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An Iranian president says he’s ready to resolve the nation’s nuclear standoff with the West — what gives?
Former U.S. Labor Secretary Robert Reich gives at least partial credit to economic pain orchestrated by the United States and international allies.
While the United States must still be "very cautious," he said on ABC’s This Week, "one of the big lessons here is that economic sanctions do seem to work.
"Right now Iran is suffering 30 percent inflation, 20 percent unemployment," he told a roundtable including CNN’s Newt Gingrich, ABC’s Jonathan Karl and PBS’ Gwen Ifill. "I mean this nation is hurting and our economic sanctions, because we've been patient with them, because we have actually rounded up almost every other nation to support us, have had a huge impact."
Is Iran suffering such high inflation and unemployment under economic sanctions?
Tumbling oil exports
Now, economic sanctions are nothing new for Iran, which has faced U.S. sanctions since its 1979 Islamic revolution. But the pressure has been rising.
Other nations have joined in sanctions since 2006 in response to Iran’s efforts to develop a nuclear weapon, according to a report by Kenneth Katzman of the Congressional Research Service, which provides nonpartisan analysis to Congress.
Oil exports, which fund nearly half of Iran’s government spending, have fallen by about half since 2011, from about 2.5 million barrels a day to about 1.25 million. The drop has been driven, Katzman says, by a European Union embargo and U.S. pressure on Iranian oil customers.
Iran also lost access to the international banking system.
The combination has caused a sharp drop in the value of Iran’s currency, the rial, Katzman says. Meanwhile, sanctions helped trigger a recession that’s driving up unemployment.
Has that meant "30 percent inflation, 20 percent unemployment," as Reich told ABC viewers?
There’s not a simple answer.
Inflation estimates range from 30 percent to 70 percent. Official unemployment statistics, meanwhile, are out of date, and outside experts question their accuracy, anyway.
The International Monetary Fund, World Bank and Organization for Economic Cooperation and Development don’t have up-to-date figures for Iranian unemployment.
Still, Reich’s in range.
Gary Hufbauer, a former U.S. Treasury official and senior fellow at the Peterson Institute for International Economics who has studied sanctions for 30 years, said Reich’s numbers "seem reasonable."
Here’s how the Congressional Research Service put it in June:
Inflation: 30 percent plus, according to Iran Central Bank in May 2013, but believed to be over 50 percent by outside experts.
Unemployment rate: Official rate is 15.3 percent as of the end of 2011, but outside experts believe the rate is higher.
The Associated Press reported in June inflation "over 30 percent," though it cited a 14 percent unemployment rate. OilPrices.com noted Sept. 19 that analysts outside the country found that unemployment rate "impossible to believe," and quoted an estimate from Mehrdad Emadi, an Iranian-born economic adviser to the European Union, of more than 20 percent. (The OilPrices.com report echoes a Reuters report from the same day.)
So "reasonable" seems like a fair assessment for Reich’s numbers.
We should also note there’s not universal agreement on the size of sanctions’ role in all that financial pain, which experts also attribute to Iran’s fiscal management.
Reich, a professor of public policy at the University of California at Berkeley with a background in economics, told PolitiFact it just makes sense unemployment and inflation would follow a slash in oil exports.
"The typical consequence for a nation dependent on exports when those exports are cut is high inflation and high unemployment," he said.
Michael Malloy, a professor at the University of the Pacific’s McGeorge School of Law who specializes in banking regulation and economic sanctions, told PolitiFact "it's likely to be a much more complicated picture."
Reich told ABC viewers that under economic sanctions, "now Iran is suffering 30 percent inflation" and "20 percent unemployment."
Iran’s own statistics aren’t widely trusted and international organizations don’t have recent unemployment figures. But those numbers fall within a broad range of expert estimates cited by news reports and the nonpartisan Congressional Research Service.
It’s worth noting that Iran’s economic struggle has been exacerbated by its own economic policies and other factors, not just sanctions. Still, there’s good evidence they’ve had a "huge impact," as Reich said. We rate his claim Mostly True.
ABC News, "‘This Week’ Transcript: Rep. Peter King and Tyler Hicks," Sept. 22, 2013
Statistical Centre of Iran, "Iran - Main Indicators," accessed Sept. 24, 2013
International Monetary Fund, "Report for Selected Countries and Subjects: Islamic Republic of Iran," accessed Sept. 25, 2013
Congressional Research Service, Iran Sanctions, July 26, 2013
Congressional Research Service, "Iran: U.S. Concerns and Policy Responses," June 17, 2013
Boston University International Law Journal, "Human Rights and Unintended Consequences: Empirical Analysis of International Economic Sanctions in Contemporary Practice," 2013
Reuters, "Unemployment mounts as Iran's economy falters," Sept. 19, 2013
Reuters, "Analysis: Iran election hopefuls have no quick fix for economy," June 10, 2013
Associated Press, "Iran's Supreme Leader tells presidential candidates it's 'wrong' to appease West," June 4, 2013, via Fox News
OilPrice.com, "Growing Unemployment and Civil Unrest - The Real Picture in Iran," Sept. 19, 2013
New York Times, "Iran’s New President Preaches Tolerance in First U.N. Appearance," Sept. 24, 2013
New York Times, "Rouhani, Blunt and Charming, Pitches a Moderate Iran," Sept. 26, 2013
PolitiFact, "Paul Ryan says the Obama administration ‘watered down sanctions’ against Iran," Oct. 15, 2012 (Mostly False)
PolitiFact, "Mitt Romney says Barack Obama 'could have gotten crippling sanctions against Iran. He did not,'" Feb. 23, 2012 (Mostly False)
Email interview with Robert Reich, professor of public policy, University of California at Berkeley, Sept. 23 and Sept. 26, 2013
Email interview with Gary Hufbauer, senior fellow, Peterson Institute for International Economics, Sept. 24, 2013
Email interview with Michael Malloy, professor, University of the Pacific McGeorge School of Law, Sept. 24, 2013
Email interview with Stephen Di Biasio, spokesman, Organization for Economic Cooperation and Development, Sept. 25, 2013
Email interview with Caitlin Berczik, communications associate, World Bank, Sept. 25, 2013
Email interview with Pavis Devahasadin na Ayutaya, communications associate, International Monetary Fund, Sept. 25, 2013
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