The Iranian Economy: Dying or Growing?


The Biden administration's significant contribution to the Iranian economy is due to the failure to enforce the sanctions as rigidly as it was during the Trump era. For example, Iran increased its oil exports during the Biden era and increased foreign trade volume.






Iran's principal goal is to lift the sanctions, which significantly strain the Iranian economy. There is a potential that the talks between Iran and the United States will end soon with an accord.


Nuclear talks between international powers and Iran resumed in December 2021.


This article analyzes the Iranian economy and the weight of sanctions, comparing the Trump and Biden administrations to explore the ramifications of relaxing sanctions on Iran following the emerging nuclear agreement.


Since 1979, the United States has placed economic sanctions on Iran to influence Iranian policy. Iran's decision to sign the nuclear deal with world powers in 2015 was motivated by a desire to ease sanctions, which were eventually lifted. The economy has been badly damaged by the withdrawal from the nuclear agreement by the Trump administration in May 2018 and the reinstatement and tightening of sanctions. However, nothing has been done to change Iran's policy on developing nuclear energy or other matters, such as its support for terrorist organizations.


Between the reintroduction of sanctions in 2018 and 2021, the Iranian economy had negative growth, significant unemployment, and high poverty rates, reaching an economic low point. The lifeline came from President Joe Biden at this critical juncture. Even before reaching an agreement and without receiving compensation from the Iranians, the Biden administration lifted sanctions, permitted Iran to use frozen funds, and eased enforcement of the restriction on Iranian oil exports. Expectations and the lifting of sanctions benefit the Iranian economy, which grew by 4.4% in the fiscal year 2021 (which ended in March 2022).[1]


Reaching an agreement and lifting sanctions would signal to the rest of the world that Iran is open for business in oil, seafaring, energy, metals, ships, vehicles, insurance, and other areas. Furthermore, an oil price of $100 per barrel or above would significantly develop the Iranian economy. Integration into the global economy would lower prices and inflation rates, as well as the burden on the population. Iran might speed up its nuclear development and devote more resources to subversive efforts in the Middle East.


Trump administration's penalties and the implications of the transition to the Biden administration will be analyzed in this essay and the economic importance of the China-Iran relationship. Finally, the paper discusses the effects of the nuclear accord on the Iranian economy's growth.


The Iranian Economy


The Iranian economy is endowed with abundant natural resources, a well-educated labor force, and a diverse range of industries. According to the World Bank, the government sector accounted for 14.46% of GDP in 2020. In terms of revenue, the energy sector is the most important. Iran has approximately 10% of the world's proven oil reserves and about 15% of its gas reserves and possesses the world's second-largest oil and gas reserves.


The Iranian economy relies on oil production and exports (between 2009 and 2019, the economy's reliance on oil revenues to fund the budget fell from 60% to 30%). Despite its enormous oil reserves, Iran has limited refining capacity and outdated technology, necessitating international investment.[2]


Groups of Islamic companies (boniades) control a sizable portion of the economy, report directly to Iranian leader Ayatollah Ali Khamenei, are not subject to public scrutiny and do not pay taxes. Asthan Quds Razvi, one of the most well-known companies, was founded by Khamenei, with current president Ebrahim Raisi serving as a trustee of this philanthropic institution. According to Reuters, the total assets regulated by Khamenei in 2013 amounted to $95 billion.


New companies have been added and established since the Reuters report. The US Embassy in Iraq claimed in April 2019 that the value of Khamenei's assets was $200 billion. The Fund of the Oppressed and Martyrs Foundation - Mostzapan - is a well-known organization that employs over 200,000 people in 350 firms and has over $10 billion in assets. Mostzapan makes investments both in Iran and internationally. The fund is used by Iranian intelligence to acquire goods from other countries, and the Mostzapan Foundation was placed on the US sanctions list in November 2020.[3]


Figure 1: Distribution of Iranian GDP 2021





Trump Sanctions on the Iranian Economy


Following the sanctions, the Iranian economy recorded a lost decade from 2010-2020. According to data from the US Department of Energy, oil exports reached a historic low of fewer than 400,000 barrels per day in 2020, compared to over 2.5 million barrels in 2017.


