Two circumstances have made a mark on Iran's
economy in modern times: Oil is the country's most
important export commodity; it makes society sensitive
to fluctuating oil prices. And contradictions with other
countries, especially the United States, have led to
sanctions that put pressure on Iran. The state is
strongly present in both industry and the financial
sector, despite privatizations and other market reforms
since the late 1990s. Extensive price controls and
government subsidies contribute to inefficiency. The
informal, "black" sector is relatively large and
corruption is widespread.
The oil has long been Iran's economic base and,
together with the mining industry and the manufacturing
industry, accounts for over 40 percent of gross domestic
product (GDP). Agriculture accounts for just over a
tenth, while the service sector accounts for the rest.
The oil sector normally accounts for around 80 percent
of export revenues, half the state budget and about a
quarter of GDP.
Major imports by Iran, covering a full list of top products imported by the country and trade value for each product category.
Some time in the 2000s, the economy had been hit hard
by tough foreign sanctions and a large race in the price
of oil. Following the tightening of sanctions against
Iran in 2011, the oil industry and the banking and
financial sectors were heavily circumscribed. Oil
exports fell by at least half, it became difficult for
the industry to obtain spare parts. The currency, the
rial, collapsed in value by 75 percent and unemployment
rose. Inflation skyrocketed to over 50 percent.
Iran had been subject to sanctions from the United
States since the 1980s (see Modern History). In 2006,
the UN Security Council also imposed for the first time
restrictions on the exchange of the world with Iran. The
sanctions were designed to force an end to Iran's
nuclear program, which appeared to be aimed at the
development of nuclear weapons. The sanctions were then
extended in several steps and the US, the EU and other
actors also introduced their own even tougher sanctions
(see also Foreign Policy and Defense). It was not until
2016 that most sanctions were lifted since Iran in 2015
signed an agreement with the major powers to cancel its
nuclear program. The International Atomic Energy Agency,
IAEA, had also confirmed that the country had fulfilled
Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including IRN which represents the country of Iran.
The agreement gave hope for a strengthened economy.
It was a welcome change after several years of cancer:
After growing annually by around 5 percent for a decade,
the economy had recovered by more than so many years in
a row. Both companies and individuals had been affected.
The state coffins had degraded rapidly in the emerged
situation. Oil money had previously enabled job creation
and cash grants to large sections of the population, as
well as rescued crisis banks and subsidized industry.
Taxes were low, several professions were completely
exempt from tax. According to analysts, Iran's economy
was so over-oiled and so inefficient and corrupt that it
was heading for collapse even without sanctions.
After all, President Hassan Rohani succeeded in
stabilizing the economy after his entry in August 2013
(see Current Policy). A provisional agreement in the
negotiations on the nuclear program led to some relief
in the sanctions. The currency strengthened and growth
hit the zero line on the right side from 2014.
Inflation, which was up 45 percent, was down 15 percent
towards the end of the year.
One year after a completed international agreement on
the nuclear program in 2015, which led to the sanctions
being eased, the International Monetary Fund (IMF)
reported that Iran had a full 12.5 percent growth in the
economy. In 2016, it was announced that inflation
recalculated on an annual basis had dropped to 9.5
percent, the first listing below 10 percent in 25 years.
This was a result of the country breaking its isolation,
being able to get its oil out on the world market and
starting to receive foreign investment. The increased
flow of goods pushed prices down.
But then the world market price of oil had more than
halved in a short time. According to some estimates,
Iran would need a high oil price, $ 140 a barrel, to
balance its budget; now the price was down around $ 50.
Growth declined again, down to single-digit numbers.
During his presidency, Rohani has stepped in to curb
oil dependency. Investment in industrial exports has
been made to increase sales of cars to Iraq and
Afghanistan and fertilizers to China. The president has
also tried to streamline the tax system and make cuts to
the state budget. Subsidies on fuel, for example, have
been called into question, as well as a cash
contribution to families who have been destined for the
poor but who a large part of the population has come to
The role of foreign capital in the development of the
country has always been a matter of dispute among the
religious leaders, as is the question of whether the
economy should be liberalized. Around three-quarters of
the economy is still controlled by state corporations,
most unprofitable, or Islamic charities, bonyad. Sthe
foundations were formed after the revolution and were
allowed to take over the large financial assets of the
shah family. They were given responsibility for helping
the country's poor and relatives to the victims of the
war against Iraq in the 1980s. With the help of the
regime, the bonyads have grown into large corporate
empires, controlled by conservative whites. The
Revolutionary Guard has also become an influential
economic player, with interests in mobile networks, oil
companies, car manufacturers and construction companies.
Most have guarded the guard - or individual
representatives of it - through a privatization wave
that began in the late 1990s.
When President Donald Trump announced, in May 2018,
that the United States would abandon the international
agreement on Iran's nuclear program, it turned the terms
upside down - for the government in Tehran, for Iranians
in common, for US companies and for example, EU
companies. countries that depend on or are connected to
the United States in different ways. They are all
affected by the stricter US sanctions against Iran that
were announced: for most industries from August 6, for
the energy sector and the financial industry as of
November 4, 2018. Trump allowed exceptions for some
countries, key political allies to the US, who were
allowed to continue for a time buy oil from Iran without
The sanctions were thus reintroduced in the second
half of the year, but Iran's economy still shrank by a
full 4.8 percent in 2018, according to the IMF. Since
then, the effects for ordinary citizens have increased,
including price increases and a lack of important import
goods. The value of Iran's currency has plummeted.
