Part I—Country Profile Iran is a large country in the Middle East which borders Iraq on the west, Saudi Arabia on the southwest, and Afghanistan on the east. It was known as ‘Persia’ until 1935. It also borders the Gulf of Oman on the south, the Persian Gulf on the west, and the Caspian sea. Its natural resources include petroleum (perhaps the 4th largest reserves in the world), natural gas, coal, copper, and iron ore. Relatively little of the vast country is suitable for agriculture (about 30%), mostly due to its lack of precipitation and deserts. Iran’s ethnic groups include Persians, Azeris, Kurds, and Arabs. Persian is the official language of Iran, with Arabic, Kurdish, and other dialects spoken there as well. Its dominant religion is Islam, with the vast majority of people being Shiites (Iran 2016).
According to the 2016 CIA Factbook, Iran’s economy is statist, combining widespread inefficiencies with a heavy dependence upon oil and natural gas exports. However, Iran also has significant economic sectors in agriculture, industry, and service. Most of the companies in the country are either state-owned or state-controlled, whether directly or indirectly. The economy is plagued by inflation, price controls, subsidies, and billions of dollars (US) in non-performing loans. While 2014 was a year of economic growth, Iran continues to be plagued by widespread unemployment. Many of its most promising youths seek education and employment in other countries (ibid.).
Iran’s population for 2016 was estimated at just over 82 million, making it the 17th most populous country in the world. Iran’s Gross Domestic Product (GDP) with respect to purchasing power parity was about $1.3 trillion U.S. dollars in 2015. Its GDP official exchange rate for the same year was just over $380 billion U.S. GDP per capita (PPP) was just over $17,000 in 2015, with a gross national saving of about 30% of GDP. GDP composition, in terms of end use, is distributed as follows: Household consumption (53%), government consumption (10%), investment in fixed capital (27%), investment in inventories (6%), and exports of goods and services (22%). GDP composition, in terms of sector by origin, is divided over agriculture (9.3%), industry (38.4%), and general services (52.3%), again looking specifically at 2015 (ibid.).
Agricultural products in Iran include wheat, rice, other grains, sugarcane, fruits, cotton, sugar beets, caviar, and wool. Its industries include petroleum and petrochemicals, gas and fertilizers, caustic soda, textiles, cement, food processing (sugar refining and vegetable oil production, and metal fabrication, both ferrous and non-ferrous (ibid.).
Labor statistics are as follows. The industrial production growth rate, for 2015, was about 2.9% (making Iran 90th in the world). By occupation, the labor force is distributed across agriculture (16.3%), industry (35.1%), and other services (48.6%). Nearly 19% of the population is below the poverty line (ibid.).
Iran’s exports amounted in 2015 to about $78 billion (U.S.), compared to about $86 million (U.S.) in the previous year. This makes Iran 39th in the world in terms of net exports. By far its largest export is oil (petroleum), followed at some distance by other chemical products, fruits and nuts (pistachios especially), carpets, cement, and ore. It has four main export partners: China (22%), India (10%), Turkey (8%), and Japan (5%)—taking 2015 figures. In terms of imports, in 2015 Iran counted $70 billion (U.S.) up from about $50 billion (U.S.) in 2014. This makes Iran 39th in world in terms of net imports. The commodities Iran imports are primarily industrial supplies, foodstuffs and other consumer goods, technical services, and capital goods. Iran’s import partners are the United Arab Emirates (40%), China (22%), South Korea (5%), and Turkey (5%) for 2015 (ibid.).
Iran’s budget revenues for 2015 were just over $56 billion (U.S.), while expenditures totaled $70 billion (U.S.). The country had, for the same year, a budget deficit of -3.5% of GDP, making it 132nd in the world. Iran’s taxes account for 14.1% of its GDP, making it about 200th in the world. In 2015 Iran carried a public debt of 13.2% of its GDP.
Under Muhammad Reza Shah in the 1970s, Iran purchased (mostly on credit) an unbelievable amount of military equipment, principally from the United States. Much of the equipment the military did not even know how to use. This is part of the reason the 1979 revolution occurred—the country was going very deeply into debt, but little if any of the money was finding its way to social programs, or to the people more generally. In 1979, just before the revolution, an additional $12 billion of military hardware had been ordered. While it is difficult to judge the effect of this out-of-control spending on today’s Iranian economy, it could not possibly have helped (Polk 2009, 122).
Part II—United States Trade Analysis
The United States does not do a great deal of trade with Iran. Its exports to Iran amounted to less than $100 million in 2016, imports just over $41 million (ustr.gov 2016). There are a number of reasons for this. One is that the United States did not really get what it wanted out of the Iranian revolution of 1979, which was a stable government—whether authoritarian or democratic—which would not cause any trouble (for example for Israel), and which would permit the United States to pursue its neoconservative policies in the Middle East. Another reason is that Iran has supported Hezbollah, an enemy of America’s client state, Israel. A further reason is that the United States has come very close to waging war on Iran, as it did against Iraq, going so far as to plan such a war in detail. Indeed, it is arguable that the U.S. would have invaded and occupied Iran, except for two factors: First, the war against Iraq proved to be a disaster. Second, the Iranian National Guard is much larger and better trained than the Iraqi armed forces were. The United States could not allow itself to be further embarrassed by a pointless war that would likely have gone even more poorly—if such a thing is possible—than did its war in Iraq. A final, related, reason is that Iran has threatened to develop nuclear weapons, in defiance of the United States’ (and Israel’s) wishes (Polk 2009, chapter 6).
A related topic is the economic and other sanctions that the United States has imposed upon Iran. In response to the Iranian revolution of 1979—which included the act of a group of student activists taking hostage several members of the American Embassy in Iran—the United States froze Iranian assets in the United States, amounting to well over $10 billion. Sanctions increased after the American invasion. Sanctions included denial of export licenses, prohibition of credits and loans from any American institution, a ban on some imports, and other measures. It is widely conceded that these sanctions, and other measures, have had little political impact, but have caused great damage and harm to the Iranian people (Fayazmanesh 2003).
- Fayazmanesh, S. (2003). The politics of the US economic sanctions against Iran. Review of radical political economics, 35(3), 221-240.
- Iran (2016). The World Factbook—Iran. Central Intelligence Agency. Online. https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html.
- Polk, W. R. (2009). Understanding Iran: everything you need to know, from Persia to the Islamic Republic, from Cyrus to Ahmadinejad. Macmillan.
- ustr.gov (2016). Office of the United States Trade Representative. Online. https://ustr.gov/.
