The Impact of the Iran Nuclear Deal on Poverty in Iran

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TACOMA, Washington — Negotiating the Joint Comprehensive Plan of Action (JCPOA) was one of President Obama’s biggest foreign policy achievements in office. Commonly known as the Iran nuclear deal, this agreement blocked all four pathways to a nuclear weapon for Iran and reduced the breakout time — the amount of time it would have taken them to gather the materials to build a nuclear bomb — from two to three months to a year. Under the deal, Iran also committed to unprecedented levels of transparency, keeping Iran from building a bomb in secret. More than 100 countries voiced support for the deal when it was announced. The impact of the Iran nuclear deal on poverty in Iran is of particular significance.

The Impact of the Iran Nuclear Deal

One of the reasons that the international community heralded the Iran nuclear deal as a success was because of the difference it made to the lives of everyday Iranian citizens, many of whom lived below the poverty line. In exchange for curbing its nuclear program, Iran negotiated an easing of sanctions from the U.S. and its allies, which put it back in the fold of the global economy.

Years of sanctions had severely depressed the value of the rial, causing inflation and shortages across the country. In addition, the oil industry, one of Iran’s most important exports, suffered immensely. Exports fell from 2.2 million barrels a day to 700,000. This, plus the EU and the U.S. halting most forms of business with the country, made the economic downturn even worse for Iran.

At the peak of the sanctions, 70% of lower and middle-class workers lived below the poverty line. Everything from basic food supplies to vital medicines had become more expensive and difficult for the average citizen to obtain. In total, sanctions caused Iran’s economy to contract 6.6% in 2012. It only grew 1.9% in 2013 and 1.5% in 2014.

The Impact of Sanction Removal in Iran

When nuclear-related international sanctions were removed in 2016, the Iranian economy strongly recovered due to a rise in oil production and exports. The GDP grew 12.5% in the first year after implementation. The economy generated 700,000 new jobs, which was 10 times as many as the period before sanctions from 2006 to 2011. Many jobs were created in the oil sector, as oil exports grew up to almost 2.5 million barrels daily and Iran’s trade with the European Union increased significantly.

Unfortunately, due to both domestic mismanagement of the economy and the lasting effects of sanctions, unemployment and inflation remained high. Most of the money came through the oil sector, which went to government officials or the upper-class. However, the economy was trending well, with inflation holding steady instead of increasing, down to 9% in 2017. The lower and middle-classes were starting to benefit, evidenced by the average household budget increasing after a seven-year decline before the deal was struck. While economic recovery was projected to be a slow process, it was happening.

Trump’s Withdrawl and Harsher Sanctions

In 2018, President Trump withdrew the U.S. from the JCPOA, despite opposition from top allies. One reason for this was because he believed that it was not strict enough since restrictions would start to ease after 10 years, though the agreement not to build a bomb was permanent. Despite promising a new, better deal, his term ended without one. Instead, harsh sanctions under his “maximum pressure” campaign have harmed the Iranian economy, but not stopped its nuclear development program. Two years after Trump pulled out of the Iran nuclear deal, Iran resumed its enrichment of uranium, a key part of building a nuclear bomb.

Trump imposed on Iran the harshest sanctions ever imposed on a country. Many of them targeted the oil industry in what he said was an attempt to “bring Iran’s oil exports to zero, denying the regime its principal source of revenue.” The rial lost two-thirds of its value, triggering rapid inflation. Iran’s GDP has declined by 11% since 2018, while the unemployment rate has risen to 16.8%. The recession caused by Trump’s sanctions made it so that 55% of the population lived below the state’s poverty line, an increase from the years where the sanctions were lifted. Average living standards have decreased by 13%. The IMF forecasted zero growth in 2020.

NGOs Helping Iran

Many NGOs are working to offset the harmful effects of the sanctions by bringing aid to the Iranian people. One in particular, the Popular Students Relief Society, works to help impoverished women and children have better lives by providing both material assistance and educational opportunities. One of its long-term projects established 35 educational centers called ”Iranian Homes” in marginalized neighborhoods all over Iran to help poor children access equal education to their peers, while also giving them a place to get a free meal and hygiene services. It also has several short-term projects, like free food delivery to slums, providing medicine in poor provinces and paying for medical care for those who cannot afford it. These efforts have helped to combat the rising tide of poverty due to the effects of the 2018 sanctions.

Desire for a Renewed Deal

The Iran nuclear deal is once again becoming a focus of foreign policy discussions because of President-elect Biden’s desire to rejoin it. A renewed deal and the sanction relief that would come along with it, could help the millions of Iranians who live in economic turmoil. Even a “freeze-for-freeze” policy — a temporary easing of U.S. sanctions in exchange for a temporary ceasing of nuclear activity on Iran’s part, could help to stabilize the economy, especially in the wake of the disruption that COVID-19 has caused. Should the U.S. rejoin the Iran nuclear deal, the terms will have to be different. Experts predict that it will be an uphill battle due to the undermining of the deal from the withdrawal in 2018. The impact of the Iran nuclear deal is clear. It significantly reduced poverty in Iran in its first iteration and it can do so again if renewed under the Biden administration.

– Brooklyn Quallen
Photo: Flickr

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