Iran’s Economic Strategy

Iran was until the fall of the former Shah of Iran Mohammad Reza Pahlavi (1919-1980) a rapidly emerging economy. Iran’s economic development however has slowed down since the Islamist revolution of 1979. After all, what international private investors in their right minds would be interested in investing in a totalitarian dictatorship?

Iran is keenly aware that its oil revenues will come to an end with the electric vehicles revolution and like the GCC countries is hoping to build a diversified post-oil economy. The Iranian regime signed the JCPOA in 2015 with the hope that trade and investments with Europe would develop Iran’s economy and thus help Iran’s imperialist ambitions survive the end of consumption of fossil fuels while still allowing Iran to develop nuclear weapons after 2030. President Donald Trump’s well-advised cancellation of the JCPOA ended that hope and Tehran is not interested in reentering the JCPOA since the regime recognizes that the next Republican administration will cancel the JCPOA once more four or eight years from now. Tehran furthermore is sophisticated enough to realize that European exporters, importers and investors will draw the same conclusion and stay away from Iranian markets for the foreseeable future. Tehran drew the logical conclusion and made an economic pact with Beijing in 2021 to sell China subsidized oil for 20 years in return for massive Chinese investments in the Iranian economy.

Tehran thus recognizes that the future of its imperialist ambitions is dependent on Iran diversifying its economy in preparation for a post-fossil-fuel future. Will the Iranian economic gambit succeed? State-owned Chinese companies are probably the only ones ready to invest in a totalitarian state like Iran and bartering oil avoids the use of banks and thus bypasses indirect American banking sanctions on trade with Iran. However, Iran will only be able to do this as long as oil remains in demand in China, which is according to Beijing for another 20 years. Iran’s economic strategy does not involve integration with the global economy and only with the Chinese market which Iran considers large enough for the Iranian economy. 

Why then does Iran not return to the JCPOA and reconcile with Washington and normalize its diplomatic and economic relations with the United States as any normal country would in Iran’s difficult situation? Then again could it be argued that the next Republican administration would break off resumed relations with Iran. However, at play here is something more, namely Khomeinist xenophobia against Americans and this ingrained intense hostility is the main obstacle against the economic development of Iran aside from of course the regime itself whose totalitarian nature fundamentally deters private foreign investors. American sanctions against Iran – including indirect banking sanctions – are likely to remain in force for the foreseeable future under both Democratic and Republican administrations and this is unlikely to change for as long as Tehran’s fundamental hostility against America remains unchanged.

Published by Daniella Bartfeld

Daniella Bartfeld is the founding director of the Aliyah Organization

Leave a Reply

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

WordPress.com Logo

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

Twitter picture

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

Facebook photo

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

Connecting to %s