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Mint Quick Edit | What can Iran’s street unrest be traced to: US sanctions or its ‘oil curse’? - News

Mint Quick Edit | What can Iran’s street unrest be traced to: US sanctions or its ‘oil curse’?

2 days ago 1

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For better or worse, what the US does could shape how things pan out in Iran. (REUTERS)

Summary

Iran’s streets have erupted in protests sparked by an inflation crisis led by a currency slide. Both structural and external factors have been at play. Let’s see what its economy’s squeezer-in-chief, the US, does next.

As urban spaces rage with protests, Iran seems in turmoil again. Is America’s long squeeze of Iran’s economy at work? Or a classic “oil curse"? The stir was set off by an inflation flare-up caused by a crash in the Iranian rial. It slid by more than 40% last year, sending retail prices skyward.

Given its informal hydrocarbon exports, its actual trade balance is as hazy as a dust-storm. But structurally, as with any other oil economy, hydrocarbon exports had long given its currency such strength that it “cursed" all other industries, which were rendered unable to compete abroad. This nixed efforts to diversify away from oil and spelt high import dependence for household needs.

For stability, US-aligned Gulf states adopted dollar pegs. But Iran’s economy wasn’t just unable to attain self-sufficiency, US curbs on its oil exports ruptured it in a way that widened its non-oil deficit, choked capital inflows and crushed its market rial.

Both structural and external factors, thus, have fomented street unrest in Iran. Of course, it seems more than just discontent over the cost of living, with calls for a regime overthrow in the air too. For better or worse, what the US does could shape how this pans out.

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