May 14, 2012
Tags: Iran, terrorism, war
The Iranian economy is in bad shape but nowhere near falling apart. Israel’s Finance Minister, Yuval Steinitz says that Iran’s economy is about to collapse, but there are other experts that disagree with that assessment. Prof. Meir Litvak is the director of the Center for Iranian Studies at Tel Aviv University. He totally agrees that Tehran’s economy is in a shambles, but adds that it is an exaggeration to say that Iran is on the brink of collapse.
“There are several examples of the difficult position of the Iranian economy,” Litvak said, “For instance, the Iranian currency, the riyal, has lost more than 50% of its value in the past five months. The central bank’s interest rate is 21%, and the inflation rate has climbed to 22% there this year, 10% higher than last year. The percentages I just quoted are Iran’s official figures so it would be reasonable to imagine the financial picture is actually much worse.
The cause of Iran’s difficult economic situation is a combination of the sanctions applied against it by Western countries, and failed economic policy by the state. Until two years ago, the Iranians spent $90 billion a year on subsidies for food and fuel. Today, they spend a similar sum of monthly compensation payments to low-income families. This compensation cancels out the savings achieved by the abolition of the subsidies.”
Nevertheless, Prof. Litvak says, “The Iranian economy is still far from general collapse. The situation in Iran is still not the end of the world. You must remember that in the past, Israel experienced annual inflation of 400%, and didn’t collapse. Turkey experienced much higher inflation, and today their economy flourishes.”
Prof. Litvak acknowledges that Iran’s oil exports have been hurt because of international sanctions, but the higher oil prices benefit the Iranian economy and offset some of the losses caused by the sanctions.
Prof. Uzi Rabi, from the Tel Aviv University, remarked, “The expression Steinitz used is colorful and exaggerated. The economic situation in Iran is woeful, but the Iranian economy is still not in a state of collapse.”
Iran is faced with some very difficult problems and their situation is getting worse. It is doubtful that even the tougher international sanctions will bring them down. It is Rabi’s opinion, “It could well be that Iran will continue to survive in the coming years. The Chinese and the Russians aren’t boycotting them, and the Indians recently agreed to buy oil from Iran, and they thus have pretty much broken the international embargo. The only thing that could bring about a total collapse in Iran is a total international oil embargo,” Rabi concluded.
In other words, the international sanctions will never work against Iran. They demand their right to become a nuclear nation. We in Israel and the West either have to accept that fact or go to war in order to prevent Iran’s aspirations from becoming a reality.