Earlier this month, America and Europe imposed new sanctions on Iran as a result of their nuclear program. This nuclear program has been a continuous threat to the Gulf and international security.
In an interview with The Majalla, Dr. Ashraf Mishrif, a professor of political economy at Kings College, uncovers the most important changes brought about in Tehran since the previous sanctions, and discusses the impact and repercussions of the new sanctions on Iran.
Dr. Mishrif discusses how these sanctions will affect Iran’s economic, political, and social conditions and argues that they could have an effect on Iran’s nuclear program.
Dr. Mishrif, an Egyptian native, has received degrees from Cairo University (BA Archaeological Conservation), Anglia Ruskin University (BA Hons History and Politics), Leeds University (MA Modern International Studies), and Kings College London (PhD Mediterranean Studies), where he was also a senior research fellow.
Having been a senior lecturer in political economy at Kings College since June 2010, Dr. Mishrif was previously a senior lecturer in international business and finance at Ashcroft International Business School, and a lecturer at University of Greenwich. He has held a range of executive and advisory posts, including ten years as a cultural advisor for the Egyptian embassy in London and a member of the Academic Board of Directors at the Boston Business Management School in Singapore. He has also provided other advisory services to a range of international companies, government departments and international organisations such as the United Nations Conference on Trade and Development in Switzerland.
Europe and America began imposing their economic sanctions on Iran earlier this month because of the nuclear program threats, as well as the threats made to close the Strait of Hormuz, through which 35 percent of the world’s oil is transported. What is your view on those sanctions? What impact will it have on Iran?
The economic sanctions have been since 1979. The sanctions have proved to be effective in some cases and ineffective in others, depending on the political situation domestically and internationally. Past experiences show that the impact on those sanctions has been insignificant because other countries in Europe such as Spain, Italy, and Germany were still cooperating with Iran, shipping barrels of oil from Iran to those European countries. Some European countries have continued to trade with Iran, with Germany, Italy and Spain importing huge quantities of oil and gas from Iran.
However, the economic sanctions which came to effect since July 1, 2012, are very likely to impact hugely on the Iranian economy, more specifically the financial sector. The Central Bank of Iran has already felt the negative effects of the sanctions, and this is evident in the current exchange rates and interest rates which affect costs of doing business in Iran. Small firms are unable to get credit facilities from banks. The government is also finding it hard to secure hard currency to purchase essential imported goods from international markets.
The sanctions have hit hard the insurance industry, with many of Iran’s trading partners finding it difficult to ensure goods [are] imported from Iran at reasonable costs; thus making Iranian goods and commodities highly uncompetitive in international markets.
Tehran is the second-largest oil producer in OPEC, with an output of 3.5 million barrels per day; it derives 80 percent of its currency through oil exports. Furthermore, it sells about 450 thousand barrels per day (18 percent of its exports) to the European Union, mainly to Italy (180 thousand), Spain (160 thousand), and Greece (100 thousand). All of those countries are facing difficult economic conditions due to their debt crises. What will be the position of those countries from the sanctions that have been imposed on Iran and the impact on Iran’s economic status? And how long will it endure?
As for the oil sector, the sanctions are likely to decrease Iranian oil exports by up to 30 percent of its current exporting capacity. This is due to the fact that some EU countries which defied the previous sanctions are now taking a hard line against Iran because of its support to the Syrian regime and its uncompromising position in relation to the nuclear program. However, I do not expect this to be as harsh as many experts are predicting on Iran, as many of Iran’s importers of oil are in the Far East and south east Asia, a region that is experiencing high levels of economic growth and many of its countries are unwilling to sacrifice their economic interests for the sake of EU political interests or the Syrian crisis. Iran has also the capacity to turn itself from oil exporter to oil trader, which it has been doing for some time now, making it easy for the country to market its oil on a short-term basis and receive immediate cash and hard currency. This strategy is working in the short term, but Iran will not be able to continue this in the long run.
With all the aspects on the Iranian crisis in mind, in your opinion how will all this end? Do you think there is a diplomatic solution? Will the sanctions increase internal pressure on the people, which may give rise to a Persian upspring just like the Arab spring?
Whether the impact of the sanctions will be severe on Iran’s domestic politics is a matter of debate. Many argue that deterioration in the economy will raise the mass[es] against the regime and could spread the Arab Spring to Iran. This is possible as Iran experienced such uprisings in 2009 (similar to those [that] occurred in Tunisia and Egypt), but were suppressed before spreading across the country. The Arab Spring will spread to Iran and other non- democratic countries in the region sooner or later. However, many analysts argue that Iran gains much of its strength against western sanctions because of its ability to mobilize its people and friendly regimes worldwide through anti-Western propaganda.
Western officials have said in recent weeks that oil-producing countries in the Gulf, particularly Saudi Arabia, will compensate for the Iranian oil that cannot make it onto the market due to the sanctions. However, Tehran has warned the Gulf against compensating the West with oil exports. What is your opinion of such threats made by Iran against the Gulf? What will the impact of this be on Iran’s internal situation?
Of course, Iran's position today is much weaker than before, not only because of its nuclear programme but also because of its support to Assad’s regime in Syria, which made almost all countries—including those in the Gulf—unsympathetic with the Iranian intervention in Syria. Saudi Arabia, Qatar, Bahrain and UAE are willing to compensate for the loss of Iran oil production. What is absolutely clear is that the sanctions will lead to sharp fluctuations and increase in international oil prices, resulting in further destabilization to the international economy and threat to global economic recovery.