Iran and Sanctions: 5 Survival Lessons for Russia

Contents:

• Modern Iran: Challenges and Prospects
• Iran's Technological Development: How the Country Overcomes Sanctions
• Iranian Nanotechnology: An Example of Significant Progress in the Science-Intensive Sphere
• The Iranian Model: Advantages of Universities, Benefits, and the Cryptocurrency Market
• Disadvantages of the Iranian Model: Brain Drain and Lack of Prospects

Modern Iran: Challenges and Prospects

Since 1979, Iran has been subject to international sanctions imposed by both Western countries and the United Nations. These sanctions have had a significant impact on the country's economy and the daily lives of Iranian citizens, limiting access to international markets and resources. The economic consequences of the sanctions have hampered the development of key industries, such as the oil and gas industry, and have negatively impacted the population's standard of living. As a result, many Iranians face increasing difficulties in obtaining basic goods and services, exacerbating the country's social and economic woes.

Following the signing of the nuclear agreement in 2016, many sanctions were lifted, leading to a 15% increase in gross domestic product over the following two years. However, in 2018, the Trump administration withdrew from the agreement, reinstating previous restrictions and implementing new measures. These actions had a significant impact on the economy, causing instability and a decline in growth.

Today, Iran continues to face pressure from harsh international sanctions that cover various sectors of the economy. These sanctions are aimed at limiting the country's access to financial resources, technology, and foreign markets. As a result, Iran's economy is facing severe difficulties, negatively affecting the population's standard of living. Sanctions affect key sectors such as energy, trade, and banking, leading to further isolation of the country on the global stage. Under these restrictions, Iran is seeking new ways to strengthen its economy and minimize the negative impact of sanctions.

• exclusion from the international financial system;
• an oil embargo, forcing the country to sell oil at reduced prices;
• freezing of foreign exchange reserves outside the country;
• a ban on foreign investment;
• restrictions on trade in various sectors, including non-military ones.

Despite a 40-year struggle with external pressure, sanctions imposed in 2018 have had a devastating impact on the economy. A sharp rise in prices has become a serious problem for the population, worsening social inequality and exacerbating financial difficulties. This situation requires attention and the search for effective solutions to mitigate the negative consequences and support citizens.

In 2021, the inflation rate in Iran was 44%, which led to a 59.6% increase in food prices. Approximately 60% of the country's population lives in poverty, with one in two facing extreme poverty. Without government support, many Iranians risk facing starvation. The situation requires attention, as high inflation and poverty rates significantly affect the quality of life of citizens and the economic stability of the country.

According to expert Nikita Smagin, the impoverishment of the population has become an obvious phenomenon, which is leading to growing public discontent. The increase in the number of crimes, in particular pickpocketing, also raises serious concerns. These factors highlight the need to take measures to improve the socio-economic situation in the country.

Sanctions have significantly worsened the unemployment situation, which has reached 9%, and among young people this figure is 27%. In recent years, the country has seen mass protests, often accompanied by violence. According to research, more than a thousand people died as a result of protests between 2019 and 2020. These events highlight growing social discontent and the deteriorating economic situation in the country.

Iran is facing economic difficulties, but is gradually beginning to recover. In 2020, the country's gross domestic product (GDP) increased by 3.4%, and by 2.5% in 2021. Despite these modest growth rates, they are a positive sign after a significant economic contraction of more than 50% in previous years. Iran's economic recovery may be due to improved domestic production and some government support measures.

The main shock from the imposed sanctions is gradually subsiding. Iran is slowly beginning to recover from the economic crisis. This is reported by Nikita Smagin, TASS correspondent in Tehran. The economic situation in the country is showing signs of improvement, which may lead to stabilization of the financial situation and an increase in investment.

Iran is taking steps to reduce its dependence on oil by directing investments into high-tech sectors of the economy. According to the World Bank, in 2018, the share of oil rents in the country's gross domestic product was only 20%, while hydrocarbon revenues account for 25% of the state budget. An important part of Iran's economic strategy is the development of the automotive industry, which already accounts for approximately 10% of GDP. This demonstrates the country's commitment to economic diversification and increased resilience to external economic conditions.