Iran's GDP amounted to $204 billion in 2020 compared to $445 million in 2017, the beginning of President Trump's term, i.e., a more than 50 % decline in three years. GDP in 2020 accounted for only half of GDP in 2017. Moreover, Iran's GDP in 2020 was slightly lower than Iran's GDP in 1986. In 35 years, GDP has not grown, despite demographic growth. Suffice it to say that in 2020, Iran's GDP, which has a population of 84 million, was half as low as the UAE's GDP, with a population of 10 million.


Table 1:


Iran's GDP in Billions of Current Dollars





















The 2018 sanctions cut Iran from its primary source of income, and oil exports declined to 100,000 barrels a day in July 2020 compared with 2.3 million before the sanctions were imposed. Thus, Iran, with substantial oil reserves, exported a tiny amount.


Since the 2018 sanctions, foreign activity in Iran has been limited, mainly by Chinese companies, after most foreign companies left and sold some of them to local companies.


Local and Chinese contractors control the existing infrastructure. However, there is no considerable progress without Western technology. However, success was recorded in developing the vast gas field in Pars. Before the imposition of sanctions, the French company Total signed an agreement to acquire the 11th phase of the project but withdrew due to sanctions. Before the sanctions, the main gas buyers were Turkey, Iraq, Armenia, and Azerbaijan.


The level of oil production in Iran is kept secret. Before the Trump administration's sanctions were imposed in January 2018, Iran produced 3.8 million barrels of oil daily. In January 2022, the US Department of Energy estimated the output level at about 2.5 million barrels per day. In January 2020, Iran produced 2 million daily barrels when the sanctions were tighter.


Iran has recorded high inflation rates of over 30% since 2018. Inflation is derived from a combination of price increases and accelerated depreciation of the rial. In April-November 2021, the annual inflation level reached 43% and declined to 35% in the fiscal year 2021/22. In the last decade, the level of inflation recorded a cumulative 735%, while the economy grew by 7.2%.


The deadly trinity of renewed sanctions imposed by the previous administration in 2018 and 2019, the fall in oil production and prices, and the covid-19 pandemic led to three years of economic retreat. This is also due to mismanagement and widespread corruption. Poverty, unemployment, and the distress of the population caused widespread protests.[4]


The Trump administration added sanctions in 2019 that also harmed companies directly belonging to the heads of the Iranian government, especially the network of companies of Khamenei. In the first four months after Trump's sanctions were reinstated, 31 European and Asian companies, which belonged to the list of the 500 largest companies in the world, announced their intention to end their activities in Iran immediately. These were huge companies such as Boeing, Total, Peugeot, Maersk, Allianz, Siemens, I, Mazda, Mitsubishi, British Petroleum, and General Electric.


Many Chinese companies remained in Iran and increased their activities in the following years. The departure of foreign companies and the avoidance of new companies from entering the Iranian economy have reduced the volume of foreign investments in a fibrous way. The large economic agreement with China was signed only in 2021, so it could not constitute an immediate and worthy turnover for the extensive abandonment of giant Western companies. Thus, foreign investment in Iran declined from $4.3 billion in 2011 to only $1.2 billion in 2020, a decrease of over 70%, as indicated in Table 2.


Table 2: Foreign Investments in the Iranian Economy 2011–2020 in Billions of Dollars

























Tables 3 and 4 indicate a significant decline in Iranian foreign trade and a reduction in income per person following the reinstatement of sanctions imposed by the Trump administration. Exports declined by about 80% between 2017 and 2020, and the income level per person in 2020 amounted to 90% of the income per person in 2017.


Table 3: Iran – Billions and Billions of Dollars in Imports and Exports 2014–2020




























Source: IMF, Direction of Trade Statistics, Various issues

* Exports to China accounted for about 43% of all exports from Iran this year. Total exports from Iran to China reached $6.1 billion.


Table 4: Iran: GDP per person in current dollars in terms of buying capacity


GDP per skull in terms of buying capacity PPP

























After the Trump administration reinstated sanctions, it added them to leaders and individuals associated with policymakers, led by Khamenei. On January 13, 2021, the US Treasury Department announced that it was taking action against two organizations, including its leaders and subsidiaries. Both companies are controlled by Khamenei: Aiko and Asthan Quds Razvi. This step came after the US administration took action in November 2020 against Mostzapan, owned by the Iranian leadership, and entered the sanctions list. 


