Are Iranians really feeling the pinch of U.S. and international sanctions on their economy?
- By Sune Engel RasmussenSune Engel Rasmussen is the Guardian’s correspondent in Afghanistan.
TEHRAN — In the Grand Bazaar, throngs of customers stand aside to make way for porters as they doggedly pull rattling metal carts. They carry carpets and leather shoes, keeping goods pulsing in and out of the Iranian capital’s commercial artery. Shelves are stocked with foreign and domestic products alike, from Lindt chocolate to counterfeit Nike slippers.
If you listen to the talk in Western capitals, harsh international sanctions on Iran’s energy and banking industries are well on their way to bringing the Islamic Republic to its knees. And there is no doubt that staggering levels of inflation, a heavily devalued currency, and soaring unemployment have taken a toll on general living standards. In conversations, it often seems that all Iranians can talk about is the economy.
"Things have become much more expensive the past five to six months," says a shopkeeper who, like most interviewed for this article, asked not to be named for fear of government retribution. "It’s because we’re not selling any oil," he says, blaming Western sanctions for his travails.
Despite the hardship, however, Iran is far from the breaking point. Six months after the United States and the European Union hit Iran with the harshest sanctions regime ever, life in the Islamic Republic still trudges along.
In the bazaar, a 2-foot-long loaf of fresh barbari bread costs 6,000 rials ($0.20), as it did six months ago. Government efforts to curtail rising prices on some staples include ramping up grain imports, mainly from the European Union. Energy prices have shot up, but are still low. The monthly energy bill for a small household in Tehran runs around $15 to $20. Kebab eateries are bustling during lunch time. "Khoob nist, bad nist," traders here generally reply when asked how business is going — "not good, not bad."
Historically, Tehran’s bazaar played a critical role in Iranian uprisings. So when bazaaris protested in October over the devaluation of the rial, some Western media got on their toes, ready for a dawning Persian Spring. U.S. State Department spokeswoman Victoria Nuland said that "clearly the Iranian people are demanding better from their government" and that the United States was "watching the situation very closely."
But if Western policymakers thought the bazaari protests would lead to broader calls for regime change, they were wrong. The protests lasted only a day, and the Grand Bazaar quickly returned to its usual, bustling self.
Deeply ingrained memories of past uprisings are one reason that very few Iranians think the sanctions will push people to rise up against the regime. The situation today is still much better than during the destructive Iran-Iraq War in the 1980s, when people survived on food coupons. And with the memory of the bloodshed, and for many the disappointment, of the 1979 Islamic Revolution in the back of their minds, there is little thirst inside the country for another attempt to overthrow the regime.
"We already had a revolution 33 years ago," says Ali, 27, a veteran activist. "It’s Iranian popular culture for fathers and mothers to tell their children: ‘We made a mistake.’"
Ali helped organize some of the Green Movement opposition protests after the fraudulent 2009 presidential election. The brutal crackdown that followed is another factor that has killed any fervor for unrest. The opposition was scattered to the wind in the years that followed, and most activists were silenced, were imprisoned, or fled the country.
"There are no opposition networks, no authority left," says Ali. He explains that though the repression of the Green Movement may have been less deadly than repression of Arab Spring uprisings, the regime has continued to persecute, monitor, and arrest activists, effectively keeping Iranians in a vise of fear.
"Sometimes, news about hunger strikes in prisons comes from the government itself," he says. "They have an interest in showing that things are worse than they might be in reality."
That’s not to say Western sanctions haven’t dealt a serious blow to the Iranian economy. The Islamic Republic has suffered at least a 40 percent drop in oil exports in 2012, and its international financial transactions have also been constrained by the sanctions regime. In March, SWIFT, a network handling most international money transactions, blocked 30 Iranian banks from using its services. After a third round of nuclear talks between Iran and the great powers broke down in June, the European Union cut oil imports from Iran, and the United States banned the world’s banks from doing oil transactions with Iran. Japan, India, South Africa, and Turkey have decreased crude imports, in part because of pressure from the United States. Chinese imports, too, have seen a slight dip due to contract disputes.
