Cash-Low Tehran Using Sovereign Wealth Fund to Stay Afloat

While boarding Air Force One for the G20 in Japan, President Trump said in an ad hoc interview; “The sanctions are very tough and Iran has to deal with them.” Trump stated he thought the leaders of Iran were making a big mistake, and said; “Iran should do the right thing for their people, if the Iranian leaders care about their people, they’ll make a deal. If they don’t, they are just thinking about themselves, and they are selfish and stupid if they don’t negotiate.”

Are Economic Sanctions Working In Iran?

The sanctions are working and Iran’s economy is experiencing 40-50% inflation as of the date of this article. Iran’s currency, the Iranian Rial, is expected to continue devaluation, and is now considered the most distressed currency in the region. The Iranian government is withdrawing money from its NDF – National Defense Fund at an increasingly faster pace, which is unsustainable according to FDD, researchers on sanctions. Iran has no choice, as sanctions have cut oil and gas revenues by over 50% and the regime’s cash flow is drying up.

One of the most recent U.S. allies to honor the Iranian oil sanctions is South Korea, according to reports from Reuters Business News. South Korea has plenty of other options, as it can buy oil from Russia, Qatar, Saudi Arabia and/or the United States. Iran cannot afford to lose many more customers. At some point the low production volume will be below its break-even point. Iran’s economic crisis is getting worse by the day – currency speculators are betting against the Iranian Rial, and the downturn in the economy is affecting the average Iranian and those in the middle class at a very personal level.

Meanwhile, according to reports from Radio Forda the Iranian regime has been steadily drawing down the NDF, taking out billions for the military, its internal state broadcasting propaganda mechanism, and other expenses. If the US were to sanction the NDF and freeze funds, things could get a whole lot worse. Since Iran’s military has been named a state-sponsor of terrorism due to the regime’s proxy terrorist activities throughout the Middle East, the NDF sanctions can easily be justified. Although that decision has not yet been made, as of the writing of this article, things are happening as we speak with the Iranian crisis.

Will The Iranian Supreme Leader Sit Down With President Trump To Talk?

A meeting of the minds does not appear imminent. Ali Khamenei called the United States ‘the most oppressive regime’ and accused the United States of economic warfare – all this among a flurry of other insults and derogatory statements. Apparently, the Iranian regime is trying to play victim and hopes this will help its case with the international community, yet at the same time attempting to look strong to its own people. Most international relations think tanks believe that Iran will have to capitulate (blink first) and eventually negotiate. That assessment appears to be correct from all the economic data coming out of Tehran.

Tensions remain high as the G20 meeting continues, and the Iranian issue is a hot topic. The problems are not going away and the rhetoric continues. Although President Trump hasn’t drawn any redlines yet, he’s hinted on Twitter; 1.) “Iran can never have a nuclear weapon,” and; 2.) “Iran better not attack anything U.S. again or risk obliteration.”The second Trump tweet is in reference to the U.S. drone that Iran shot down while it was flying in international airspace, and as a reminder to all that the Trump Administration has not taken ‘military action’ off the table. Hard to say how much of that is just tough-talk, but most international diplomacy experts concur with the serious nature of the first item.

Trump Hands Iran Victory

 

For all of Donald Trump’s differences from his predecessor, during the presidential campaign he largely followed the same footsteps as Barack Obama when it came to to foreign-policy. They both agreed that the wars in Iraq and Afghanistan were poorly managed and they both had similar visions for trade with Europe. One area where the two couldn’t be further apart however, is Iran.

In fact, one of President Trump’s most divisive acts was upending a piece of flagship legislature put into place by the previous administration. The nuclear agreement with Iran known as the Joint Comprehensive Plan of Action was referred to by Donald Trump as the “worst deal ever.” The Foundation for Defense of Democracies CEO, Mark Dubowitz notes that unlike President Obama the current administration’s rhetoric regarding Iran has been far from sugar-coated. Learn more about Mark Dubowitz here.

President Trump had little interest in being diplomatic with Tehran. As he promised, the nuclear deal was ended and sanctions were brought back, but for the most part his administration’s military advisors were able to deal with concerns about blowback in the Middle East and managed to contain Iran’s presence in Syria.

The relative success of President Trump’s controversial decision makes it even more bizarre what he did next. The announcement that the U.S. would withdraw all U.S. forces from Syria and reduce our military presence in Afghanistan left a lot of people shaking their heads for the consequences it would mean for our allies in the region. What’s more concerning though, is the effects the decision will have on the US’s efforts to enforce policies meant to prevent Iran from funding terrorism. Many experts suggest that it will only be a positive for the totalitarian regime.

The President’s threats against Iran were clear about what lines they needed to stop crossing – in short, supporting terrorist organizations in Lebanon and Palestine such as Hezbollah. However he did not state in what way these lines would be enforced. With a minimized military presence in the region the President has left himself few options to enforce his will besides sanctions, which Iran has shown little reverence for in the past.
The most baffling aspect of Trump’s decision to the experts is that it runs counter to the position held by the majority of Democrats and Republicans who believe the U.S. should maintain a military presence in Syria. For little cost and risk of US casualties our troops have provided a stopper against Russian, Iranian and ISIS aggressors and served as back up to our European allies in the region. It’s unclear what the President’s long-term plan is, if he has one, but one thing is certain, so far it looks good for Iran. Stay in the loop as the story progresses.