A statement by the US Treasury Department noted that: "While Bonyad Mostazafan is ostensibly a charitable organization charged with providing benefits to the poor and oppressed, its holdings are expropriated from the Iranian people and are used by the Supreme Leader Ali Khamenei to enrich his office, reward his political allies, and persecute the regime's enemies."[5]


Iran lost $120 billion in oil export revenues from the US withdrawal from the nuclear agreement from May 2018 to August 2021. From 2011-2015, the sanctions caused a decline of more than 50% in Iranian oil exports. Former Iranian President Hassan Rouhani estimated the total damage of the Trump administration's sanctions at $200 billion.[6]


The Biden Administration


Under Trump, the sanctions harmed the Iranian economy in all areas, but at the time of writing, the Iranian economy points to improvement and a return to economic growth. The Biden administration seeks to reach an agreement with Iran and is pursuing a policy of gestures. For example, the US allowed Iran to use frozen funds.


The volumes are not significant and are tens of millions of dollars. In February 2022, the State Department announced that it was removing Iranian nationals engaged in the nuclear program for civilian purposes from the sanctions list after the Americans authorized South Korea to pay $63 million of the $7 billion confiscated by them in January 2022.


However, the Biden administration's significant contribution to the Iranian economy is due to the failure to enforce the sanctions as rigidly as it was during the Trump era. For example, Iran increased its oil exports during the Biden era and increased foreign trade volume. The changes in the Iranian economy were felt in the immediate term. In the 2021/22 fiscal year, the current account balance became positive after a long period. Iran began the new fiscal year on March 21, 2022, with GDP growth of 4.4%. Inflation declined to 35%.


Gabriel Noronha, a special advisor to the US State Department, noted that only oil sales to China generate $10 billion annually for Iran. An IMF report indicated that Iran's foreign exchange reserves grew from $12.4 billion to $31.4 billion between 2020 and 2021, a huge increase of 2.5 times. The rise in oil prices mainly explains the increase.


And most of the reserves are not liquid. The lifting of the sanctions would allow the Iranian economy to make use of the reserves. Before the Trump administration's sanctions renewal, the foreign exchange reserves in 2018 reached $122.5 billion. The improvement in the situation in Iran has also allowed the country to invest in the oil industry and increase productivity. In April 2022, the Petroleum Minister noted that output had reached the pre-sanction level of 3.8 million barrels daily. He added that export revenues reached $18 billion in 2021, 2.5 times higher than the previous year.[7][8]


In any case, the Iranian economy recorded growth of 4.4% in 2021. This was the first period of growth after years of contraction. The past does not predict the future, but after signing the 2016 agreement, the Iranian economy soared by more than 12%.



Table 5: Comparison of sanctions in Iֽran during the Trump and Biden administrations


Trump Administration

Biden Administration

Cancellation of 2015 agreement

Unilateral gestures to Iran in the field of sanctions

Tightening sanctions and the "maximum pressure" policy

Easing the implementation of the sanctions and turning a blind eye to bypassing them

Historic low in Iranian oil exports

Massive increase in oil exports

Record inflation

Decline in inflation rates

Decrease in foreign activity

Extensive Chinese activity



Alongside the Biden administration's easing of sanctions, Iran has developed several domestic industries. Chief among them are the automobile and crypto industries, through which Iran bypass sanctions. The car industry is the second largest after the oil industry. The market for cars produced in Iran amounted to about $30 billion in 2021.


More than 100,000 people are directly employed in this sector, and another 700,000 are engaged in related industries. The two most prominent companies in the field are IKCOand SAIPA. In 2021, Iran produced 894,298 cars. The government encourages the domestic car industry to meet demand and reduce foreign exchange spending. Iran is 19th in the world in car production (China ranks first and the US second).[9]


Iran's crypto industry is proliferating, with an estimated 4.5% of the total global Bitcoin mining occurring in Iran. The industry is helping to circumvent sanctions by importing products and paying in crypto. The coins mined by the miners are sold to the Iranian Central Bank.


