| Curso Grado en Iran Country Risk Report, June 2019 Iran Country Risk Report (June 2019) After some months of implementation, the re-imposed US sanctions against Iran are seriously affecting Iranian economy and forcing disputed political and even military reactions. The present report attempts to provide an analysis of Iran by addressing: the consequences of sanctions, the current and future state of its energy sector, the internal situation of the country, and the future prospect of the Iran-US relations. C. Asiáin, M. Morrás, I. Urbasos Report [pdf. 14,1MB] EXECUTIVE SUMMARY The US unilateral withdrawal from the JCPOA on May 8, 2018, reshaped the Iranian domestic and international reality. On the one hand, the JCPOA enabled Iran to increase its GDP above 7% in the period of 2016-2018, more than double its oil exports and maintained President Rouhani in office after the 2017 elections. On the other hand, the US reimposition of the previously lifted sanctions demonstrated the deep vulnerabilities of the Iranian economy and its huge diplomatic isolation. US sanctions will affect the whole of Iran’s foreign relations due to its extraterritorial nature. The EU will try to avoid its effect through legal protection of its companies and citizens with mechanisms such as the SPV, whose scope and effectivity is yet to be proved. China, as it is less exposed to the US financial and political influence, will be able to better circumvent sanctions but still far from being totally unaffected. Other countries such as India, Turkey or Russia will find difficulties to handle secondary sanctions, but will be able to maintain a certain degree of trade with the Islamic Republic. Japan or South Korea will have to follow US demands because of its strategic alliance in the Asia-Pacific region and resume energy imports and investments. The Iranian economy is expected to enter into recession during 2019, GDP growth is expected to be -4.5% and unemployment rate will increase to the 15.4%. This economic hardship will concentrate the political debate in the 2020 legislative and 2021 presidential elections, whose result will determine if a moderate or hardliner political faction seizes power. Social unrest from ethnic minorities and opposition is expected to rise if the economic conditions do not improve, challenging the current political equilibrium of the country. The energy sector will be deeply affected by US sanctions as it banned all countries from investing and purchasing Iran’s energy products. Sanctions are expected to reduce Iran oil exports to 1million barrels a day from the 2017 levels of 2.4 mbdp, decreasing governmental revenues drastically and freezing most foreign investments. The lack of FDI and technology will aggravate the problems of the Iranian energy sector with possible irreversible effects depending on the sanctions duration. US-Iran relations are expected to worsen at least until the US 2020 Presidential elections, when a more dialoguing candidate could substitute the hawkish Trump administration. The United States is expected to maintain its current strategic alliances with Saudi Arabia and Israel, whose common goal of pressuring Iran can have unexpected consequences for the Middle East. Domestic politics in Iran, US, Israel and Saudi Arabia will play a major role in the evolution of the events.