The World Economic Crisis and an Insulated Iran?

al Jazeera – Excerpt: However, Iran’s nuclear technology has advanced faster than expected and a 2007 report by the US government accountability office (GAO) found that “since 2003, the Iranian government has signed contracts reported at about $20bn with foreign firms to develop its energy resources. Further, sanctioned Iranian banks may fund their activities in currencies other than the dollar”.

What the GAO report could not foresee – because it had forgotten about its domestic accountability issues – was that the 2007 US sanctions against Iranian banks ironically ensured Iran’s immunity from the global financial crisis that was about to explode.

Iran was among the few major economies in the world not to be severely affected by the crisis.

Smaller banks from emerging economies, Islamic banking and less formal means of cross-border payments, including cash and ‘hawala’, provided the best protection for those who were kept out of the ailing Western banking system as a form of ‘punishment’.

The same report also shows that Iran’s exports grew from $8.5bn in 1987 to $70bn in 2006, representing an 824 per cent increase.

Iran’s exports have continued to grow since. According to the Economist Intelligence Unit (EIU), they are expected to reach $82bn this year.

Iran’s largest export market is Iraq, followed by China.

As irony would have it, Iran’s trade with both countries has grown exponentially since the US invasion of Iraq in 2003.

Moreover, and despite the sanctions, the net flow of foreign direct investment (FDI) into Iran has grown steadily too, save for the 2008-2009 blip. The EIU estimates that Iran’s net FDI will rise by 100 per cent within the next four years.

This is partly due to Iran’s successful and increasing reliance on ‘South-South’ trade, which effectively translates into her own sanctions against the West.

As an example, the China National Petroleum Corporation (CNPC) is due to start drilling in the South Pars field shortly as part of a $5bn project signed last year. The CNPC was chosen as a new partner to replace France’s dithering Total.

…According to International Monetary Fund (IMF) figures, Iran is the sixteenth largest economy in the world, consistently enjoys healthy growth rates and trade balances, and has a low national debt burden.

Despite having had one of the youngest populations in the world for the past two decades, the Iranian unemployment rate has stabilised at around 12 per cent since approximately a decade ago.

The country’s economy is also one of the most diversified in the region, second only to that of Turkey.

Iran’s petrochemical exports have grown 15-fold since 2000 and her steel and car manufacturing industries are the largest in the region with outward investments in several countries.

More importantly, Iran is among only a few countries learning to master high tech areas such nanotechnology, nuclear technology and space exploration.

In addition, it has one of the most sophisticated military industries in the region, despite having one of the lowest military budgets.

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