Some of the mining takes place even in mosques, and companies belonging to the military are also engaged in the field. The extensive activity takes place in the Rapsanjan industrial zone. In 2021, Rouhani's advisors issued a report on how to deal with sanctions through crypto. The report's authors noted that an effective policy in the field would yield the Iranian treasury about $2 million a day and more than $700 million a year.[10]


One of the reasons for Iran's improved economic situation was its ties with China. After years of financial and diplomatic isolation due to sanctions, Iran has deepened its cooperation with China. In March 2021, Iran and China signed a 25-year long-term agreement under which China would invest $400 billion in Iran's energy, infrastructure, and communications sectors. On the other hand, Iran will sell oil and gas to China at low prices and provide Chinese access to ports.


Iran sees China as its economic and diplomatic ally in the face of American pressure. As one of the only powers capable of providing diplomatic protection against the US, China sees Iran as a means of increasing its diplomatic influence.


There are breaks in the Sino-Iranian relationship due to China's relations with other countries in the Middle East, particularly Saudi Arabia and the United Arab Emirates. China is only partially compliant with US sanctions and is Iran's largest trading partner, the country's leading energy partner, and largest investor. Some economic deals between the countries are conducted under the radar, allowing China to continue purchasing oil from Iran. The price of oil for China and its influence in the Middle East are higher than the fear of violating US sanctions.


The data on China's purchase of oil from Iran are confidential. A Reuters report from January 20, 2020, cites official Chinese data that China purchased only 260,312 barrels of oil per day in December 2019. An unofficial figure calls for doubling the quantity.


On January 21, 2022, Reuters quoted official sources in China as saying that China had loaded about four million barrels of Iranian oil as reserves in December 2021. The Economist estimated on February 17, 2022, that Iran exports about one million barrels daily to China. Iranian oil arrives in China as if it was sent from Oman, the United Arab Emirates, or Malaysia.


China is Iran's leading trading partner and is responsible for strengthening the country's shaky export and import industries. In 2020, China accounted for about 43% of all Iranian exports, and Iran exported $6.1 billion worth of goods to China, as shown in Table 3 above.


Despite this, 2021 was one of the most challenging years. The socioeconomic pressure increased and included all sectors, and the deficit widened. The economic situation has become a topic of conversation among the population, parliament, and policymakers. Poverty encompasses all spheres of life in the country. More and more people are looking in the trash cans on the streets, and children are selling cheap goods.[11]


The Iranian government has no solution to the population's difficulties. The labor minister noted that 26 million Iranians lived below the poverty line in 2019. Economy minister Ihsan Handuzi said that the administration could increase the grants to the poor (amounting to $4 per capita per month), but no more. The average Iranian worker earns about $120 a month. The Iranian government, which has so far provided significant assistance in the form of a subsidized exchange rate for essential goods, is holding discussions to repeal this policy.[12]


In January, President Ebrahim Raisi presented a report on the "economic achievements" since coming to power in budget discussions for the 2022-2023 fiscal year. During the talks, Raisi noted that inflation is "under control" and that non-oil exports have increased by 40% since coming to power. During parliamentary debates since that meeting, members of parliament have vigorously attacked Raisi's ministers, especially in the economic sphere, including that a car made in Iran at the cost of less than $10,000 is sold to residents for about $20,000.[13]


Opinion pieces push for a solution in negotiations with the US, warning that Iran will be dependent on China economically and Russia politically, and "everyone knows how Russia is exploiting Iran's weaknesses."[14]


Iran's growing understanding that it must lift the sanctions, followed by an improvement in the economic situation, to allow the population to return to normal life. Even the most senior clerics who recently met with Raisi expressed the need to integrate into the world and end the isolation. The clerics urged him to send a message of peace and reconciliation to the world. In the meantime, the government is in no hurry to reach an agreement.[15]




The difficult economic situation results from sanctions, corruption, monopolies by the leadership, mismanagement of the economy, money laundering in the banking system, and the allocation of vital resources to terrorist groups and wars throughout the Middle East.


Raisi, Iran's eighth president, inherited a faltering economy. So far, the shaky economy has not caused a policy change, but Iran has no other solution than to be flexible in its approach. The Trump administration’s sanctions policy has severely damaged the Iranian economy. Iran now has a rare opportunity from the Biden administration to lift sanctions, ease restrictions on the economy and population, and record impressive economic growth.


