How Iran can build economic resilience under mounting pressure
By Barzin Jafartash
Industrial policy researcher
With mounting US economic pressure, including restrictions on oil exports, declining foreign-exchange revenues and sharp fluctuations in the exchange rate, the Iranian government needs to immediately put three key strategies at the top of its agenda to strengthen economic resilience.
This is in addition to measures already being taken, such as facilitating customs procedures, increasing strategic reserves of essential goods or raising the value of food vouchers. All of these measures are useful, but there are three fundamental strategies that the government needs to take seriously and is not currently pursuing with sufficient determination.
The first, and most important, is import substitution.
When goods can no longer be imported, either because of sanctions and a blockade or simply because there is not enough money to pay for imports, one option is to reduce consumption. That, however, leads to the situation currently being witnessed: weaker economic growth or even negative growth.
Another path is to launch a broad import-substitution drive, replacing a significant share of the goods that were previously imported by defining a range of large, medium-sized and small projects. The private, public and quasi-public sectors can all become involved, creating employment, generating economic activity and, ultimately, producing goods domestically.
This is something Iran itself pursued to some extent after 2018, when then-US President Donald Trump withdrew from the JCPOA. Alongside restrictions on imports, efforts were made to establish production projects in the automotive sector and several other industries. This led to greater domestic production capacity and import substitution.
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