citizen born in Arizona and a former Marine— in August 2011 for allegedly working for the CIA. A 2012 retrial overturned the espionage conviction and instead charged him with “cooperating with hostile governments.” He was sentenced to 10 years in prison. But on May 25, Hekmati’s lawyer said that he plans to appeal the sentence. The following is the full text of Kerry’s statement.

            On this Memorial Day, we honor brave Americans who gave their lives for the notion that someone else's freedom is connected to our own. But this Memorial Day also marks another milestone: 1,000 days since an American veteran, Amir Hekmati, was unjustly detained while he was visiting his family in Iran.
            Mr. Hekmati has spent almost three years in an Iranian prison on false espionage charges. We remain especially concerned about reports of Mr. Hekmati’s health in prison.
Mr. Hekmati’s family in the United States has endured the hardship of his absence for too long. He is the eldest son, and his family misses him and needs him home.
            We respectfully request that the Government of the Islamic Republic of Iran release Mr. Hekmati so that he may be reunited with his family in the United States.

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