Following the Islamic Revolution of 1979, the US and later the EU imposed a series of sanctions on Iran, most targeting its energy sector. In addition, more than $12 billion in Iranian assets were frozen.
By 2012, international sanctions resulted in Iran’s rial reaching a record low against the US dollar and losing 80 percent of its value. Sanctions on crude oil and a loss of revenue from this resource resulted in the country’s budget deficit reaching between $30 and $50 billion that year.
A United Nations report issued in 2014 revealed between 44.5 percent and 55 percent of Iran’s urban population lives below the poverty line. The average monthly income, according to the report, was the equivalent of around $600 US for a family of five people. Iran has 10.4 percent unemployment and 10.5 percent inflation.
Economic sanctions and an embargo were lifted in 2015 as a result of the framework for a Comprehensive Agreement on the Iranian nuclear program.
However, in May of 2018, President Trump withdrew from the agreement and sanctions were re-imposed. The US Treasury hit Iran’s Persian Gulf Petrochemical Industries Company with economic sanctions due to its ties with the country’s Revolutionary Guards, which the US now designates as a foreign terrorist organization.
The Trump administration’s confrontational approach and a contentious response by Iran’s ruling mullahs will likely prevent meaningful diplomatic progress between the two nations for the foreseeable future.
A series of events elevated the conflict between Iran and the US. In June, two oil tankers were attacked in the Gulf of Oman near the Strait of Hormuz. President Trump and his Secretary of State, Mike Pompeo, immediately blamed Iran for the incident despite a lack of evidence.
The previous month, it was reported tankers were attacked in the UAE port of Fujairah. Again, there wasn’t any evidence the Iranians were involved. Both incidents resulted in the US sending additional warships and troops to the region. The Pentagon produced a video and photographs of an Iranian outboard motor boat alongside what appeared to be the hull of a tanker and this was widely criticized as insufficient evidence.
On 20 June, the Iranians said they had downed a US military Broad Area Maritime Surveillance Demonstrator drone over Iranian territory. The US disputed this and insisted the spy drone was operating in international air space when attacked.
President Trump said he has not ruled out an air strike in response to the drone shoot down. Asked by the media what his response would be, Trump replied, “You’ll soon find out.”
Iranian Foreign Minister Mohammad Javad Zarif accused the US of engaging in “economic terrorism” and covert operations against Iran. Zarif added the US had encroached on Iranian territory.
On 20 June, Donald Trump responded to the drone incident by arranging an attack, only to order a stand-down moments before the plan was set in motion. Shortly thereafter, President Trump imposed additional sanctions on Iran. As a result of this growing crisis, oil prices have moved up from their recent lows and gold prices, in part, have risen as investors seek safe haven assets.