Decoding Iran’s energy sector: Surviving without thriving under sanctions regime Premium

In the present-day context, when both regional and global order is being reshaped, Iran’s growing confrontation with the United States and Israel continues to shape the current regional security narrative.

The centrality of Iran in West Asian affairs cannot be ignored. Iran’s strategic location, huge energy resources, and its assertive role, particularly in the region, have always attracted international attention. In the present-day context, when both regional and global order is being reshaped, Iran’s growing confrontation with the United States and Israel continues to shape the current regional security narrative.

For over four decades, Iran has operated under one of the most complex and sustained sanctions regimes in the world. What began as targeted post-1979 restrictions evolved into a dense architecture of U.S., European Union (EU), and United Nations (UN) measures addressing Iran’s nuclear programme, ballistic missiles, regional activities, and financial networks. The present article is an attempt to examine Iran’s energy potential and how it manages to trade despite U.S. sanctions.

What are the key challenges faced by Iran to realise the full potential of its huge oil and gas reserves? It is argued that despite America’s ‘Maximum Pressure’ policy, Iran has been able to survive without thriving under the sanctions regime. It has crafted various ways and means to circumvent the sanctions, thus mitigating the negative impact on its economy. The Iranian leadership has come up with its ‘Maximum Resistance’ strategy to counter the Maximum Pressure policy. This article also unpacks trade beyond hydrocarbons to explain the toolkit adopted by Iran to manage its overall economic challenges.

This article is from The Hindu e-book. Iran: Revolution in retreat

Following the U.S. withdrawal from the Iran nuclear agreement, formally known as the Joint Comprehensive Plan of Action ( JCPOA), in 2018, President Donald Trump imposed comprehensive sanctions against Iran, targeting the country’s core banking system, oil imports, and conduits to the global financial system. The most arduous sanction of all is preventing Iranian banks from using the Belgium-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, the largest electronic payment network in the world.

The International Monetary Fund (IMF) reports suggest that Iran’s main source of revenue, its oil exports, dropped from 2.5 million barrels a day to almost zero between 2018 and 2020, and its currency hit record lows. More than 100 major foreign companies withdrew from the Iranian market or cancelled investments since 2018, leading to a loss of tens of billions of dollars in investment.