Iran's Economic Conditions: U. S. Policy Issues
The Islamic Republic of Iran, a resource-rich and labor-rich country in the Middle East, is a central focus of U.S. national security policy. The United States asserts that Iran is a state sponsor of terrorism and that Iran's uranium enrichment activities are for the development of nuclear weapons. To the extent that U.S. sanctions and other efforts to change Iranian state policy target aspects of Iran's economy as a means of influence, it is important to evaluate Iran's economic structure, strengths, and vulnerabilities. Since 2000, Iran has enjoyed broad-based economic growth. However, strong economic performance has been hindered by high levels of inflation and unemployment and low levels of foreign investment. Some contend that President Ahmadinejad's expansionary monetary and fiscal policies have worsened unemployment, inflation, and poverty in Iran. Iran has long been subject to U.S. economic sanctions, and more recently, to United Nations sanctions, over its uranium enrichment program and purported support for terror activities. Such sanctions are believed by many analysts to contribute to Iran's growing international trade and financial isolation. Iran's economy is highly dependent on the production and export of crude oil to finance government spending, and consequently is vulnerable to fluctuations in international oil prices. Although Iran has vast petroleum reserves, the country lacks adequate refining capacity and is highly dependent on gasoline imports to meet domestic energy needs. To reduce this dependency, the country is seeking foreign investment to develop its petroleum sector. While some deals have been finalized, reputational and financial risks may have limited other foreign companies willingness to finalize deals.
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