US & World Economies World Economy Iran's Economy, the Impact of the Nuclear Deal, and Sanctions By Kimberly Amadeo Updated on November 29, 2021 Reviewed by Robert C. Kelly Reviewed by Robert C. Kelly Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital. learn about our financial review board Woman in black chador in mosque in Shiraz, Iran. Photo: Photo: Chekyong/Getty Images Iran's gross domestic product was $1.06 trillion in 2021, according to the International Monetary Fund (IMF). The IMF projects that its economy will grow by 3% throughout 2021. However, unlike some other countries, Iran's economy is affected by economic sanctions imposed against it by countries like the U.S. Here's how sanctions have impacted the Iranian economy over the years. The Current Iranian Economy Iran's economy had recently received a boost when the United States lifted sanctions in 2015. In February 2016, Iran began shipping oil to Europe for the first time in three years. It exported 4 million barrels to France, Spain, and Russia. Crude petroleum made up more than two-thirds of Iran's exports in 2018, according to the Observatory of Economic Complexity. Its primary export markets are China, India, South Korea, the UAE, and Japan. Note Iran has a command economy. Between 50% and 60% of the Iranian economy is at least quasi-owned by the government. Then, on May 8, 2018, President Donald Trump announced the United States would withdraw from the 2015 nuclear deal and reimpose sanctions. That severely hurt Iran's economy. Iran has the third-largest oil reserves among OPEC countries (which collectively represent nearly 80% of the world's oil reserves). However, sanctions have prevented it from fully capitalizing on that resource. After peaking at 2.6 million barrels in daily exports in 2006, it slipped to 1.9 million by 2018. In 2021, it's averaging around 400,000 barrels per day. After the Iran deal lifted sanctions, Iran had hoped to increase its oil exports. At the beginning of 2021, Iran's unemployment rate hovered around 10%. Sanctions have caused its currency, the rial, to plummet. That's caused its inflation rate to skyrocket. At the end of 2020, some two years after sanctions were reimposed, inflation remained incredibly high, roughly 30%. In 2019, Iran's GDP per capita was just under $6,000. That makes its standard of living roughly what China's was in 2015 and nearly half of where Russia stands. However, there's a stark urban-rural divide in Iran. While just 6% of urban Iranians lived in poverty in 2017, 27% of rural Iranians did. But the economy had somewhat of a cushion. High oil prices from 2008 to 2018 allowed Iran to amass $121 billion in foreign exchange reserves before sanctions were imposed again. In 2019, that figure came crashing down to under $13 million. 2018 Sanctions Trump imposed sanctions because he said Iran violated the nuclear deal. Trump wanted to see: More diligent inspectionsSunset clauses become permanent (Trump thought the clauses with a sunset would allow Iran to eventually produce a nuclear bomb)A stop to Iran's ballistic missile programThe removal of any presence or influence in LebanonStop funding the Iranian Revolutionary Guard Corps, Hezbollah, and other terrorist groups Note President Joe Biden has since signaled a willingness to rejoin the Iran deal if Iran resumes compliance. Some experts say there was an underlying motive behind the sanctions. The Trump administration, Saudi Arabia, and Israel want to end the Iranian clerical regime. Saudi Arabia and Iran have long been on opposite sides of the Sunni-Shiite split. On May 8, 2018, Trump officially announced his intention to leave the deal. Sanctions would be reimposed throughout the rest of the year. The Hong Kong and Shanghai Banking Corporation said Trump's decision to reimpose trade sanctions on Iran raised the price of oil by $10 per barrel. On November 2, the administration granted waivers to eight countries that had cut back on Iranian oil imports. They included South Korea, India, Japan, and China. It did not grant a waiver to the European Union. In May 2019, Iran announced it would suspend some of its commitments made under the deal. These include stockpiling uranium and heavy water. In July 2019, Iran announced it would enrich uranium beyond the limits set in the nuclear deal. In June, Trump almost announced a military strike on Iran after the country shot down a U.S. drone. 2015 Nuclear Deal In July 2015, the United States, the EU, Russia, China, and Iran signed the Joint Commission Plan of Action. Iran agreed to limit its nuclear development program in return for the end of economic sanctions. Specifically, Iran agreed to reduce its stockpile of enriched uranium and remove about two-thirds of its centrifuges that produce uranium. It would eliminate the core of the Arak plutonium reactor. Iran agreed to neither produce nor acquire highly enriched uranium or weapons-grade plutonium. The U.N.'s International Atomic Energy Agency inspectors must have daily access to Iran's entire nuclear production supply chain. The agreement guaranteed that, for 10 years, Iran would be at least a year away from producing a nuclear weapon. That is much longer than its "breakout time" of two to three months before the agreement. According to The New York Times, the deal succeeded in getting 97% of Iran's nuclear material out of the country. The agreement did not address all issues people had with Iran's behavior, including its support of terrorism, its refusal to turn over four American hostages, its ballistic missiles, and its human rights violations. 