As Iran economy’s is reeling and Iran’s President Hassan Rouhani is showing every sign of interest in reaching an agreement with the West on its nuclear program, it seems high time to reach an agreement with Iran. Such an agreement would eliminate one of the most troubling hot spots in the Middle East and will serve as an example on how to deal with explosive situations worldwide.
Iran’s main exports are oil and gas, and they account for most of the government revenues. However, as a result of the stringent sanctions imposed by the international community, oil exports fell by half. Iraqi oil exports overtook Iran’s for the first time since the 1980s and the Iranian rial fell by a record low to the U.S. dollar in September 2012.
According to some estimates, Iran may be losing as much as $60 billion annually in energy investment, and over $50 billion in oil revenues. At the same time, the price of imports has risen significantly and led Iran to use barter trade to circumvent the international dollar payment system. In a report published in 2012, the World Bank stated that financial sanctions and product boycotts would exact a heavy toll in 2013.
The worsening economic situation has led an increasing number of educated Iranians to seek overseas employment, resulting in a professionals’ “brain drain” at a time when the country needs them most. In 2006, the International Monetary Fund (IMF) said that Iran had the highest brain drain among 90 countries it measured, a situation that since then has only worsened and which may cost the government an estimated $40 billion a year.
Although the country’s unemployment rate is estimated at 12 percent, youth unemployment could be as high as 40 percent. Over 60 percent of Iran’s population is under 30 years old. As of 2010, there were about five million Iranians living abroad whose combined net worth has been estimated at $1.3 trillion.
Price controls, subsidies—particularly food and energy, widespread corruption, and smuggling undermine the growth of the private sector. At the same time, sanctions are lowering Iranian’s living standards, as the weak rial increases inflation through higher import costs.
This situation has made it harder to obtain some medicines, and has led to shortages in hospitals of drugs to treat cancer, diabetes, and other diseases. People have had to resort to using cheap imitation medicines from countries such as China, Pakistan, and India, and suffered the consequences. In December 2012, Iran’s Health Minister Marzieh Vahid Dastjerdi was fired after she criticized the government for not making funds available to purchase imported medication.
At the end of 2012, the official inflation rate was estimated at 27.4 percent, although according to unofficial estimates it is roughly twice as high. Official figures state that food prices have climbed by 60 percent within a year, which many believe is an underestimate. This has had a catastrophic effect on business, and on people’s quality of life.
Within this climate of confrontation, the election of Mr. Hassan Rouhani is widely seen—both within and outside Iran—as creating the conditions for a change of policy regarding Iran. He is considered a moderate who is eager to establish harmonious relations with the West, particularly with the United States.
He not only has liberated several high-profile political prisoners, but has also chosen among his advisers veteran bureaucrats and pragmatists with long experience in dealing with Western powers. Those who voted for him expect him to fulfill his promise of “moderation” in both internal and external relations. A recent exchange of letters between the United States and Iran’s president is a reason for cautious optimism.
Better relations with the West would fulfill most Iranians’ aspirations for a safer environment and better quality of life. As Kamran Sabahi, a 53-year old Iranian photographer told me in New York, “We have been waiting a long time for this to happen. We have almost given up hope.”
Dr. César Chelala is a co-winner of an Overseas Press Club of America award.
