The United States, European Union, and the U.N. have imposed tough economic sanctions against Iran – blocking access to the international banking system and hurting sales of Iranian crude oil – as a way to persuade Tehran to abandon its nuclear program.
In the short term, the harsh sanctions have had an impact on Iran’s local economy – inflation has gone through the roof and unemployment rate is staggering, especially among young Iranians. Prices of consumer goods have doubled, tripled, even quadrupled in some cases, according to local consumers.
The business community is in disarray, and while things keep getting worse, it’s all people are talking about.
Barely getting by
He said he has been unemployed for the past year, doing odd jobs and that he barely makes enough to feed himself, let alone his wife and children. The lack of jobs and the extraordinary rise in food prices have hamstrung him. But he was most worried about what the crippled economy is doing to the youth of Iran, who he said are turning to crime and drugs if they can’t find work.
In Iran, appearance is everything. How you are dressed and wearing a beard says a lot about your politics.
As I talked to Ahmed, who was dressed in Western-style clothes, another man looked on disapprovingly. He had a full dark black beard and was dressed in conservative black clothes. He was listening to everything Ahmed said and wanted to talk to us, although he declined to give us his name.
He said that people like Ahmed were making excuses and were lazy. He argued that the economy had become tougher, but no more so than the Iranian people were used to over the years. He blamed the U.S. for the bad economy, accusing President Obama of unfairly trying to squeeze Iran. But he said that in the end, the rough economic times had taught Iran to be more self-reliant.
“We need to tighten our belts for now and weather this storm with the West as we have always done. And we will be victorious again,” he said.
New sanctions real impact
The most recent international sanctions have targeted Iran’s crude oil and banking sector. In addition to harsh U.S. measures, 27 countries in the European Union agreed in January to ban Iranian oil imports – giving countries until July 1 to terminate their deals. They also put a freeze on assets belonging to the Central Bank of Iran and a ban on trade in gold and other precious metals.
Anthony Cordesman, the Burke Chair in Strategy at the Center for Strategic and International Studies and a long-time Iran watcher, said that the despite years of sanctions against Iran, the most recent ones have had the greatest impact – partly because they target the banking industry.
The banking sanctions “have had the most popular, or broad, impact. Right now Iran can’t even operate on the international clearing house.”
“I think that this is the first time that sanctions have really had a major bite. Up to now, they have all been fairly limited,” said Cordesman. “But beginning in November, and it’s just beginning to bite, you can’t bank internationally effectively, you can’t move money. You don’t have a stable conversion rate – but the rial [Iran’s currency] is way down, so your savings are of very uncertain value, unless you’ve invested in property. You don’t know what’s going to happen to your business. You have to be very cautious about how much money you can spend on a marriage for your children or their education.”
He added that we really won’t begin to see the full impact of the sanctions until summer, when they have all gone into effect. “So everyone knows it’s getting worse, but no one knows yet how serious.”
Vali Nasr, the incoming dean at Johns Hopkins School of Advanced International Studies, explained how these sanctions differ from 30 years of sanctions that mostly targeted imports into Iran.
“The new set of sanctions targeting Iran’s oil industry, central bank, ability to conduct international financial transactions – are of a different nature largely because they are going after the government’s source of income – the ability to sell oil or receive money for oil,” said Nasr. “So these have had an impact because they have caused extensive inflation inside Iran. They’ve caused the government to scrap a variety of projects, which has caused unemployment.
“There is no doubt that economic hardship has become much more pronounced. And there is on top of that a layer of uncertainty. So there is significant economic hardship that is hitting the lower rung of society and the Iranian middle class,” said Nasr.
Back in Tajrish Bazaar, Roya, a well-dressed woman in 60’s wearing a Hermes scarf for a hijab and carrying a Louis Vuitton bag, explained how even she is being hit by the economic uncertainty. While she is a wealthy Iranian living in the leafy suburbs of affluent North Tehran, she said her purchasing power has been halved by the struggling economy.
“Everything has doubled in price,” Roya said. “My son lives in Los Angeles and it’s cheaper to go shopping there…amazing. Things have become difficult for me even though I am among the better off Iranians. I can’t imagine how difficult it is for folks downtown.”
When I asked her what the solution was she replied sarcastically, “That’s for the country’s economists to figure out.”
Close to the bone
For international relations analysts, like Cordesman and Nasr, getting reliable information on what’s going on in Iran is very difficult. Both analysts said that basically all of their information on the impact of the current sanctions is anecdotal.
“You have to rely on anecdotal information especially because the Iranian government does not have an interest in revealing how painful the sanctions are. They may admit that they are hurting, but they don’t want to put numbers out there,” said Nasr.
But it’s not all doom and gloom for the regime. President Mahmud Ahmahdinejad often touts during public events that Iran has a record $90 billion in foreign exchange reserves, as well as untold reserves of gold, silver and precious stones.
Even though experts estimate that Iran has seen a decline in sales of about 300, 000 barrels of oil per day, as a result of the sanctions, this has been offset by a 15 percent rise in crude prices.
And the effect and pain of sanctions has not been distributed evenly. While blue-collar workers in downtown Tehran can expect to eat meat once a month only as a treat, north Tehran is awash with Mercedes and Porsche jeeps costing as much as $500,000 after the import tax has been paid.
Will the sanctions achieve goal?
So the question remains as to whether or not the sanctions will achieve their goal: curtailing Iran’s nuclear program.
“The sanctions have had an impact of getting Iran to the negotiating table. Iran came to Istanbul [the site of the latest diplomatic talks] with much more seriousness than in the past,” said Nasr.
But he added that the sanctions alone won’t be enough for Iran’s leaders to give up a program they have invested heavily in – both financially and in terms of building the nuclear program as a point of national pride. “Just because the Iranian public dislikes this regime – that does not mean that they dislike the nuclear program. They don’t see this as the regime’s nuclear program, they see it as Iran’s nuclear program,” said Nasr.
In order for the sanctions to work, Nasr explained that the U.S. and other parties at the table need to give something back – otherwise it would just seem like Iran is surrendering to the West’s demands, not an easy sell at home.
“Until now – the whole approach has been stick-heavy and carrot-poor. And the sticks are very explicit and the carrots are vague. And maybe that was necessary to get their attention and to show that we meant business. But now going forward – [the U.S.] can’t ask [Iran] for concrete concessions – like stop this, stop that – but not put concrete things on the table, like this sanction will be lifted. If all the concessions are on Iranian side and what they get is just a promissory note, I don’t think it will fly.”
“End of the day, these two countries have not had a single thing they’ve agreed on or done together in the last 30 years. So you couldn’t expect them to actually be able to conclude a deal without some sort of reciprocal, trust building, concrete steps going forward.”
Msnbc.com’s Petra Cahill contributed to this report.
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