These historically unprecedented economic measures have been responsible for eroding the country’s foreign exchange reserves and undermining confidence in the rial. In the unofficial market, the national currency has plummeted from roughly 15,000 rials to the dollar in the beginning of 2012 to roughly 33,000 rials this Jan. 10, unleashing inflation of at least 40 to 60 percent. The situation has also created a shortage of drugs and medical supplies, which led to the sacking of Health Minister Marzieh Dastjerdi, a convenient scapegoat.
It is common to hear Iranians bash their politicians for economic mismanagement and corruption. Working as a chauffeur at Tehran’s domestic airport, Farzaneh, 38, also moonlights as a driver of a shared taxi. "These are worth nothing," she says, waving her hand at the spread of rials on the dashboard. Regulated by the government, taxis have been barred from raising their prices, so instead, Farzaneh, a divorced mother of one, works two jobs. "Every 40 hours, I sleep once," she says to the passengers in the cab, who nod in sympathy.
Many Iranians, however, don’t just blame the Islamic Republic for the dire economic conditions — they blame the financial sanctions, which they view as hostile as any armed attack. With seven months left in office, President Mahmoud Ahmadinejad has tried to save his legacy by harnessing these grievances. As part of a comprehensive economic reform, the government offers almost all Iranians 450,000 rials per month (now worth roughly $13.50) to compensate for higher energy prices, a measure that has also helped drive inflation. For a low-income family with a few children, that amount can come close to a monthly income.
For a long time, Iranian politicians denied that the sanctions had any effect, but that narrative changed recently. Ahmadinejad, who has come under fiery internal criticism from parliamentarians for the state of the economy, redirected blame toward Iran’s foreign antagonists. "A clandestine, vast, and heavy war has been waged [against Iran] on the global scale," he said.
In addition, the government has managed to halt the price hikes on essential goods and services like bread, cooking oil, most meat products, and public transport. Iranians now have to rely on the government not just for cash handouts but also for goods they have normally been accustomed to, further insulating the regime from revolt.
"People are becoming more dependent on the government for everything," says Ali, the activist. "Why would they rebel against this government?"
Working against Ahmadinejad is the unemployment rate, which analysts believe may be over 20 percent — caused in part by a 30 percent slump in domestic car production since last summer. Iran hasn’t amassed a large external debt, but the government is increasingly facing problems paying back its creditors.
Najma, 29, says that the government owes the engineering company he works for 70 billion rials ($2.1 million). "The situation is first of all caused by sanctions, but the government is not a good manager either," he says over a cappuccino at a coffee shop in affluent north Tehran.
Here, even the well-off concede that sanctions are biting — but not to the bone. Reihane Vahid, 32, a theater director, says her family can no longer travel to Europe for vacation. Instead, they make do with flying to Kish Island, a popular tourist destination in the Iranian waters of the Persian Gulf. "We are a long way from taking to the streets," she admits.
As is usual in times like these, hardship for some spells profit for others. Those with ties to the regime have stood the best chance of enriching themselves. Top officers in the Islamic Revolutionary Guard Corps (IRGC) have allegedly amassed great wealth through smuggled goods, including everything from alcohol and cigarettes to flat-screen televisions. Even Ahmadinejad has accused the IRGC of profiteering. A few crafty types also find ways to make a profit independently.
"You can get poor in one day; you can get rich in one day," says a currency dealer in a small hookah cafe in the old center of the city. With one house in the rich neighborhood of Gisha and one in Canada, he manages to take advantage of the volatile currency trade by transporting foreign cash between continents.
"I don’t even work. I have people for that," he says, sipping tea while sucking on a sugar cube. "It’s like a game of blackjack. The dealer always wins."