2006 Sanctions In 2006, the United Nations Security Council imposed sanctions on Iran. Between 2006 and 2010, the United Nations imposed a total of four rounds of economic sanctions on Iran. They included an embargo on materials related to uranium production and enrichment, financial transaction restrictions, asset freezes, and travel bans. 1979 Sanctions The United States first imposed sanctions on Iran on November 14, 1979. President Jimmy Carter responded to the November 4, 1979 hostage crisis. Iranian students took 66 Americans hostage at the U.S. Embassy in Tehran. Carter froze all Iranian assets that were under the jurisdiction of the United States. In January 1984, the United States imposed additional sanctions in response to the bombing of the U.S. Marine base in Beirut. It had been carried out by Iran's client, Hezbollah. The United States designated Iran as a state sponsor of terrorism. The designation remains in place. It triggers restrictions on U.S. foreign assistance, a ban on arms transfers, and export controls for dual-use items. Iran's Role in the Middle East Iran supports disruption in Iraq, Syria, and anywhere else its fellow Shiites are fighting Sunni Muslims. Between 1980 and 1988, Iran fought a war with Iraq that led to clashes between the U.S. Navy and Iranian military forces between 1987 and 1988. Iran-Contra Scandal Through much of the 1980s, the United States financed the Nicaraguan “contras” rebellion against the Sandinista government by secretly selling arms to Iran. This led to the Iran-Contra Scandal in 1986, which implicated members of the Reagan administration in illegal activities. From October 1984 to October 1986, the United States assisted the military activities of the Nicaraguan contra rebels during the prohibition on such aid. It financed this by selling U.S. arms to Iran in contravention of stated U.S. policy. That was also possibly in violation of arms-export controls. In late November 1986, Reagan administration officials announced that some of the proceeds from the sale of U.S. arms to Iran were used to fund the Contras. The Iran/Contra Report of Independent Counsel found that some of Reagan’s advisers and Cabinet members sitting on the National Security Council were involved. They set up Oliver North and other National Security Agency employees as scapegoats to protect the Reagan administration. The report added that much of the best evidence of the cover-up was made in the last year of the Counsel’s investigation, too late for most prosecutions. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. International Monetary Fund. "GDP, Current Prices." International Monetary Fund. "Islamic Republic of Iran." The Wall Street Journal. "More Shipments of Iranian Oil Are Readied for Europe." The Observatory of Economic Complexity. "Iran." Wharton School of the University of Pennsylvania. "With Sanctions Lifting, What's in Store for Iran?" The New York Times. "Trump Abandons Iran Nuclear Deal He Long Scorned." Organization of the Petroleum Exporting Countries. "OPEC Share of World Crude Oil Reserves, 2018." Federal Reserve Bank of St. Louis. "Crude Oil Exports for Iran, Islamic Republic of." World Bank. "Islamic Republic of Iran." Federal Reserve Bank of St. Louis. "Constant GDP Per Capita for the Islamic Republic of Iran." Federal Reserve Bank of St. Louis. "Constant GDP Per Capita for the Russian Federation." Federal Reserve Bank of St. Louis. "Constant GDP Per Capita for China." Federal Reserve Bank of St. Louis. "Gross International Reserves Held by Central Bank for Iran, Islamic Republic of." CNN. "U.S. Pushes for Changes to Iran Deal as Trump Signals Tougher Stance." Council on Foreign Relations. "What Is the Iran Nuclear Deal?" The New York Times. "Behind Trump's Termination of Iran Deal Is a Risky Bet." Council on Foreign Relations. "The Sunni-Shia Divide." Congressional Research Service. "Iran Sanctions." Business Insider. "HSBC: Trump Trade War Part of 'Triple Shock' of Threats to the Global Economy." The New York Times. "U.S. Reimposes Sanctions on Iran But Undercuts the Pain With Waivers." The Wall Street Journal. "U.S. Tightens Iran Sanctions After Tehran Threatens to Abandon Nuclear Curbs." The Wall Street Journal. "Iran Threatens to Extend Nuclear Breaches." The White House. "The Historic Deal That Will Prevent Iran From Acquiring a Nuclear Weapon." Council on Foreign Relations. "International Sanctions on Iran." State Department. "State Sponsors of Terrorism." Brown University. "The Counterrevolutionaries (the Contras)." Federation of American Scientists. "Walsh Iran/Contra Report - Part XI: Concluding Observations."