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January 2019, No. 90


Economy

How to Counter New US Sanctions


Torkan proposed four solutions to counter the sanctions.
“Our first drawback is the high energy consumption in the country”.


Akbar Torkan, President Hassan Rouhani’s advisor announced that two more income deciles have dropped under the poverty line and the middle class has been reduced from six income deciles to four, while their income has reduced by half in value. However, he said, the two high-income groups still maintain their place.

Addressing the 12th International Congress on Strategic Management in Tehran (November 19), he added: “The two lower income deciles have increased to four.  In such a society that poverty is so widespread you see million-dollar cars parading in the streets.”

He acknowledged that “the economic growth of the country is lower than predicted”, and explained: “We have over 3.5 million unemployed waiting to join the labor market. Meanwhile, our maximum capacity for creating jobs would be 700,000 a year.”

The President’s top advisor described the new round of US sanctions to be more complicated and difficult than the previous sanctions against Iran in 2012 to 2014.

Pointing to the history of the sanctions against the country over the past years, he said: “During the war, US sanctions against Iran were very serious, but at the same time, given the conditions in the world, there were many solutions our managers could use to counter the sanctions. For example, you saw that during the war and when the F-14 fighters were available only to the US Navy and the Iranian Air Force, we could procure aircraft parts despite the US sanctions; the same condition applied to the US-backed Cobra helicopters which were owned by Israel and Iran. We could obtain parts of these helicopters despite the tough sanctions.”

He added: “As years went by, there were stricter controls and today we are in a situation that when a container is loaded on a ship you can tell what its contents are. Therefore, the sanctions are tougher and more complex than before.”

He said in order to see how we can counter the US sanctions and what are our options, we must first assess our own situation. 

Oil, Petrochemicals Export under Pressure: Torkan added: “Moreover, the sanctions are putting heavy pressure on oil & petrochemicals exports, as well as shipping, transportation and even the basic metals we need. Inside the country too, we are faced with a major challenge to the banking system, and despite the interest of all statesmen to steer liquidity to the production sector the capital goes where the rate of return on capital is high.” 

Energy Equivalent of 5.4m Barrels of Oil Consumed: Torkan said that energy was another challenge facing the economy, noting that at the beginning of the 11th government, 61 million liters of fuel were consumed every day, but today we see daily consumption of over 100 million liters. The daily gas and oil consumption stands at 5.4 million barrels and interestingly, this amount of wealth is not generated in the country.

“This is the condition of our country, and on the other hand, the United States has imposed sanctions and is seeking to hurt the country, what should be considered in such circumstances?” 

Reduce Energy Consumption: Torkan proposed four solutions to counter the sanctions. “Our first drawback is the high energy consumption in the country,” he said. “We can reduce this consumption, if we reduce the current $80 billion energy consumption to $60 billion, we can spend the $20 billion on creating wealth and employment, and this is definitely achievable.” 

Construction Industry the Driving Force behind Employment & Production: He said the construction industry was another opportunity for the country and said: “The construction industry, having the least dependency on abroad, offers the best opportunities to us. This industry can act as a driving engine to improve the employment situation and the economy through 140 subsidiary fields. Therefore, we may need to move the engine to stimulate demand because the purchasing power of the people in the housing sector is low.”

He said tourism was one of the most important solutions in the present situation, and despite the importance of attracting foreign tourists, domestic tourism can also be very useful.

Torkan added: “Domestic tourism can help improve the distribution of wealth in the society. For example, people in high-income cities save money the entire year to travel to different cities on New Year holidays or other holidays. This means transfer of wealth which would cause financial turnover, trade, and economic boom in different parts of the country.” 

The Elites: The top adviser to the President said knowledge based fields and companies were the fourth solution to the current economic conditions of the country. “The issue of exit (brain drain) of outstanding talents, although small in number, is important because out of the 1.2 million students entering the first grade of primary school, about 800,000 get their diplomas. Out of this number, 50,000 enter fields that are the basis of the country’s development. Of this number, the first 5,000 students are elites who are the fruits of all our investments and efforts and they play an important role in the country. So if we lose these 5,000 people it means we have lost the assets of the country. Under such conditions will recruitment of these elites in government agencies solve the problem?! I do not think so. In order to take advantage of these top students we need to create jobs in proportion to the capability and expertise of these people, and this can be achieved only through knowledge-based companies which can create innovative capacities under the sanctions.”

 

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  January 2019
No. 90