Iran Economy Facts
Economical overview
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.
- Countryaah.com: 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 its commitments.
- 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. Check findjobdescriptions to learn more about 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 expect.
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 being penalized.
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 caves.
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)
Total GDP
US $ 454,013 million (2017)
GDP growth
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)
Inflation
35.7 percent (2019)
Government debt’s share of GDP
32.2 percent (2018)
External debt
US $ 6,276 million (2017)
Currency
Iranian Rial
Merchandise exports
US $ 28 345 million (2000)
Imports
US $ 15,207 million (2000)
Current account
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
2006
December
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 minority everywhere.
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 Germany.
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.
November
Sunni kidnappers are executed
Six members of a Sunni organization are being executed in the city of Zahedan for kidnapping European tourists.
October
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.
September
Iran does not obey the UN
Iran announces that uranium enrichment has not been interrupted.
August
Heavy water factory inaugurated
A new heavy water production plant is inaugurated by Ahmadinejad in Arak.
July
The Security Council sets the ultimatum
The UN Security Council orders Iran to discontinue all enrichment and nuclear research by August 31.
May
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 arrested.
April
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.
March
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.
February
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.
January
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.