The infrastructure is dilapidated and accompanied by water shortages and electricity outages.  The poverty rate is skyrocketing, the inflation rate is high, there is a shortage of basic goods, the population and leadership are criticizing the government more strongly than in previous years, and there is a tangible danger of a broad popular uprising.


Oil exports would double within six months if a new agreement is signed. With high oil prices exceeding $100 per barrel, Iran could purchase industrial machinery that would allow it to produce higher quality goods for the domestic market as well as exports.


Foreign trade would grow to a large extent. In 2016, the first year when sanctions were lifted, European industrial exports to Iran amounted to about three billion euros. Today, the volume of exports has declined to around 750 million euros. The increase in industrial imports would contribute to industrial production and higher employment, production, and exports.


The Iranian economy has also benefited from the return of many citizens who left the country and will return with their skills and financial means. The Iranian Foreign Ministry estimated in 2021 that about four million Iranians are living abroad, including 1.5 million in the United States. It is estimated that Iranians abroad own assets worth $1.3-2 trillion. Iran has also eased the issue of military recruitment for Iranians abroad, allowing them to redeem their military service for a fee of 15,000 euros starting in March 2022.[16]


The Iranian economy is already reaping the first fruits even before a possible deal, mainly due to the Biden administration's unilateral gesture policy and turning a blind eye to the full implementation of sanctions and increased oil sales to China, trade, and allowing the use of some frozen funds. This makes it easier for Iran to create a network of secret banking to deal with the sanctions.


Expected sanctions relief, market conditions such as a lack of oil and high prices, and the Ukraine crisis helped the Iranian economy. Iran is preparing for this and has even appointed Ahmed Assadzadeh as deputy petroleum minister for international affairs.


The Iranian economy would gain after the lifting of sanctions in the following areas: oil production and exports, an increase in foreign trade, a reduction in inflation rates, which have risen to about 50%, a drop in overt and covert unemployment, a massive increase in foreign investment, and the entry of multinational companies into the Iranian economy. Iran could also use its overseas financial and other assets that have been frozen due to sanctions. These assets exceed $100 billion.


The lifting of sanctions would double the revenues of oil exports due to the increase in output and oil prices. Iran could increase production from 2.4 million barrels of oil per day to more than 3.8 million by the end of 2022, 17 to 5 million barrels per day within a decade. International oil companies would resume operations in the country, provide new technologies, and increase output. Iran currently exports 1.1 million barrels of oil per day, mainly to China, and would be able to double the volume of exports within six months.[17]


Oil prices increased from $54 in January 2021 to $84 in October 2021, to over $106 on April 15 this year. Following the lifting of the previous sanctions in 2016, oil exports increased from 1.6 barrels per day to 2.3 million in 2017. So far, Iran has been forced to pay intermediaries large sums for oil sales. After sanctions are lifted, Iran would be able to receive market prices for oil exports.


Failure to sign the agreement will close the door to significant economic and social opportunities. The economy has grown in the past year, but this was mainly due to the non-enforcement of sanctions during the Biden era.


Signing an agreement would also strengthen the Iranian economy and help finance and support its proxies in the Middle East.  Therefore, there are sound economic reasons for Iran to strive for the signing of the nuclear agreement. But financial reasons have not, until now, been the main factor in decision-making for the Iranian leadership.


*** The article was primarily published by The Jerusalem Institute for Strategy and Security




[4] See Raz Zimmt, Protest demonstrations in Iran against the backdrop of a sharp rise in the prices of basic goods, INSS Insight May 16, 2022.

[6] Al-Arabiya, 4 March 2021.


[8] Afp, April 5, 2022.

[9] IRNA, May 22, 2022.

[11] تحلیلی بر سیاستگذاری استخراج رمزداراییها)رمزارزها (original in Persian)( در ایران و ارائه پیشنهادهای سیاستی.

[12] August 23, 2021.

[14] Jahan Sana'at, 7 October 2021. This newspaper is affiliated with the pragmatic wing that supports a return to the nuclear agreement.


[17] According to the National Oil Company, SHANA, November 28, 2021.