On September 9, the Valdai Discussion Club presented the report “Neither East, Nor West: How Iran’s Economy Copes With Sanctions”. The discussion was moderated by Ivan Timofeev, the Club’s programme director, who noted that Iran remains one of the key cases for those studying the use of sanctions, and that Iran’s experience is extremely important for Russia. Timofeev emphasised that, while this experience cannot be copied literally, it requires careful, unbiased, and objective study.
Adlan Margoev, a researcher at the Institute of International Studies at MGIMO and a co-author of the report, briefly outlined some of its key points. Margoev analysed Iran’s reaction to the sanctions, noting that Tehran was simultaneously trying to reach an agreement with the initiators and adapt to the terms of the sanctions. According to him, the results of Iran’s attempts to reach an agreement show that sanctions are a “one-way ticket.” Even if at some point it is possible to remove or soften them, it is very difficult to ensure the sustainability of this deal. Iran’s policy of adaptation to the sanctions framework was moving forward in three directions: ensuring macroeconomic stability, relying on its own resources and supporting its own production, as well as supporting socially vulnerable groups. Despite a number of achievements, it can hardly be called completely successful, which Margoev attributes to the preference for administrative methods of regulation and the difficulty in completing any reforms due to the chronic lack of consensus among the elite. In summary, the analyst noted that Iran, despite colossal sanctions pressure, is coping with its basic needs – and this is certainly a positive experience – but it cannot yet scale this success to the entire economy.
Maxim Baranov, Acting Director of the Second Asian Department of the Russian Foreign Ministry, noted that the approach outlined in the report is of interest both from the point of view of assessing the development of modern Iran and from the point of view of survival under sanctions. Speaking about specific areas with which the Iranian experience is significant for Russia, he pointed to the development of non-oil exports, which have grown exponentially since the Islamic revolution and have achieved great diversity both in terms of nomenclature and geography, as well as the successes of the Iranians in trade using not only convertible currencies, but also the Chinese yuan and the Indian rupee as units of account. Now Russia also actively uses national currencies in trade. The diplomat named the need for far-reaching work to create a regulatory framework for combating sanctions. The corresponding declaration signed by Russia and Iran is becoming a basic document for interaction with other countries and can serve as a basis for transferring anti-sanction cooperation from a bilateral to a multilateral format. “Sanctions are not our choice. But we can choose how to fight them,” Baranov added.
Kayhan Barzegar, Senior Academic Advisor at the Institute for Political and International Studies (IPIS), acknowledged that sanctions have caused serious difficulties for the Iranian economy, but added that Iran is capable of coping with them and will not collapse under any circumstances. Sanctions put pressure on the Iranian people, especially the middle class, but they cannot alter the country’s strategic approaches and priorities. Barzegar noted that Iran is now actively involved in regional politics, using its advantageous geographical location, and this has delivered extremely positive results. “Sanctions have made Iran pay more attention to relations with neighbouring countries, and the new administration continues to adhere to this approach,” he explained. The country is switching to regional supply chains and trying to develop relations with regional economic organisations. The reorientation towards countries in the Global South helps it protect its national interests. As a result, Iran is now becoming a hub for economic ties in the region, Barzegar said. “Western sanctions have made Iran more principled, and we will not surrender in the face of them,” he concluded.
Sumbula Sultanova, Executive Secretary of the Russian-Iranian Business Council, described the Iranian “resistance economy” as a well-coordinated mechanism aimed at maximising the use of internal resources – human, financial and natural – as well as resisting external pressure by creating reserves of necessary goods. Counteracting the sanctions regime falls under the jurisdiction of state institutions. In order to withstand waves of economic sanctions, Tehran strictly regulates foreign trade, as well as prices for a number of consumer goods and housing and communal services tariffs. “The timely adjustment of the economy by the state allows Iran to stay afloat again and again,” Sultanova said. According to her, in Iranian-Russian trade and economic cooperation, it is the public sector that serves as a catalyst, and without synergy with the state, private business is unable to work in this area. Sultanova named problems related to logistics, mutual settlements, customs regulations and the lack of an agreed-upon legal framework as being among the factors that hinder the development of bilateral trade. In this regard, the interpenetration of financial systems looks promising, she believes.
Lana Ravandi-Fadai,
Senior Researcher and Head of the Eastern Cultural Centre at the Institute of Oriental Studies of the Russian Academy of Sciences, noted that the development of the Iranian economy can be called relatively successful. In her opinion, banking plays a key role in overcoming sanctions. She puts the oil industry in second place. Another important point, according to Ravandi-Fadai, is the development of relations with neighbours, both those under sanctions and those not under sanctions. In addition, she believes it is necessary to take into account the influence of domestic policy, including the creation of free economic zones. Also, one cannot discount the factor of the Iranian diaspora and Iranians working in other countries, who import sanctioned equipment into the country. In the field of microelectronics and technology in general, cooperation with China, on which Iran depends to some extent, is of great importance. At the same time, Iran is pursuing technological research under a targeted state policy.
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
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