Sanctions against Iran begin to take their toll

Thursday 15 July 2010 11.16
Mahmoud Ahmadinejad - Insists that Iran's nuclear programme is peaceful
Mahmoud Ahmadinejad - Insists that Iran's nuclear programme is peaceful

Some worry about higher food prices, some fret about overseas travel and others about business, but it is clear that ordinary Iranians are feeling the effects of sanctions imposed over Tehran's nuclear programme.

President Mahmoud Ahmadinejad has scoffed at 'pathetic' US sanctions and said a UN resolution had no more worth than a ‘used handkerchief'. Although some Iranians back their leader's tough position, others are fearful for the future.

The latest measures are mainly aimed at vital sectors of the economy such as banking and energy, which analysts say will raise the cost of trade by making it more difficult to transfer funds or insure cargo.

In shops and markets, people say they are struggling to cope, squeezed by soaring rents and grocery bills on the one hand and stagnant salaries on the other.

‘Prices go up as soon as there is talk of sanctions. The nation is paying a heavy price for the nuclear dispute,’ said an English teacher in Tehran.

‘Do the officials know how difficult it has become for ordinary people to even feed their children?’ said the 45-year-old father of two, who earns about $400 per month.

Mohammad Sadati was also in no doubt about the cause of the rising prices: ‘As soon as there is talk about the possibility of new sanctions against Iran, the price of everything goes up,’ said the 36-year-old architect.

The US, the UN and the EU have imposed new sanctions against Iran over its nuclear enrichment activities, which the West fears could lead it to make a bomb. However, Iran says its nuclear programme is peaceful.

A growing number of oil companies, trading houses and other international firms have stopped doing business with Iran this year as the US has led international efforts to isolate Tehran.

Last week, media reports said Iranian aircraft had been denied fuel in Germany, Britain and a Gulf Arab state because of the latest unilateral US sanctions. An Iranian official denied it, calling the reports ‘psychological warfare’.

However, BP confirmed yesterday it had stopped supplying jet fuel to Iran Air at Germany's Hamburg airport.

Isolation fears

Mahtab Heshmati said she was worried by the prospect of Iran's international isolation.

‘I have two children studying abroad. I hope sanctions will not isolate Iran in a way that we will not be able to fly abroad and see our children,’ she said.

Political analysts say growing economic problems are likely to undermine the government's efforts to persuade Iranians that the restrictions will not cripple Iran's economy.

Businessman Habib Rostami says he was forced to shut down his food import company because of limitations imposed on Iran's financial sector.

‘Doing business in Iran is becoming more and more difficult,’ he said. ‘The prices of goods are so high that ordinary Iranians cannot afford them.’

Critics say Mr Ahmadinejad's harsh anti-Western rhetoric has provoked the West to take a tougher line but his resistance to international pressure has struck a chord at home.

Retired teacher Nasrin Nemati complained of high inflation but said she was proud of the government for taking a stand.

‘I am ready to pay the price to preserve our nuclear programme,’ said the 41-year-old. ‘Who are the Westerners to tell us to halt it?’

The fourth round of UN sanctions calls for measures against new Iranian banks abroad if a connection to the nuclear or missile programmes is suspected.

The sanctions also encourage vigilance over transactions with any Iranian bank, including the central bank.

It also expands a UN arms embargo against Tehran and blacklists three firms controlled by Iran's national shipping company and 15 belonging to the Revolutionary Guard Corps.

Belt-tightening needed

EU leaders agreed last month to tighten UN sanctions with additional measures against Iran's financial, banking, insurance, transportation and energy sectors.

Despite Mr Ahmadinejad's bombast, Iran's leaders have shown signs they know it is time for some belt-tightening.

Supreme Leader Ayatollah Ali Khamenei called for ‘encouraging the culture of saving and discouraging opulence and consumption of foreign goods’.

Mr Ahmadinejad wants to dismantle Iran's costly subsidy system from September to make Iran less vulnerable to sanctions.

Cutting subsidies on fuel and food, which critics say will increase the cost of living, is a high-risk strategy for the government and may revive anti-government protests that shook the country for months after last year's disputed presidential election.

The opposition says the vote was rigged to secure Mr Ahmadinejad's re-election. However, the government denies the allegations.

Iran, the world's fifth largest crude oil producer, lacks refining capacity and imports 40% of the gasoline it needs. However, it plans to increase capacity to become self-sufficient within a few years.

Oil traders say Iranians could yet feel the pinch from sanctions which have already put off several foreign energy companies from selling to or investing in Iran.

‘Things are getting tough for the Iranians,’ said one Middle East trader. Like the authorities, Iran's state media have played down the effect of sanctions.

‘If you watch Iranian television and read hard-line newspapers, you will have no fear of sanctions,’ said Bita.

The 31-year-old private sector employee continues, ‘But I follow the news on the Internet ... It is scary to be the citizen of an internationally isolated country.’