The recent decline in oil prices will not suffice as economic leverage against Iran, since sanctions relief stemming from the Joint Plan of Action (JPOA) more than makes up the economic shortfall, according to a report written jointly by the Foundation for Defense of Democracies (FDD) and Roubini Global Economics (RGE).

The analysis, published Wednesday, runs counter to claims made by Obama administration officials. Deputy Secretary of State Antony Blinken has asserted that “New sanctions are unnecessary because…Iran already is under acute pressure from the…existing sanctions regime. In recent months, that pressure has only grown stronger with the dramatic drop in oil prices.” David Cohen, the Treasury Department’s Under Secretary for Terrorism and Financial Intelligence, stated, “[T]he current sustained decline in oil prices is…imposing an additional set of sanctions on Iran”. Therefore, he continued, new sanctions are unnecessary and detrimental.

While the price of oil, Iran’s chief export, has declined about 50% since its peak over the summer, FDD and RGE assess that “[d]eclining oil revenues amplify economic pressure but do little to reverse the near-term benefits of sanctions relief.” Additionally, “the recent growth in Iranian non-oil export earnings and overall better management of the economy by Iranian President Hassan Rouhani’s team will help cushion the economy against falling oil prices.” therefore, the depressed price “will be insufficient to precipitate the kind of economic crisis that drove Iran to the negotiating table in the first place.

Due to sanctions on its oil industry, Iran has already diversified its economy and will do so more in the future to reduce its dependence on oil revenue. According to The Wall Street Journal, oil makes up only 22% of Iran’s GDP, and non-oil exports have significantly increased. These exports, which include cheap Iranian-made vehicles sold to Iraq and Afghanistan and natural gas-based petrochemicals shipped to China, have risen by 20% in the past eight months. President Rouhani recently proposed reducing reliance on oil revenue even further, from financing 50% of the current budget to just 33%, by substituting it with non-oil exports. Iranian leaders have called for the adoption of a “resistance economy” with greater reliance on domestic producers rather than imports.

[Photo: IR Iran / YouTube]