Introduction – one sentene about political strucuture power had balance -outline how the JCPOA played a factor and how it has negativly The Iran’s gov’t structure has their own checks and balances, peoples are so upset The most salient issue Iran faces are renewed economic sanctions caused by the United States’ withdrawal from the JCPOA. These economic sanctions, although not fully enacted yet till November, will have sweeping implications for the economy in these two ways; high unemployment coupled with high inflation. The simultaneous combination of these two economic disasters is , which is referred to as Stagflation in macroeconomic theory Government Structure Iranian government is a hierarchical system in which each key politicians have checks and balances of power to keep different branches of the political structure controlled. This hierarchical structure was established after the 1979 Revolution. This revolution was dedicated to overthrowing the monarchy that lasted 2,500 years prior. This revolution established an Islamic Republic government. The governmental bodies within the state political structure can be divided into two sides: the bodies that deal with religion and the bodies that are clerical in nature. Within this theocratic government, the voters are able to elect the president, the parliament, and the assembly of experts. Although voters have the power to elect the President, he must answer to the Supreme Leader for all governmental decisions (The Structure of Power in Iran, PBS). The highest level of Iran’s political structure is the Supreme Leader, who is not elected by the voters, but chosen by the Assembly of Experts. This stream of power and who is elected by whom is shown in a flowchart as FIGURE ___ The current Supreme Leader is Ali Khamenei who has been in power since 1989. The Supreme Leader has all power over Iranians economy, foreign policy and education. Since the revolution, there have only been two Supreme Leaders: Ruhollah Khomeini, and Ali Khamenei. Ruhollah Khomeini reigned from 1979 until his death in 1989 placing Ali Khamenei in power since 1989. The Supreme Leader is constitutionally granted sweeping powers with the final say on decisions relating to the economy, environment, foreign policy, education, elections and most notably, Iran’s nuclear program. Furthermore, the Supreme Leader is also responsible for the appointment of half of the Guardian Council. The Guardian council, in turn, is in charge of protecting the constitution, controlling elections, vetting potential candidates for the parliament as well as the president. Now on the clerical side of Iran’s political structure, the president leads the government and the Cabinet. He is in charge of the economy, and is the face of Iran concerning intra-state diplomacy. Both the president and the parliament are directly elected by voters, however they are required to answer to higher powers. Managing both the President and the Supreme Leader is the Assembly of Experts, comprised of 86 clerks. This powerful political group are are elected by the public every eight years. Furthermore, this body is in charge of appointing and supervising the Supreme Leader. Collectively, they also have the power to replace him (The Structure of Power in Iran, PBS). In essence, all of these political positions are placed to balance powers within the Iran’s political structure. Sanctions and JCPOA Since the late 1970’s the United States has put forth several sanctions that have limited commercial trade with Iran. Particularly, the Department of State’s Office of Economic Sanctions Policy and Implementation is responsible for “enforcing and implementing a number of U.S. sanctions programs that restrict access to the United States for companies that engage in certain commercial activities in Iran” (Sen, Ashish Kumar, 2018). For example in 1979, The United States created sanctions after an Iranian student forcibly entered the Embassy in Tehran and took diplomats hostage. As a result the United States froze $12 billion in Iranian assets (Sen, Ashish Kumar, 2018). In 1992, the United States Congress passed the Iran-Iraq Arms Nonproliferation Act. This act declared that the United States had the power to to stop the transfer stop any transferring of goods, services or technology to Iraq or Iran, if this transferring activity could lead to the country gaining any “chemical, biological, nuclear, or advanced conventional weapons” (Sen, Ashish Kumar, 2018). This prohibition of exports from the United States to Iran was continued in 1996 through 1997 under the democratic United States President Bill Clinton (Sen, Ashish Kumar, 2018). In July of 2015, the Joint Comprehensive Plan of Action (JCPOA) went into effect. This deal included China, France, Russia, United States, United Kingdom, and Germany. Essentially, this arrangementdeal, created under the Obama Administration, sought to ban Iran’s usage of nuclear weapons. The United States monitored Iran’s nuclear weapon activity and also set forth incentives that would benefit Iran. Within the Iran Deal, the United States set forth five conditions that Iran would have to adhere to uphold their end of the deal. First, the United States required Iran to reduce its uranium stockpile by giving up 97% of its enriched uranium. Then, the United States limited Iran’s uranium enrichment to 3.67% for 15 years (Young, 2018). Next, the deal required Iran to reduce centrifuge which is used to enrich uranium. This step required Iran to give up two-thirds of centrifuges causing Iran to take up to 12 months to produce enough fuel for a nuclear weapon (Young, 2018). After that, Iran was to commit to inspection of nuclear production by the United Nations.
