IMF says sanctions on Iran dampening economic sentiment

Uncertainty surrounding the sanctions on Iran and its relations with the United States pose a risk to the oil-producing nation's economy, the International Monetary Fund said Monday.

The comments were a reference to the new sanctions the Trump administration imposed early this month on individuals and companies supporting Iran's ballistic missile program and the Revolutionary Guards military force.

The measures came after Iran test-fired a medium range missile, which the White House contends violated a UN Security Council resolution proscribing missiles that could carry a nuclear device.

Washington issued a tough warning that the United States and its allies had been "too tolerant of Iran's bad behavior" under the 2015 six-nation agreement to monitor and contain the country's nuclear weapons development.

"The Trump Administration will no longer tolerate Iran's provocations that threaten our interests," former National Security Advisor Michael Flynn said early this month, before being forced to resign his post. 

"The days of turning a blind eye to Iran's hostile and belligerent actions toward the United States and the world community are over."

The IMF's annual report on Iran's economy, known as the Article IV review, said "renewed uncertainty regarding sanctions is dampening sentiment."

The IMF staff said in their assessment the country benefited from higher oil production and is expected to grow 6.6 percent in 2016/2017, before easing to 3.3 percent in the next year.

However, the uncertainty surrounding the nuclear agreement "and especially relations with the US, could deter investment and trade with Iran and short-circuit the anticipated recovery," the report cautioned. "If the agreement is derailed, the economy could risk recession."

Reimposing sanctions "would lower direct investment and capital inflows, and disconnect Iran from the global financial system."

Jafar Mojarrad, IMF executive director for Iran, noted that, "Regrettably, remaining US sanctions and related uncertainty have hindered the return of global banks to the Iranian market and continue to hamper large-scale investment and trade."

Source: AFP