The development of high technology in Iran is becoming an important priority. Despite the skepticism that sometimes accompanies the optimism of Iranian officials, there is a grain of truth in their statements. The active implementation of intelligent solutions and innovative technologies contributes to the country's economic growth and increased competitiveness on the international stage.

Iran's Technological Development: How the Country Overcomes Sanctions

In recent years, Iran has shown significant growth in the high-tech sector, despite strict international sanctions. Since the early 2010s, when the country's economy stabilized thanks to oil revenues, a real boom in IT startups has begun in Iran. In 2013, only two science and technology companies were registered, but by 2015 their number had increased to 1,610. Currently, more than 5,000 such companies operate in the country. This growth demonstrates the potential and innovative spirit of Iranian tech entrepreneurs.

According to expert Nikita Smagin, internet upgrades have had a significant impact on the growth of internet usage in Iran. For many years, internet speeds in the country were extremely slow, but in the 2010s, the government took steps to significantly improve them. This transformation has led to the majority of Iranians actively using the internet via smartphones, thus avoiding the period when the internet was used exclusively on desktop computers. Improved internet access has been a significant factor in Iran's digital transformation, opening up new opportunities for communication, business, and education.

Doing business in Iran has its own unique characteristics that differ from international practices. While many companies around the world focus on creating their own websites, Iranian entrepreneurs often start by promoting themselves through instant messaging apps. Telegram was previously the most popular, but after it was blocked, WhatsApp took over. According to official statistics, approximately 9 million Iranians earn money through Instagram, representing over 10% of the country's total population. This underscores the importance of social media and messaging apps in the Iranian business environment.

Strict censorship and blocking of key global platforms create both obstacles and opportunities for the local IT industry in Iran. Despite the inaccessibility of many foreign social media platforms, including Chinese and Russian ones, millions of Iranians use VPNs to bypass these blocks. As a result, only Instagram and WhatsApp remain accessible in the country, while other services are inaccessible due to US sanctions. This creates unique conditions for the development of local alternatives and stimulates tech innovation.

Smagin notes that users seeking to access restricted services often encounter notices regarding compliance with US legislation. This underscores the challenging environment facing local businesses. Lack of understanding and compliance with the law can create additional barriers for companies looking to expand their services and meet customer needs.

In response to the departure of Western services from Iran, the country has begun to actively develop its own equivalents. These services include:

• The Iranian service Alibaba, which has no connection with the Chinese company of the same name, offers ticket sales and tour booking services using local maps.
• Digikala is a marketplace and delivery service, similar to eBay.
• Snapp! is a taxi and delivery service, a local equivalent of Uber, founded with the participation of German and British investors.

In Iran, leading companies occupy important positions in their segments, providing services that are in demand by almost every resident of the country. The active development of small start-ups and high-tech companies confirms that Iran is confidently progressing in the field of information technology. This growth demonstrates a growing interest in innovation and digital solutions, creating a favorable environment for the further development of the country's IT sector.

Nikita Smagin, a TASS correspondent in Tehran and author of the "Iran on Duty" Telegram channel, notes that despite existing difficulties, Iran's IT sector continues to actively develop and adapt to changing conditions. This demonstrates the industry's high flexibility and innovative potential, finding new ways to overcome challenges and implement modern technologies. Iranian IT companies are actively working on creating new solutions, which contributes not only to domestic growth, but also to the possibility of entering international markets.

Iranian Nanotechnology: An Example of Significant Progress in a Knowledge-Intensive Field

Iran has significantly developed its nanotechnology sector in recent years, which is reflected in the active support of start-ups at all stages of their life cycle - from idea to implementation. Research initiatives in the country are aimed at solving urgent applied problems, including the development of new drugs, meeting industrial needs such as the production of plastic and construction materials, and the effective purification of polluted water. This strategy not only contributes to scientific progress but also strengthens Iran's position in the global high-tech market.

Iranian developments in nanotechnology, although not a leading position in the global market, are still of significant interest. A report by the Dutch company Flanders Investment & Trade highlights key achievements of the Iranian nanotechnology industry, which highlight the country's potential. These successes demonstrate the growth and development of Iranian technology, which could strengthen Iran's position in the global scientific and technological arena. Importantly, investments in nanotechnology could lead to the creation of new jobs and an improved economic situation in the country. Innovative solutions and developments in this field open up new opportunities for various industries, including medicine, electronics, and environmental technologies.

