David Petraeus: Iran's economy is in a 'tailspin'

He says it would be 'suicide' to start war with US

By Matt Egan, CNN Business
Copyright 2019 CNN

Ex-CIA director David Petraeus Petraeus spoke to CNN from the sidelines of the SALT Conference in Las Vegas.

(CNN) - Crushing sanctions from the United States have sent Iran's economy into a "tailspin," ex-CIA director David Petraeus told CNN Business.

Petraeus, who was also America's top general in the Middle East, warned that Iran's economy could continue to nosedive "as we tighten the screws a few more turns."

Despite soaring tensions between Washington and Tehran, the former CIA director isn't overly concerned about an all-out war breaking out.

"Certainly, if Iran were to precipitate that, it would be a suicide gesture," Petraeus said from the sidelines of the SALT Conference in Las Vegas. "It would be very, very foolhardy. And they know that."

The bigger risk, the former head of US Central Command said, is "inadvertently ending up in some kind of clash" with militias trained and funded by Iran.

"That could escalate and could get out of hand," he said.

The Trump administration has accelerated its crackdown on Iran in recent months by vowing to wipe out the OPEC nation's oil exports.

On Wednesday, US officials imposed new sanctions targeting Iran's revenue from exports of industrial metals such as iron, steel, aluminum and copper.

The new penalties will punish Iran's mining and metals industry, which employs about 600,000 workers, according to Eurasia Group.

"Factory closures will increase pressure on the central government," Eurasia Group analyst Henry Rome wrote to clients on Wednesday. "This is a recipe for greater domestic discontent."

 

'Deepening contraction' in Iran's economy

 

Iran's economy surged after global sanctions were lifted as part of the nuclear agreement reached in 2015 with the Obama administration. GDP growth accelerated to 12.5% in 2016, according to the International Monetary Fund.

President Donald Trump withdrew from the Iranian nuclear agreement in 2017, imposing tough sanctions that have sparked a painful recession.

Iran is facing a "deepening contraction," the IMF said in April. GDP shrank 3.9% last year, and it is expected to decline by another 6% in 2019. Unemployment is expected to climb to 15.4% in 2019 and above 16% in 2020.

Petraeus, who now analyzes geopolitical trends in his role as chairman of the KKR Global Institute, said the real question is whether Iran decides to just "tighten its belt" in response to the economic trouble, or instead opts to hold back channel talks with Washington.

 

Rising risk of 'miscalculation'

 

Iran announced on Wednesday that it will no longer comply with parts of the nuclear agreement, including limitations on stockpiling heavy water and low-enriched uranium.

"Iran's decision to openly chip away at its nuclear commitments marks the beginning of a new and concerning dynamic between the US and Iran that is ripe for miscalculation," according to Rome, the Eurasia Group analyst.

US intelligence has revealed planning by Iran and Iranian proxies for possible attacks against US forces and interests, CNN has reported.

"We do not seek war," US Secretary of State Mike Pompeo said in a statement on Thursday. But he added that any attack will be met with a "swift and decisive US response."

Susan Rice, who served as national security adviser in the Obama administration, said at the SALT Conference it was a "grave mistake to walk away" from the Iran nuclear deal because it makes a bad situation worse.

"I hear drums beating for a potential war," Rice said.

Petraeus said he's worried about an entity in the Gulf "doing something foolish" and then "shooting starts."

"One doesn't know how you get that to de-escalate," he said.

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