Rouhani administration desperately needs deal to reverse economic decline

Iran desperately needs this deal. The sanctions regime put in place by the U.S., U.N. and EU has devastated the Iranian economy. Sanctions have been essential in pressuring the Iranians to come to the table and negotiate away key parts of their nuclear infrastructure. As a CRS report by Kenneth Katzman demonstrates:

Sanctions caused Iran to suffer its first gross domestic product (GDP) contraction in two decades -- about 5% contraction in 2013... Iran's economy is 15%-20% smaller than it would have been had sanctions not been imposed. Many Iranian businesses have failed, the number of nonperforming loans held by Iranian banks increased to about 15%-30%, and many employees in the private sector have gone unpaid or underpaid. The unemployment rate is about 20%.

Sanctions drove Iran's crude oil sales down about 60% from the 2.5 mbd of sales in 2011, reducing Iran's crude oil sales revenue from100 billion in 2011 to about35 billion in 2013 and even less in 2014... The JPA caps Iran's crude oil exports at about 1.1 mbd.

Sanctions caused the value of the rial on unofficial markets to decline about 56% from January 2012 until January 2014. The unofficial rate is currently about 37,000 to the dollar, and the government has repeatedly adjusted the official rate (currently about 27,000 to the dollar) to reduce the spread between it and the unofficial rate.

The drop in value of the currency caused inflation to accelerate during 2011-2013. The Iranian Central Bank acknowledged an inflation rate of 45% in July 2013, but many economists asserted that the actual inflation rate was between 50% and 70%. The sanctions relief of the JPA has helped reduce the inflation rate to about 30% currently.

Mr. Rouhani, the president of Iran, was elected on an economic reform package. But in order to do that, he has to end the sanctions, and in order to do that, he has to make a deal. He's up for reelection in two years; there are important elections next year in the parliament and their government bodies. He needs this deal in order to kick start the economy, in order to aid his political faction in the complex Byzantine Iranian political system.