• An electrospinning machine for the production of nanofibers used in medical dressings, prosthetics, and filtration systems.
• A nanotechnological system for deep water purification, capable of converting even heavily polluted water into suitable for drinking and watering plants.
• Nanoliposomes are molecules that improve the absorption of biologically active substances, used in medicine and cosmetology. Of particular interest is a drug for the treatment of leishmaniasis, which helps macrophages release active substances at the site of infection.
• Super-strong electrodes for spot welding, providing high efficiency and reliability.
• Drugs with nanomicelles that easily penetrate the blood-brain barrier, expanding the possibilities of treating various diseases.

The Iranian Model: University Advantages, Benefits, and the Cryptocurrency Market

Despite its challenging economic conditions, Iran is a promising platform for digital business. Unique factors such as a growing youth audience, high internet penetration, and support for startups contribute to the dynamic development of digital technologies in the country. These conditions create a favorable environment for innovative solutions and new business models, making Iran attractive to investors and tech entrepreneurs.

Iran invests heavily in education, allocating about 20% of the government budget, one of the highest shares in the world. By comparison, Russia spent only 4.9% of its budget on education in 2021. This underscores Iran's serious approach to developing its education sector. Iran ranks 60th in the World Intellectual Property Organization's Global Innovation Index. However, its achievements in education are significantly higher: the country ranks 9th in higher education's contribution to innovation and 14th in knowledge production. These facts underscore the importance of education as a key factor in Iran's innovative development and economic growth. Despite ongoing international sanctions and challenging economic conditions, Iranian universities continue to provide high-quality education. Tehran University, one of the country's leading universities, is ranked among the top 400 universities in the world. Its metallurgy and mining departments are particularly noteworthy, ranking in the top 75 globally. This demonstrates the high level of training of specialists and their competitiveness in the international arena.

From 2000 to 2016, the volume of scientific publications by Iranian scientists increased 27-fold, allowing them to reach the level of European universities. For example, Babol University of Technology ranked 14th in the world in terms of scientific paper citations, placing it on par with the University of Oxford. This growth demonstrates the significant progress of Iranian science and education, as well as the high quality of research conducted in the country.

Since 2005, Iran has been actively developing technology parks and business incubators, contributing to the growth of the country's innovation ecosystem. Pardis Technopark, often referred to as Iran's Silicon Valley, has become an important hub for startups. It is home to highly qualified specialists and the necessary resources, making Pardis an attractive location for entrepreneurs and investors. Successful projects and startups emerging from this technology park contribute to the development of technology and the economy of Iran.

Iran's startup community is rapidly growing, spanning a wide range of fields. Recent years have seen rapid development in technology, innovation, and entrepreneurship. Startups in Iran are active in fields such as information technology, finance, healthcare, agriculture, and the environment. This growth is driven by a high level of education, the creativity of young people, and support from public and private investors. Interesting startup initiatives attract the attention of not only local but also international partners, facilitating the exchange of experience and expanding business opportunities. As a result, the Iranian startup community is becoming a major player on the global stage, offering innovative solutions to pressing problems.

• e-commerce;
• aviation;
• robotics and automation;
• aerospace;
• communication technologies;
• social media;
• digital entertainment;
• smart cities;
• nanotechnology;
• cloud computing;
• financial technology.

The Iranian authorities provide a wide range of incentives for high-tech companies. These measures are aimed at stimulating scientific research and innovation in the country. Among the offered incentives are tax incentives, subsidies for scientific projects, and access to specialized investment funds. Such initiatives create a favorable environment for the development of science and technology in Iran, helping to attract investment and the development of high-tech startups.

• tax exemptions for up to 15 years;
• interest-free loans from banks and government funds;
• provision of office and laboratory space;
• insurance services to reduce risks;
• the possibility of creating consortiums with foreign companies, provided that control remains with Iranians.

The process of obtaining benefits can take up to two years due to complex procedures for assessing innovation. This is due to the need to thoroughly check all aspects of the project and its compliance with the established criteria. Potential recipients of benefits should be prepared for a long wait and prepare all the necessary documents to successfully pass the assessment.

