Why Iran’s economy is struggling

Daily Telegraph: The leader of Iran’s Islamic Revolution, Ayatollah Khomeini, once declared that “economics was for donkeys”. These words could sum up the regime’s management of the economy. The Daily Telegraph

The leader of Iran’s Islamic Revolution, Ayatollah Khomeini, once declared that “economics was for donkeys”. These words could sum up the regime’s management of the economy.

Iran has fabulous natural wealth — 130 billion barrels of proven oil reserves, the second largest in the world, along with 971 trillion cubic feet of natural gas.

These assets have kept Iran afloat even through the worst years of war and sanctions. But vast oil revenues are of limited use if the world banking system is not available to invest them.

Iran depends on its natural wealth because its stagnant economy, with unemployment stubbornly high at about 20 per cent, is dominated by corrupt and inefficient state-owned enterprises.

The public sector absorbs about 70 per cent of gross national product, making Iran’s unreformed command economy almost as moribund as the old Soviet Union’s.

So the economy is Iran’s key weakness.