Iran’s Economic Growth and the Nuclear Deal

Iran’s central bank published its preliminary annual report last week for the previous Persian year (March 2014 to March 2015), according to which Iran’s GDP grew 3 percent. The report represents the latest sign of improvement in Iran’s economy in part as a result of the partial sanctions relief it received after signing an interim nuclear agreement in November 2013. Iran’s strong growth rate, its halving of inflation, and the erosion of the sanctions regime raise serious questions over Western countries’ leverage over Tehran in nuclear negotiations, and whether reaching an acceptable nuclear deal is even possible.

A 3 percent growth rate is a significant improvement compared to the negative growth (-1.9 and -6.8 percent) Iran experienced over the two previous years. Over the last Persian year, Iran’s oil sector grew 4.8 percent, and the year before by -8.9. The industry and mining sector experienced 5 percent growth, up from -2.9 percent the previous year. The same pattern reveals itself in the service sector, with 2.4 percent growth compared with -1.5 percent the year before. Only the agriculture sector saw lower growth than the year prior: 3.8 percent compared to 4.7.

Moreover, President Hassan Rouhani’s government has also reined in Iran’s runaway inflation. Over the last year, inflation dropped by half: to 14.8 percent from 32.1 percent the year before:

A country chafing under severe sanctions does not experience 3 percent growth. Iranian officials believe that not only is the sanctions regime falling apart, but the United States is determined to sign a nuclear agreement at almost any price and has no serious military threat on the table. Such beliefs, combined with the improvement of Iran’s economy, have diminished Western countries’ leverage, and along with it, the prospect of Washington and its allies signing a nuclear deal that will ensure the security of Iran’s neighbors and the world.

Saeed Ghasseminejad is an associate fellow at Foundation for Defense of Democracies and its Center on Sanctions and Illicit Finance. Find him on Twitter: @SGhasseminejad