The United States imposed its first sanctions against Iran back in 1979 when the Iranian revolutionaries seized the American embassy and took its diplomats hostage. However, only after 2010 the restrictions that Washington and its allies imposed on Tehran for advancing its nuclear programme had a devastating effect on the Iranian economy. Cut off from the oil market and the international financial system, Iran saw its oil exports shrink by a factor of two and had to rely much more on its remaining trade partners.
In fact, by 2023, its top five trading partners accounted for three quarters of Iran’s non-oil trade. Oil used to be Iran’s main revenue driver so much so that a decline in its exports tripled the country’s budget deficit, which reached 5 percent in 2022. Foreign currency also became scarce, while the value of the Iranian rial fell more than ten-fold. Inflation accelerated to 47 percent in 2023, according to a preliminary estimate by the IMF. All these factors resulted in slower GDP growth. Before 2012, Iran reported real GDP growth at about 5 percent, while the global economy expanded by about 3 percent.
After that, the Iranian economy has been falling behind as its GDP increased by an average of 1.4 percent against a 2.5 percent of the global economy. Iran experienced two sanctions shocks. Its leadership viewed external pressure as the main cause of the country’s economic woes. This is why the government responded to the first sanctions wave in 2010−2013 by trying to ease restrictions through negotiations.
However, striking a balance among all the parties involved in the nuclear talks proved to be an uphill battle. The resulting Iranian nuclear deal created a framework which was second to none in the world in terms of verification of the peaceful nature of Iran’s nuclear programme, while the negotiators failed to devise a mechanism for assessing whether the United States performed its commitments in good faith in terms of lifting sanctions and enabling transnational corporations to tap the Iranian market without fearing any restrictions.
