Consequences the factional battles over the economy

Consequences of Conflict

Countries emerging from violent conflict face
extraordinary constraints mobilizing the human and financial resources that are
urgently needed, first for humanitarian relief and subsequently for economic

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Conflict almost always affects the rate of growth of
a country’s economy as a result of the negative effects on it has on physical
and human capital, markets, investment and but economic changes go beyond this,
with conflict often transforming economies and bringing about a switch to
informal activities, many of which are often illegal.

Conflicts surrounding the Islamic Republic of Iran

The Iran–Iraq War was an armed
conflict between Iran and Iraq lasting from 22
September 1980, when Iraq invaded Iran, to 20 August 1988. The war followed a
long history of border disputes, and was motivated by fears that the Iranian Revolution in 1979 would inspire insurgency among
Iraq’s Shi’ite majority,
as well as Iraq’s desire to replace Iran as the dominant Persian Gulf state.

The total cost of the war from its
beginning in 1980 until early 1987 was more than US$240 billion. Therefore, since
the 1979 revolution, the Iranian economy has been beset by a costly eight-year
war, unremitting international pressure and isolation, and ideological
conflict. Iran’s reliance on oil revenues put the state at the mercy of energy
market fluctuations, with prices below $10 per barrel in 1999 and above $145
per barrel in 2008.

policies established during the revolution were strengthened after Iraq’s 1980
invasion. However, the post conflict period observed increased urban poverty, dropped real per
capita income, and failure of price controls,
collapse in oil prices,
and strict rationing of basic consumer goods in preventing rampant inflation.
Meanwhile, the factional battles over the economy polarized the political
environment and eroded what was left of the private sector.

Recovery of the Economy

The cease-fire facilitated a major shift in the Islamic Republic’s economic
approach. We sought to rebuild a country battered by a decade of revolution and
a war with approximately $1 trillion in direct and indirect costs. This agenda

Infrastructure development

Privatization of state enterprises

Foreign exchange liberalization

Establishment of free-trade zones

And elimination of subsidies and
price controls.

 Reconstruction was strong and
post-war investment and relaxation of government restrictions helped generate
robust growth in gross domestic product, government revenues and employment. This
was followed by a solid beginning to serious economic restructuring. Many
notable national milestones including the following were observed:


Ø  Unifying the exchange rate  

Ø  Establishing an Oil Stabilization Fund as a cushion against
market volatility

Ø  Authorizing the first post-revolutionary private banks

Ø  Pushing through some improvements to the framework for
foreign investment

Ø  Stewarding the economy through a tumultuous period of
unprecedented low oil revenues

Ø  And luring new interest and investment from the West.

This has been followed by many more efficient
economic policies over the years which have been contributing greatly to the
national economy till date.


Solutions to Reconstructing Economies in War Torn Countries

In war torn nations, policy must aim not just to
rebuild what was destroyed by war or recreate the status quo from before the
conflict; it must seek to break with the past. This means pursuing policies
that are conducive to more inclusive growth and enhanced human development.
Stronger growth is associated with rising incomes and expanding opportunities
for human development. Another implication of the situation is that development
is an incremental process.

The major drivers of post-conflict economic growth are
capital intensive resource extractive industries, investment- and
trade-enabling policies promoting an environment that fosters investment and
trade, re-establishment of a credible and efficient monetary policy regime and
rebuilding the domestic financial and banking sector.

The Islamic Republic of
Iran strongly believes that such an approach, with the help of the global
community, will make economic recovery a self fulfilling prophecy in war torn