How Iran can ...
Page 1
The result was that industrial growth remained solid even during the COVID-19 years. Industrial employment also increased.
Interestingly, Russia adopted precisely the same strategy following the sanctions imposed after the 2014 Crimea crisis and again after the 2022 Ukraine conflict. It pursued import substitution very seriously and has now moved from import substitution toward technology-related policies, upgrading the approach in qualitative terms to what can be described as technological sovereignty.
The basic idea is to invest in producing goods that were previously imported or to deepen domestic production of goods that had previously been assembled locally. Iran's experience in this regard was positive, while Russia, alongside other policies, has also achieved results. Its unemployment rate, for example, has fallen to 2.2%, while economic growth has remained relatively satisfactory.
Moving toward Global South
The second strategy that needs to be taken seriously is a pivot toward the Global South. This means prioritizing the expansion of relations with neighboring countries, China and Russia, as well as Africa and South America.
The priority should be the neighboring countries, followed by China and Russia as major economic powers, and then Africa and South America.
Unfortunately, this policy has never been formally established. Iran's aspirations still, for example, remain focused on companies such as Germany's Siemens or on attracting Britain's BP to invest in the country's oil industry.
A genuine pivot to the East requires political determination, and that determination appears to be lacking to some extent.
Russia, particularly after the sanctions imposed in 2022, moved firmly in this direction. At an economic conference held in Russia just a few months ago, President Vladimir Putin explicitly announced that the country's official policy was a pivot toward the Global South.
Work on the ground
The third strategy is to enter into mutually beneficial engagement with the industrial capitalist class.
Iran has a relatively capable private sector, particularly since 2018. These businesses have grown significantly, and industrialists genuinely understand production. Projects can be developed with them as well as with public, non-governmental and quasi-governmental economic groups.
The first two strategies — import substitution and a pivot to the East — require policymaking by the government, but the work on the ground needs to be carried out by industrial capitalists, entrepreneurs and investors, whether in the private, public or quasi-public sectors.
The three strategies, therefore, are import substitution, a pivot toward the Global South, and engagement with the industrial capitalist class.
War of resilience
These three strategies can address many of the country's economic challenges, including reducing dependence on oil revenues through the import substitution of non-oil goods, diversifying the economy, controlling inflation, and addressing both the trade and budget deficits.
The Iran-US war has effectively turned into a war of resilience. The more import substitution can be pursued to meet domestic needs, create jobs and stabilize the exchange rate, the greater the country's resilience will become.
Import substitution generates foreign-exchange savings, which improves the trade balance and makes it easier to manage the exchange rate. This, in turn, strengthens the country's resilience.
In particular, a pivot to the East and deeper engagement with neighboring countries can facilitate the supply of essential goods and further strengthen resilience.
In this sense, these three strategies constitute a resilience strategy: goods are ultimately produced domestically, employment is created and foreign exchange is saved, while the resulting revenues can also be used to support the budget.
This strategy can therefore work specifically as a means of increasing resilience, and it has already been tested in both Iran, from 2018 to 2021-22, and Russia.
Russia began launching import-substitution projects in earnest in 2014 under Putin. The following year, an import-substitution commission chaired by the prime minister was established — an indication of the level of importance attached to the policy. The approach has continued to this day, nearly 12 years later, and has produced relatively significant achievements.