In 2018, Iran banned the use of cryptocurrencies, but in 2019 the country legalized them, seeing them as a way to reduce dependence on the US dollar. Iran currently accounts for approximately 4.5% of global Bitcoin mining, generating approximately $1 billion annually. Legalizing cryptocurrency is boosting Iran's economy and expanding opportunities for miners amid international isolation and sanctions. Iran offers some of the lowest electricity prices in the world, at just 0.4 cents per kilowatt-hour. This creates favorable conditions for cryptocurrency mining. Government support for the development of the crypto industry includes the creation of the Association of Crypto and Blockchain Companies and the integration of local payment systems with cryptocurrencies. These measures are fueling interest in cryptocurrencies and stimulating investment in the sector, making Iran an attractive destination for miners and blockchain entrepreneurs.

This creates new opportunities for Iranian companies in the field of international settlements and promotes the development of blockchain startups. The development of blockchain technologies and their implementation in the business processes of Iranian enterprises can significantly improve the efficiency of financial transactions and strengthen their position on the global stage.

Disadvantages of the Iranian model: brain drain and lack of prospects

Despite Iran's achievements in the field of technology, it is necessary to critically analyze the government's optimistic statements about significant successes in the IT sector. As Nikita Smagin, TASS correspondent in Tehran, notes, Iranian analogues of international services, although they perform certain functions, are significantly inferior to the original platforms. This emphasizes the need for further development and modernization of technologies in the country to achieve competitiveness in the global market.

The problem with social networks and instant messengers remains relevant in Iran. Iranian authorities have attempted to create their own services, but they have been unable to compete with foreign counterparts, even with state support. Attempts to attract users to local platforms have been unsuccessful, and their market share remains minimal. Javad Salehi Esfahani, a prominent Iranian economist, argues that the high level of state ownership undermines private initiative in the country. The state and quasi-state structures control approximately 80% of the Iranian economy, significantly limiting opportunities for private sector development. In this context, small and medium-sized enterprises face significant obstacles in their pursuit of growth and innovation. This creates a need for reforms that will increase the share of private ownership and support entrepreneurial activity. Startups in Iran rely heavily on state support, but such investments are often directed only to established companies. The country has a shortage of private venture capital funds and business angels willing to take risks. This limits opportunities for new startups and slows their development. The investment ecosystem requires improvement to attract more private investment and create a more favorable environment for startups. Increasing the number of venture capital funds and supporting entrepreneurs could significantly enhance the innovative potential and competitiveness of the Iranian market.

State control over education and science is an important aspect that generates much controversy. Scientific organizations are required to submit reports to regulatory authorities, and many scientists consider this practice unacceptable. Such interference often does not correspond to the actual requirements of science and can negatively impact research activities. Scientists need the freedom to conduct research and development, which allows them to achieve new discoveries and innovations. Therefore, it is important to find a balance between the necessary oversight and ensuring the independence of the scientific process.

The difficult economic situation and strict government policies are the main causes of the brain drain from Iran. In 2014, the country's science minister estimated the annual losses from the emigration of highly educated specialists at $150 billion, which significantly exceeds oil export revenues. The period from 2007 to 2012 revealed alarming statistics: 96% of Iranian patents were registered outside the country. While previously it was primarily highly skilled professionals who emigrated, recently there has been an increase in the number of people without higher education seeking to escape poverty. This phenomenon threatens the development of Iran's scientific and technological potential, causing serious economic and social consequences for the country.

Economic sanctions continue to be a major challenge, creating significant uncertainty and hindering sustainable development. Despite strict restrictions, high-tech companies can demonstrate profitability, but investing in such projects is perceived as high-risk. This is especially true after the imposition of new sanctions in 2018, which increased pressure on entrepreneurial activity and hindered access to international markets. In the face of these challenges, it is important to find new ways to adapt and innovate to minimize risks and ensure long-term growth.

Sanctions have had a significant impact on people's perception of risk. According to Nikita Smagin, "Restrictions force a focus on the short term, as predicting future events becomes impossible. You can invest in a project, but changes in the political situation could jeopardize the results of your work." Such circumstances highlight the importance of flexibility and adaptability in the face of uncertainty, which is becoming a key factor for successful investment management in the modern world.

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