WASHINGTON—Iran is accelerating its efforts to buoy its non-oil trade and to find new markets in Asia, Africa and the Middle East as it struggles for economic survival amid an intensifying U.S. financial war on Tehran and its allies, the country’s chief economic manager said in an interview.
U.S. and European sanctions targeting Tehran’s oil exports and central bank have contributed to an 80% depreciation of the Iranian currency, the rial, over the past two years, said Shamseddin Hosseini, Iran’s minister of economic affairs and finance.
He also said the blacklisting of virtually all of his country’s banking system by Washington and Brussels has significantly raised the cost for Iranians conducting international trade, forcing them to seek alternative payment methods or to resort to barter trade.
Still, Mr. Hosseini said Iran’s economy is adapting to the West’s sanctions as the government promotes non-oil exports and businesses not conducted in dollars or euros. He also said the country’s foreign-exchange reserves remain above $100 billion, keeping Tehran’s finances stable despite hopes inside the Obama administration that Iran is on the brink of an economic collapse.
“Our financial system is very flexible and very modern,” Mr. Hosseini said. “One important lesson we’ve learned from the sanctions: We have to use all kinds of foreign exchange. We don’t depend on euros or dollars.”
Mr. Hosseini visited Washington last week to attend the annual meetings of the International Monetary Fund and World Bank, making him one of the few senior Iranian officials to visit the U.S. capital in recent years.
The minister met with The Wall Street Journal at Iran’s lone diplomatic office in Washington, an “interests section” in Georgetown that is associated with Pakistan’s Embassy. The mission’s walls are adorned with portraits of the Islamic Republic’s founding ayatollahs and pictures of Iran’s famed mosques and gardens.
Mr. Hosseini has emerged in recent years as the frontman for President Mahmoud Ahmadinejad’s economic policies, which have been widely criticized inside Iran. Iranians will vote for Mr. Ahmadinejad’s successor in June.
The IMF last week released a grim assessment on the state of Iran’s economy.
Growth contracted 1.9% in the year ended March 31, according to the fund, and is anticipated to shrink another 1.3% during the current fiscal year. Prices, meanwhile, in Iran jumped more than 30% last year, fueled by the rial’s fall, and are expected to climb by around 27% this year.
The IMF, however, said it expected Iran’s economy to return to growth of more than 1% in 2014, lending support to Mr. Hosseini’s view that Tehran isn’t facing an imminent financial collapse. Still, this is considerably lower than the nearly 8% growth Iran registered in 2007.
Independent economists have criticized the IMF in the past for making overly optimistic assessments of Iran’s economy. Some financial analysts have also questioned whether Tehran’s foreign-exchange reserves are as high as Mr. Hosseini cites. The fund acknowledges it depends on Iran for much of its economic data.
Still, even some of Iran’s biggest critics in Washington have concluded in recent months that Tehran appears to be weathering parts of the U.S. financial assault, even though it has cut deeply into Iran’s revenue. Iranian officials have acknowledged that their oil exports have been cut by more than half at times over the past year.
The U.S. and its European allies have been seeking to use sanctions to force Iran into curtailing its nuclear program, which Washington believes is designed to produce atomic weapons. Iran has denied this charge, but has refused to make any concessions in international negotiations. Israel has threatened military strikes on Iran’s nuclear sites if sanctions don’t slow Tehran’s program.
Patrick Clawson, an Iran expert at the Washington Institute for Near East Policy, recently wrote that Iran has succeeded in recent months in reorienting its exports away from oil to focus on agriculture, mining and industry.
These businesses haven’t been targeted by Western sanctions as much as Iran’s oil wealth, he argued. And Tehran has been successful in expanding its trade with Asian and Middle East countries, including China, India and Turkey, despite sanctions that have cut off most trade with Europe.
“The Islamic Republic is in the midst of a non-oil export boom,” Mr. Clawson wrote. “It has the potential to remain a middle-income country even with no oil exports, and the reserves to finance the transition in the meantime.”
Mr. Hosseini said Iran’s non-oil exports grew 20% in 2012 from a year earlier. He said the weak rial has made Iran’s exports less expensive and more competitive overseas.
“Our foreign trade is focused on non-oil exports and reducing imports,” Mr. Hosseini said. “In general speaking, the economy of Iran is focused on local trade.”
In one potentially ominous development for the U.S., Iran on Saturday said it was considering exporting oil to North Korea, Iranian state media reported. A delegation from North Korea’s Oil Ministry is in Tehran for negotiations.
Iran and North Korea signed a scientific-cooperation agreement last September in Tehran.
Pyongyang conducted its third nuclear-weapons test in March, and its program is considered significantly more advanced than Iran’s. U.S. officials have worried Iran could barter oil to the energy-starved North in exchange for assistance in the nuclear field. Tehran and Pyongyang have denied cooperation on nuclear or missile technologies.
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