By Babak Vaziri & Sina Nahavandi:
We all see that Iran’s economy is nearing a death spiral. “Will Iran become the next Venezuela?” Almost every Iranian has faced this question. In this article, we will explain that Iran, with the Islamic Republic Regime, not only has become Venezuela but also the acceleration of its economic collapse is much higher than Venezuela.
First, we look at the economic situation in Venezuela by studying the inflation rate and the conversion rate of USD to Bolivars (Venezuela currency). Then, we will compare it with the current economic situation in Iran that the Islamic Republic has created.
Almost all Venezuela’s income is from the oil industry. In 2015, the oil-dependent economy contracted 5.7%, and the inflation rate, which was at 57% in 2014, suddenly reached 181%. In 2016, oil revenues fell by 12.7%, and Venezuela’s non-oil revenues fell by 19.5%, which in turn brought the inflation rate to 254%.
In 2017, this trend continued. The inflation rate reached 741%, and now a country that once was in good condition because of high oil prices, suddenly faced an economic disaster with falling oil prices. Venezuelans reduced their meals, long queues were formed for food and toilet paper, and a food crisis forced them to eat garbage from dumpsters.
Maduro’s government blamed the situation on an “economic war” led by political adversaries with the help of the United States. That’s exactly what President Rouhani and Ayatollah Khamenei say today. In August 2018, Iran’s Parliament summoned President Hassan Rouhani to answer questions about the country’s economic crisis. Rouhani blamed the United States sanctions, not government mismanagement, for his country’s troubles.
In September 2018, President Hassan Rouhani and his cabinet went to meet the Supreme Leader, Ayatollah Ali Khamenei. During their conversation, Khamenei mentioned the even the shortage of baby diapers, blamed it on “the enemy” (US) who “wants the Iranian people to be angry with their own government.”
In December 2015, Venezuela’s Bolivar on the black market was at nearly 700 to 1 for the USD. However, in December 2018, each USD was 46,974,000 Bolivars. That is approximately 67,106 times more.
According to Professor Steve Hanke, an American applied economist and a distinguished professor at Johns Hopkins University, Venezuela’s annual inflation rate on September 04, 2018 was 55,049% which is 304 times compared to 2015.
Now let’s return to Iran’s economy and compare it with Venezuela’s economy. According to Professor Hanke’s analysis, the inflation rate in April 2018 was 52.7%. Only after 5 months, on September 4, 2018, the inflation rate reached 268%.
The reason we say that the acceleration of the collapse of Iran’s economy is much higher than Venezuela is because it took two years for Venezuela’s inflation rate to increase from 57% to 254%, but in Iran it took only 5 months.
According to Professor Hanke’s calculations, Iran’s inflation rates were 211%, 244%, and 268% on September 2, 3, 4, of the 2018 rate, respectively. That means, in just three days, poor Iranian people witnessed a 57% rise in the inflation rate with the management of the Islamic Republic Regime.
Each USD in September 2018 was 38,900 Rial, and on September 4, 2018, it reached 140,000 Rial. An increase of 260% in just one year! Do you see how close it is to the 268% inflation calculated by Professor Hanke?
In December 2018, Iran’s President Hassan Rouhani presented a $47 billion state budget (an 85% decrease compared to 2018). Officials have said the budget calculations were based on a forecast oil crude price of $50-$54 per barrel and exports of 1 to 1.5 million barrels per day. However, Iran’s oil exports have sharply dropped a few months earlier than when sanctions began. The IRI regime sold 2.3 million barrels of oil a day in June 2018, but experts believe that it only sold 1 million barrels per day in August 2018.
What has been said is the catastrophic situation of the Iran’s economy, which has been created by the Islamic Republic regime. Like Venezuela, the inflation rate chart of Iran has taken the form of “exponential” and Iran’s economy is on the verge of collapse. That being said, the acceleration of the economic collapse in Iran is far greater than the economic collapse in Venezuela.
Babak Vaziri is an Iranian sociopolitical activist and blogger based in Iran. Prof. Sina Nahavandi is an Iranian sociopolitical activist and blogger based in the United States.
For more information about Iran, you can follow Babak Vaziri on Twitter @Babak_1992.
© Copyright by Babak Vaziri, Sina Nahavandi, 2019. All rights reserved.