Reintroduced US sanctions also mean that exports of
Iranian goods are made more difficult. Most countries,
with China as the major exception, now avoid doing
business with Iran for fear of being subjected to US
punishment. In 2019, according to the IMF, Iran's
economy declined by 9.5 percent.
In early 2020, Iran faced another major problem, as
it proved to be one of the worst affected by a pandemic.
The impact on the Iranian economy of the spread of the
corona virus remains to be seen, but the government has
promised extensive support to citizens living in small
circumstances (see Calendar).
Iran's size and rugged terrain make it difficult to
maintain effective communications, but infrastructure
damaged during the war against Iraq in the 1980s has
been repaired and the transport network has been
expanded, not least the railways. The final stage of a
railway from Turkey via Tehran to Zahedan at the border
with Pakistan was completed in 2009. In 2014, a line was
opened from Iran through Turkmenistan to Kazakhstan.
Both strengthen relations with Central and South Asia.
In 2016, direct freight traffic started by train from
China to Iran. There is a metro in Tehran.
On the long coast to the south there are four major
ports. Through the largest, Bandar Abbas on the Strait
of Hormuz, 90 percent of container traffic goes.
The international sanctions meant that for many years
Iran could not renew its aircraft fleet or import spare
parts (it also hit the railroad). In early 2016, Iran
Air was able to sign a contract with US Boeing to
purchase 80 aircraft. The contract was the first of its
kind since the revolution in 1979. Negotiations were
also conducted with European Airbus. But the sanctions
reintroduced under President Trump have stopped
business, in terms of both manufacturers and transport
companies that have been trafficking Iran.
Many historical sites were popular tourist
destinations during the time of the Shah. The UN UNO
World Heritage List lists two dozen places in Iran, of
which the ruin city of Persepolis is perhaps the most
famous. With the revolution and the war on Iraq, almost
all foreign tourism ceased. The travel industry could
then recover somewhat, only to be limited again by
sanctions. Iran is otherwise a country with great
potential. There are also high mountains, ski resorts,
rich nature conservation areas, desert regions and salt
The authorities have particularly developed the
hospitality industry on the island of Kish in the
Persian Gulf - roughly opposite Dubai - which is a
visa-free free trade zone. From neighboring countries
come Shi'a Muslim pilgrims who visit the holy cities of
Qom and Mashhad.
FACTS - FINANCE
GDP per person
US $ 5,628 (2017)
US $ 454,013 million (2017)
3.8 percent (2017)
Agriculture's share of GDP
9.5 percent (2017)
Manufacturing industry's share of GDP
12.0 percent (2017)
The service sector's share of GDP
54.4 percent (2017)
35.7 percent (2019)
Government debt's share of GDP
32.2 percent (2018)
US $ 6,276 million (2017)
US $ 28 345 million (2000)
US $ 15,207 million (2000)
US $ 12 481 million (2000)
Commodity trade's share of GDP
31 percent (2017)
Main export goods
oil, genuine carpets, caviar, agricultural products
Largest trading partner
Japan, China, United Arab Emirates, Italy, South
Korea, Germany, France, Russia
Bad choices for the president's supporters
Ahmadinejad suffers from severe setbacks in elections to local political
assemblies and the important Expert Assembly. His followers are in a clear
Congress with Holocaust deniers
Iran invites several history revisionists to a conference on the Holocaust,
the Nazi mass murder of Jews. President Ahmadinejad made a number of
anti-Semitic statements during the year, claiming, among other things, that the
Holocaust is a myth invented by Western powers after the war to humiliate
UN sanctions against nuclear research
The UN Security Council is imposing sanctions on eleven people and eleven
organizations that are considered to have links to the Iranian military industry
and the nuclear research program.
Sunni kidnappers are executed
Six members of a Sunni organization are being executed in the city of Zahedan
for kidnapping European tourists.
New uranium centrifuges are used
A new set of centrifuges for enrichment of uranium is put into operation.
1994 terrorist act blamed on Iran
The Iranian government and the Lebanese Hezbollah militia are accused by an
Argentine court of lying behind an explosive attack on a Jewish center in Buenos
Aires in 1994, when 85 people were killed and hundreds more injured.
Iran does not obey the UN
Iran announces that uranium enrichment has not been interrupted.
Heavy water factory inaugurated
A new heavy water production plant is inaugurated by Ahmadinejad in Arak.
The Security Council sets the ultimatum
The UN Security Council orders Iran to discontinue all enrichment and nuclear
research by August 31.
Government newspaper closes
The Iranian state newspaper closes after publishing a drawing that has been
interpreted as derogatory to the Azerbaijani minority. The drawing triggers
riots in the city of Tabriz in the northwest and at least 50 people are
Iran excludes IAEA
ElBaradei reports to the Security Council that the IAEA has not gained
sufficient transparency in the Iranian nuclear research program.
The uranium has been enriched
President Ahmadinejad says Iran has succeeded in enriching uranium but is not
trying to manufacture nuclear weapons.
Deadly attack in the southeast
21 people are killed in a raid against a state delegation in Sistan-e
Baluchistan province in the southeast.
The core program is reviewed
The UN Security Council orders IAEA chief Mohamed ElBaradei to review the
Iranian nuclear program.
Attack on the Danish Embassy
The Danish embassy in Tehran is attacked by a crowd protesting against the
newspaper Jyllands-Posten's satirical drawings by the Prophet Muhammad.
The Security Council is engaged
The IAEA reports Iran to the UN Security Council.
New step in the emotional conflict
Iran breaks the IAEA seals at the Natanz research facility.
Nuclear program negotiations break down
Foreign ministers from the UK, France and Germany say they give up attempts
to negotiate with Iran on its nuclear research program and recommend that the UN
Security Council take over the issue.