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How Decades Of US Sanctions Crushed Iran's Economy - YouTube
Channel: CNBC
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Tensions between the U.S.
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and Iran are on the rise.
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Iran has filed a complaint with the United Nations over what it says
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was a U.S.
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violation of its airspace.
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The U.S.
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claims Iran shot down a drone in international airspace.
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Announcement from Iran today that it has breached another
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limit set by the 2015 nuclear deal.
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Iran now pushing back on President Trump's assertion that
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the United States shot down an Iranian drone.
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Iran has released new footage they say shows their
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forces taking over a British tanker.
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Iran is claiming that it has arrested
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17 Iranian nationals who are
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acting as spies for the CIA.
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A big factor behind all of this is the Iranian
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economy. Decades of U.S.
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sanctions have decimated it.
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And in 2019.
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Iran appears more and more desperate.
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Here's why.
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When it comes to trade policy, sanctions are the most used
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tool in the U.S.'s tool
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box. Stephanie Segal, a senior fellow
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at the Center for Strategic National Studies, explains.
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They're there as part of the toolkit to
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incentivize certain behaviors.
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One criticism is that they've used, been used
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more in a punitive sense.
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So rather than incentivizing kind of forward looking
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action, they've been used to punish
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past behaviors and
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there are particular concerns about that because
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the reason that our sanctions policy can
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be so potent is because we
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have the dollar at the center of the
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international system.
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The U.S.
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first started imposing oil sanctions in
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1979 to respond to growing terrorism
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concerns from the country.
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From the mid-1980s through the 1990s, the U.S.
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continued imposing sanctions that focused on
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U.S.-Iranian imports and entities that did
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business with the country.
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We actually don't have much of a bilateral
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economic relationship with Iran.
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So the only way that we can actually use
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an economic tool to influence
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Iran's behavior is through third
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countries.
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Then in August 2003, the International
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Atomic Energy Agency found traces of enriched
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uranium at one of Iran's nuclear power plants.
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To the United States and its allies, it looked like
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Iran was inching closer to producing nuclear
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weapons. In June 2005, President
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Bush signed Executive Order
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13382, which froze assets
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and transactions of individuals involved with growing the
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supply of weapons of mass destruction in
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Iran, North Korea and Syria.
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The United States and other allies tried to negotiate with
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Iran to limit the amount of uranium produced,
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but Iran insisted its actions were peaceful.
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Five years later, President Obama enacted the
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Comprehensive Iran Sanctions Accountability and Divestment Act.
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It expanded on sanctions from the Clinton and Bush
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administrations to who could face sanctions, new
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restrictions for financial institutions and eliminate
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exemptions on Iranian imports.
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Our concept at the time was you
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start small, you start with the really toxic stuff, the
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nuclear weapons program and missile programs, and then
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you use that as a way of essentially building a wedge
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between Iran and the rest of the international community, you could
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use to develop other sanctions tools in the future.
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That's Richard Nephew.
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He was in charge of developing and executing the
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U.S.-Iran sanctions strategy from
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2011 to 2013.
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The U.S.
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continued to focus sanctions on Iran's service-based
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industries, but it realized it had to switch
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tactics to have a bigger impact on Iran's economy.
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Initially, we really took what the Iranians gave us. They
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exposed themselves to a broader range of sanctions and
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targets by attempting to evade the sanctions
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in place.
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But over time, we started
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to see that momentum and
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the impact of those sanctions was lessening.
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We started going after what you would call the
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tendons of Iran's international business
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activity, things like transportation, things like
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insurance, all those sorts of services you need to be
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part of the modern global economy.
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Nephew also advised the Obama White House on the
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2015 nuclear deal or Joint
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Comprehensive Plan of Action.
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The deal would lift secondary sanctions on Iran and
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help boost the country's economy.
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The U.S.,
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China, France, Germany, Iran,
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Russia and the U.K.
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agreed on the plan in July 2015.
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But in May 2018, President Trump announced
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that the U.S.
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would be pulling out of the 2015 nuclear
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deal.
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We had the JCPOA, not a
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perfect document, it allowed a
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number of exceptions.
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Iran continued to test fire new missiles.
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There were time limits on Iranian
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commitments under the JCPOA that would
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expire after an extensive period of time.
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By November 2018, President Trump
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reinstated sanctions on Iran's most important
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economic sectors like energy and shipping, but
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granted six-month waivers to eight countries that purchase
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Iranian oil.
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The sanctions have really hurt Iran's GDP over the years.
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The IMF predicts that Iran's GDP in
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2019 will shrink by six percent.
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Iran's GDP per capita on 2018 was
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5037 U.S.
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dollars. That's less than a tenth of the US's.
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The U.S.
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aimed to target Iran's oil industry.
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But everyday Iranians have felt the effects of the
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sanctions. In February 2019, the
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World Bank reported Iran's inflation rate had grown
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42 percent from the previous 12 months,
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driving food prices up almost 63
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percent. It's also leading to shortages
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in food and medicine.
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There are no restrictions on the U.S.
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export of foods and medicines to Iran.
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Financial institutions don't know exactly who
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they're dealing with in Iran and are
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worried that they may be dealing with
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a sanction entity or
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institution or a company or person
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that would make the provider of
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the food and medicine liable to U.S.
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sanctions for violating the policy.
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Companies remain hesitant to invest in Iran amid the
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prospect of more U.S.
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sanctions. That's making it harder and harder for Iran
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to keep up with oil powerhouse Saudi Arabia.
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Iran needs capital for its aging oil
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infrastructure.
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The Iranian government still relies on oil sales to help
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fund its government, but it's been trying to wean itself off.
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In 2009, about 60 percent of government revenue came
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from the petroleum sector.
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For Iran's 2019 budget, about 30 percent
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of revenue is expected.
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When the U.S.
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expanded sanctions in 1995,
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Iran was exporting almost six percent of the world's
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petroleum. As of 2018, that number has been
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cut down to less than three percent.
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And it could be even less.
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Iran has stopped reporting its production numbers to the
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Organization of the Petroleum Exporting
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Countries. Out of all the OPEC
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countries, Iran still holds the third largest
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oil reserves.
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The United States, though, now produces more oil than
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any other country, pumping out almost 11 million
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barrels of crude oil per day in 2018.
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In comparison, Iran produced 3.5
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million barrels.
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Iran appears to be hurtling toward a tipping point.
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Will it become another North Korea using a nuclear weapons
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program and aggression as bargaining chips on the world
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stage? Or could it become the next
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Venezuela, a once oil rich country
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now in political and economic turmoil.
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In Venezuela, corruption crippled the country's energy
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industry and without money to finance the maintenance of
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it, investors left in droves.
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Venezuela's economy has collapsed, and now it's seeing a
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political struggle between its current president and a
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U.S. backed opposition leader.
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Iran's political situation remains static
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despite the immense pressure on its economy.
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One of the things that's affecting the Iranian economy right
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now is this kind of stillborn effort at
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reform. And it's something that President Rouhani
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still wishes to engage in.
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A lot of his senior advisers and cabinet people wish to engage in,
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but they haven't gotten as much traction as they could and they want
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to get, especially with international investment.
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The World Bank predicts that Iran's economy will
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shrink by more than 2 percent in the next two years.
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Iran faces a dwindling number of options and the
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clock is ticking.
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