As sanctions bite, sense of panic rises in Iran

Many Iranians are buying dollars at govt rate and selling them for almost twice as many rials

One measure of the profound anxiety now coursing through Iranian society can be seen on Manouchehri Street, a winding lane at the heart of this city where furtive crowds of men gather every day like drug dealers to buy and sell US dollars.

The government has raised the official exchange rate and sent police into the streets to stop the black marketeers, but with confidence in Iran’s own currency, the rial, collapsing by the day, the trade goes on. “Am I afraid of the police? Sure, but I need the money,” said Hamid, a heavyset construction engineer who was standing by a muddy patch of greenery amid a crowd of other illicit currency traders here. “Food prices are going up, and my salary is not enough.”

The fuel for this manic trade is not an actual economic collapse – the new European oil embargo has yet to take effect, and there is plenty of food on the shelves – but a rising sense of panic about Iran’s encirclement, the possibility of war and the prospect of more economic pain to come. The White House announced a further tightening Monday aimed at freezing Iranian assets and constricting the activities of Iran’s Central Bank.

Already, the last round of sanctions on Iran’s Central Bank has begun inflicting unprecedented damage on Iran’s private sector, traders and analysts say, making it so hard to transfer money abroad that even affluent businessmen are sometimes forced to board planes carrying suitcases full of US dollars.

Yet this economic burden is falling largely on the middle class, raising the prospect of more resentment against the West and complicating the effort to deter Iran’s nuclear program – a central priority for the Obama administration in this election year.

“For the past few months, our business customers have been coming to us saying their clients are giving up on them, because they believe they will not be paid,” said Parvaneh, 41, who works at a Tehran bank. Like others interviewed for this article, she declined to give her full name, fearing repercussions for herself and her family.

“They are starting to lay off employees,” she said. “Iran’s economy has always been sick, but now it seems worse than ever.”

The rising economic panic has illustrated – and possibly intensified – the bitter divisions within Iran’s political elite.

A number of insiders, including members of the elite Islamic Revolutionary Guards Corps, have begun openly criticizing Iran’s supreme leader, Ayatollah Ali Khamenei, in recent weeks. One of President Mahmoud Ahmadinejad’s aides indirectly accused Khamenei of needlessly antagonizing the West in ways that pushed down the rial’s value, the latest sign of a rift between the president and the supreme leader that is helping to define the parliamentary elections, which are scheduled for March 2.

“They criticise Ahmadinejad and even the supreme leader by name now; it’s not like before,” said Javad, 45, the manager of a travel agency in north Tehran.

Reorienting trade

With Iran now importing as much rice and other food staples as it grows at home, trade obstacles could become far more significant in the coming months. Most Iranian traders discount the possibility of real food shortages, saying Iran is already reorienting its trade eastward and has always found ways around sanctions in the past. But with more avenues closing off every month, those evasive measures are likely to be ever more cumbersome and expensive.

Ordinary Iranians complain that the sanctions are hurting them, while those at the top are unscathed, or even benefit. Many wealthy Iranians made huge profits in recent weeks by buying dollars at the government rate (available to insiders) and then selling them for almost twice as many rials on the soaring black market. Some analysts and opposition political figures contend that Ahmadinejad deliberately worsened the currency crisis so that his cronies could generate profits this way.

Javad’s travel agency is a striking illustration of Iran’s current plight. With six weeks left before the Persian New Year, the phone should be ringing with reservations for holiday travel, he said. Instead, “there’s been no business for the past three weeks.”

It’s not just that would-be travellers are frightened. The agency cannot price its holiday packages, because with exchange rates fluctuating wildly, they do not know what rate to use. Even Iranians who oppose their government tend to see the growing economic pressure as an unfair gesture unlikely to yield any positive results.

“We know they want to pressure us so we rise against our government, but we are not in a position to do that,” said Murad, 41, a haggard waiter at a Tehran tea shop. Like many middle and lower-class Iranians, Murad seemed to blame both his own government and the west for his plight. He makes about $50 a day in the tea shop where he has worked for 25 years, he said, and with three children at home, his life has gotten measurably harder in the past year.

“Prices are going up so much I have to work all the time, and we still can’t buy new clothes even once a year,” he said. “The rich don’t suffer, they are protected. The truth is, we’d like to have good relations with the West. What is the point of ‘Death to the USA’? But what can we do about this?”
Because of the ever-tighter pressure on any kind of trade with Iran, the black market price of Herceptin, a breast cancer drug, has nearly doubled in the past year, said Lian, a young nurse who works in the cancer ward of one of Tehran’s major hospitals (the government regulates the mainstream supply of such drugs, but supplies are very limited).

The sanctions have also affected medical technology, because radiology machines fall under the “dual use” provisions of laws aimed at keeping nuclear technology out of Iran.

At Shohada Hospital, one of the country’s premier institutions, about 1,200 cancer patients a year go without radiological treatment, because the radiology equipment is no longer working and replacement parts cannot be brought into Iran, said Pejman Razavi, a doctor at the hospital.

Many Iranians are also skeptical about the Western preoccupation with Iran’s nuclear programme.

“The economic pressure will not push Iran to a nuclear settlement,” said Kayhan Barzegar, the director of the Institute for Middle East Strategic Studies, who has taught in the United States. “The nuclear file is a nationalistic issue; it’s too late for Iran to backtrack. Domestic politics will react negatively to any negotiation – candidates in the elections will say: You sold the nuclear programme!”

In an interview, Ali Akbar Javanfekr, an adviser to Ahmadinejad, also dismissed the sanctions as counterproductive, saying Iranians had suffered worse isolation during the 1980s and had always found ways around them. “This is not the way to approach us,” Javanfekr said. “You should instead speak to us with respect. You should win our heart.”

Some Iranian businessmen make similar comments, noting that there are always ingenious new ways to sell oil and to transfer money, and that the people who will suffer most from sanctions are not the ones who can pressure the government for change. “So you kill the pistachio trade in Iran,” one businessman said. “How does that stop nuclear enrichment?”