Earlier this month in Vienna, diplomatic talks between the Islamic Republic of Iran and the P5 + 1 reached an impasse as Tehran took a maximalist stance. The plan’s self-confidence is in part the result of improving its financial situation. The latest data on Iran’s non-oil exports shows a 47% increase in the first seven months of the Persian year 1400 (April 2021-November 2021) compared to the same period last year.

Iran’s economy still suffers from massive inflation, huge budget deficit, lack of investment, falling turnout and sluggish growth. Yet one fact cannot be ignored: the economy is doing better, even with all the lingering turmoil.

Any improvement in Tehran’s economic situation reduces Washington’s influence over the mullahs’ regime and encourages Supreme Leader Ali Khamenei, President Ebrahim Raisi and chief nuclear negotiator Ali Baqeri Kani to demand more and give up less.

A steady improvement in the Iranian economy without both a resumption of the nuclear deal and the complete lifting of sanctions could convince Khamenei to take the final step and go nuclear, in the hope that the economy will be become resilient enough to withstand a new wave of sanctions until the world decides it should normalize relations with the nuclear Islamic Republic.

The Biden administration should work to change that calculation by launching a new campaign of maximum pressure using all elements of US national power. One of the pillars of this maximum pressure campaign should be the reintroduction of real pressure of sanctions on the regime.

What is behind the improvement in Iran’s economic indicators and how can the Biden administration counteract them? Let’s look at non-oil exports.

Non-oil exports, as defined by Tehran, include everything except crude oil. Iran keeps its oil exports a secret and does not even declare its total value. Although the regime does not regularly provide detailed reports on its non-oil exports, it does publish a few details that shed light on its trade.

Iran exported $ 27 billion worth of non-petroleum products between April 2021 and November 2021, nearly $ 9 billion more than it exported during the same period in 2020. This year until now 56%, or $ 14.7 billion, of the country’s non-oil products. exports were from petrochemicals and gas condensates.

Data provided by the Trade Development Organization shows that the quantity of exports in this category only increased by 16 percent while receipts increased by 50 percent. Another 24 percent of total non-oil exports come from the export of mineral products, the quantity of which increased by 15 percent while their value increased by 110 percent.

Together, these sanctioned industries provide nearly 80% of Iran’s non-oil revenue. Here, the lack of enforcement of sanctions is a problem. The main export destinations for the Islamic Republic, accounting for 70 percent of the country’s exports, are Iraq, China, the United Arab Emirates and Turkey. The latter three are the top exporters to Iran, accounting for 64 percent of Iran’s total imports.

In other words, Iran’s sanctioned exports to these countries are recycled through their financial systems, and Tehran uses the proceeds to import what it needs. Most of the increase in the Islamic Republic’s non-oil export earnings comes from rising world prices that have no significant relation to Washington’s Iranian policy.

Nonetheless, Biden’s Iranian policies could have an effect on the discounts Tehran offers its customers. Sanctions have forced Tehran to offer deep discounts to customers due to the increased risk of doing business. Biden’s dovish approach to Tehran could have reduced that risk and allowed the regime to grant smaller discounts to its clients.

The modest increase in the amount of Iran’s non-oil exports in petrochemicals, gas condensates and minerals may be the result of the end of the global Covid-19 recession and increased demand for these products. In addition, a more flexible application of sanctions plays a role, allowing Tehran to sell more.

In a counterfactual world, where the Biden administration had adopted the maximum pressure strategy, doubled down on its sanctions campaign, and found innovative ways to isolate the regime, one would expect the quantity of Iranian exports to decline, even if it is insufficient to neutralize the massive price increases. Moreover, by tightening the financial seat of Tehran, Washington could further limit the access of the mullahs’ regime to its income and to its foreign exchange reserves.

That’s what the Biden administration should be doing. Global price movements are playing against Washington, so the White House should relaunch and amplify the maximum pressure campaign to regain the leverage it lost in 2021 thanks to a more flexible application of sanctions and changes in the ‘Mondial economy.

If there is a way for the United States to resolve the Islamic Republic’s nuclear crisis through negotiation, something that rational people may have reasonable doubts about, it can only happen through pressure, not appeasement. .

Dr Saeed Ghasseminejad is Senior Advisor in Iran and Financial Economics at the Foundation for the Defense of Democracies (FDD), specializing in Iranian economy and financial markets, sanctions and illicit financing. Follow Saeed on Twitter @SGhasseminejad. FDD is a Washington, DC-based, non-partisan research institute that focuses on national security and foreign policy.

Image: Reuters.