Finally, the United States, European Union, and United Nations would remove energy, economic and financial sanctions from Iran. However, this step was only completed if Iran was compliant with the other steps in the Nuclear Deal. Removing the sanctions from Iran would ultimately increase economic growth, boost trade and encourage foreign direct investment to flow into Iran. This deal also marked an easing of tensions between the Islamic Republic and the rest of the world which ultimately is critical for regional stability (Young, 2018). In 2016, the International Atomic Energy Agency (IAEA) confirmed that Iran had accomplished their side of the nuclear deal. Therefore the United States removed the secondary sanctions on Iran while leaving the primary sanctions still in effect (Sen, Ashish Kumar, 2018). The primary sanctions’ purpose is to limit most commercial and export activities between United States and Iran. These sanctions were governed primarily by the Iranian Transactions and Sanctions Regulations (ITSR). Although Iran has complied with the rules and regulations set by the Nuclear Deal, the United States Congress still passed a ten year extension of the Iran Sanctions Act (ISA) on December 15, 2016. Lastly, in 2017, President Trump and his administration renewed sanction waivers that were created by the Secretary of State John Kerry. The United States of Representatives passed the Countering Adversarial Nations Through Sanctions Act that imposes new sanctions on Iran, North Korea and Russia. These sanctions are snapping back into place and stagflation is an effect that will happen within the Iranian economy as a direct result (Habibi, Nader, 2018 & Sen, Ashish Kumar, 2018).
Stagflation in Iranian Economy
Iran is facing one of the worst economic problems a country can face: stagflation. According to the Oxford Dictionary stagflation is a “persistent high inflation combination with high unemployment and stagnant demand in a country’s economy” (Oxford Dictionaries). Stagflation consists of both inflation and stagnation in an economic cycle. Inflation tends to occur when prices of the economy increase, while stagnation occurs when manufacturing of goods and services decrease. This would be known as a period of no growth or development for Iran. Ultimately, stagflation causes an increase in unemployment as the country does not require workers to produce goods and services that people are not buying. Stagflation is a serious economic cycle that should not be taken lightly. The system that the economic world has in place to fix inflation usually causes stagnation and unemployment to worsen. In addition, the systems the economic world has in place to fix stagnation and unemployment tend to make inflations worse. Therefore solving employment and inflation issues work against each other. (Staff “Stagflation” 2018). Although the Iranian economy has grown since the Nuclear Deal due to resumed Oil Exports, growth outside the oil sector has decreased. (washington Post) Not having active sanctions in effect have been negatively affecting the Iranian people. A combination of inflation and scarcity has caused necessary goods to soar. Eggs, a basic necessity good that is usually cheap for consumers, has risen about 40% (“Iranian economy collapsing” 2018). Groceries are not the only good or service that has been affected. Real estate along with electronic goods have both almost doubled in prices (Cronin & Flanagan 2018). Because the cost of basic needs is increasing, the value of the Iranian currency also known as the rial, is decreasing. The Iranian currency has drastically decreased, given the fact that the Iranian rial was at 112,000 and is about 90,000 within one week. This is a 22,000 decrease in Rials. The Arab News reported “Iranian rial has lost more than 50 percent of its value against the US dollar in the unofficial market since January 2018” (Cronin & Flanagan 2018). Figure — shows a influx of the United States dollar rate in Iran. From 1968-2011 the United States Dollar Rate in Iran stayed around or just below 10,000 rials, but a drastic peak hit in 2011-2012 and caused rials to almost reach 40,000. Around 2012 the unofficial United States dollar rate became a jagged line increasing then decreasing, ranging up until 2017 when the United States dollar rate skyrockets to 80,000 rials. Although Iran is gaining more income, the government is forced to spend its liquidity to pay for debts, and terror organizations like Hamas and Hezbollah while leaving the economy in shambles (“Iranian economy collapsing” 2018). In addition to economic hardship, the Iranian citizens are suffering from unemployment. Although all citizens in Iran are being affected by the high unemployment rate, the younger generation is getting hit the hardest as they make up majority of the population in Iran. Unemployment for the younger generations is at 26.20% (“Iran Youth Unemployment Rate” 2018). Several working class Iranians are demanding a solution to the fact that they are extremely frustrated that the economy has seen little to no change despite the “lifting sanctions under an international nuclear deal” (Habibi 2018). Some business owners in Iran claim that Iranian factories should focus on development and export more products to allow more factories to be put online, ultimately increasing employment. This idea goes hand in hand with the main goal of shifting Iran’s economy from agricultural based economy to a more self sufficient economy where Iran is able to develop and fine tune its ability to make and sell mandated goods (Basravi 2018).
In conclusion, maintaining Iran’s economic having Iran in this state of instability is actually ideal for Khomeini’s regime as it only adds fuel to the people’s hatred of the United States. As middle class workers can no longer afford basic necessities, the Iranian government uses the US as a scapegoat to blame high prices on. This excuse effectively covers up corruption and poor leadership within the highest Iranian government bodies. From the movie Our Man in Tehran feeling of hatred plays the role in everyday life for Iranian people. In the movie, they depicted Iranians burning American flags while screaming “Death to America” Having the United States drop out of the JCPOA also isolates Iran from the rest of the world, which means Ali Khamenei, own people are less likely to question his legitimacy. It is the ultimate form of regime survival- until Iran completely runs out of money. With that being said, Kim Jong Un, the Supreme Leader of North Korea, does the same thing. Kim Jong Un isolates his population off from the rest of the world and balames the rest of the world for the problems that he causes in his own country. However one policy recommendation would be for the United States to step in and help Iran. Because of Iran’s devastating economic situation, the Iranian economy is in scrambles and the people are living in inhumane conditions. The Iranian President should go to the United Nations and negotiate a new Joint Comprehensive Plan of Action (JCPOA). This new JCPOA should require the United States to relieve its sanctions if Iran compliance with the JCPOA regulations. This negotiation of a new JCPOA, along with the help of the United Nations, will ultimately allow the Iranian government to bolster their economy and improve living conditions for the Iranian people.