International sanctions against Iran, on Iranian oil exports and banks, have put a lot of pressure on the country’s economy during last few years. Moreover, declining global oil prices have struck a double blow to Iran’s economy which was starting to recover under the new government of Hassan Rouhani.
Oil prices has slumped approximately 50 per cent since June and resumed their decline. Saudi Arabia, the world's largest crude oil exporter, which plays an important role in controlling oil prices, announced that it will not cut the oil production despite a global glut. Experts believe that Saudi Arabia’ strategy is to flood the international market to harm the economy of Iran, which needs the oil global price to be over $100 per barrel to break even. In addition, the Saudi plan is to challenge Iran’s foreign policy, according to which it is currently expanding its relationships with world powers.
The slide in oil prices is shrinking Iran’s budget, because Iran’s income heavily depends on oil money.
The total state budget presented by Rouhani's government for the next Iranian year, which starts 21 March 2015, will be 294 billion dollars, based on a projected barrel price of 70 dollars, which is not guaranteed at this stage. While the current budget is based on the assumption that oil would sell for 100 dollars a barrel.
Besides the losses from falling oil prices, Iran’s oil exports have cut 60 per cent to one million barrels a day due to the Western sanctions against the country.
In addition, the frozen assets of Iranian banks and businesses due to the international sanctions, have led the country into a severe economic crisis during last years. As a result, the Iran currency (Rial) lost two thirds of its value against the US dollar in 2012.
Iran needs to reach a deal and agreement with the world powers over its nuclear program to be relieved from the sanctions and save its economy.
“A complex deal on Iran’s nuclear program can be reached only if global powers stop pressuring Tehran”, Foreign Minister Mohammad Javad Zarif warned Saturday evening.
President Rouhani and his cabinet continue to focus on nuclear talks and are willing to reach an agreement, however Iran and the major powers have not made huge progress yet.
This article has been published on The News Hub