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As sanctions crush rial's value, Iranians point fingers at Ahmadinejad

Western leaders may finally be seeing the result of stringent sanctions as Iranians blame their government, not the US and EU, for the precipitous economic decline of the oil-rich country.

By Afshin ValinejadCorrespondent, Staff writer / October 16, 2012

Illegal in the past, peddlers are returning to the streets of Tehran, Iran, an obvious result of the worsening economy. Police are being lenient, given the tough times.

Afshin Valinejad


Tehran and Kashan, Iran; and Istanbul, Turkey

Parinaz could see the growing impact of Iran's deepening economic chaos every day while riding the Tehran subway. To make ends meet, more and more Iranians had gone underground to sell cheap Chinese goods to passengers.

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But it was one particular sight that illustrated for Parinaz the depths to which US-led sanctions and Iran's economic mismanagement have brought financial hardship: A young woman who once had the money to pay for a nose job – the plastic surgery was obvious – was selling trinkets in a subway station, and being told by a policeman it was illegal to do so.

"What should I do? I need to live, right?" she shouted loudly at the policeman, heard by all the daily commuters in the station. "Should I sell myself then? If I can't make money this way, I would have nothing but my body...."

The embarrassed officer let the woman continue selling, but her words shook Parinaz, who requested that only her first name be used.

"The peddler looked like a respectable woman," the pharmaceutical researcher recalls. "I was sure that if she had any other way of earning money, she would not have chosen this. It was obviously an effort for survival."

A host of US and European sanctions targeting Iran's oil exports and its banking system over its disputed nuclear program have put a chokehold on the economy. The value of the national currency, the rial, plummeted 40 percent in early October, and inflation stands officially at nearly 24 percent. Experts say the real figure could be double that or more.

"I heard a proverb from my grandfather that 'the high pressure of rising prices is going to break our backbone,' " says Heydar, a retired civil servant. "Honestly speaking, I never felt it and never could sense it, but these days I easily witness that the backbone of many people like me in the middle class is breaking. I can hear the horrifying sound of people squeezed by the economy."

The US-led sanctions are just one target of blame for the hardship. More and more, lawmakers and ordinary Iranians blame the high inflation and unemployment as much on the government's mishandling of the oil revenue windfall of recent years as on sanctions.

Even supreme leader Ayatollah Ali Khamenei admitted this Oct. 10, acknowledging that while the sanctions may cause problems, "mismanagement may even increase these problems."

As an oil exporter during a period of high oil prices, Iran should be flush with cash from pre-embargo sales that it could use to shield Iranians from the worst of the adverse effects of the sanctions. Instead, the government's spendthrift ways on costly projects and cash handouts have left little protective buffer.

Some 102 parliamentarians have signed a letter demanding a chance to question President Mahmoud Ahmadinejad on his economic policies, and more than half of the elected body voted to reexamine his landmark subsidy reforms. Parliament Speaker Ali Larijani – long a political rival of the president – has said mismanagement accounted for 80 percent of Iran's financial woes.

Falling behind

The contrast between Iran and other oil-exporting nations could not be greater – an unsavory fact for many disgruntled Iranians.

Iran has been under US sanctions since 1979. New sanctions have become increasingly severe in a bid to compel Iran to stop its nuclear program. They are joined by a host of United Nations Security Council (UNSC) and European Union measures.

1992: The Iran-Iraq Arms Non-Proliferation Act sanctions any entity that helps Iran with weapons development.

1995: A comprehensive ban on US trade and investment in Iran is passed.

1996: The Iran and Libya Sanctions Act limits third-party investment in Iran's energy sector to less than $20 million.

2000: The Iran-Syria-North Korea Non-Proliferation Act is passed.

After 9/11: President George W. Bush freezes assets of people and entities deemed to support terrorism. Several links to Iran are identified; dozens more are added in the next decade.

2006: The first UNSC sanctions ban nuclear, missile, and dual-use technologies, and freeze assets of people and entities involved.

2007: The second UNSC sanctions resolution imposes an arms embargo on Iran.

March 2008: The third UNSC sanctions resolution extends asset freezes and authorizes inspections of Iranian ships and aircraft.

June 2008: The EU freezes assets of dozens doing business with Bank Melli, accused of facilitating Iran's nuclear and missile efforts.

June 2010: The fourth UNSC sanctions resolution bans ballistic missile activities, freezes assets of Iran's Revolutionary Guard and Iran's state-run shipping line, and adds a host of banking restrictions. The EU bans investing in or assisting Iran's energy sector and develops its own list of asset freezes.

June-July 2010: The Comprehensive Iran Sanctions, Accountability, and Divestment Act boosts restrictions on Iran and prevents US and foreign companies from selling refined gas to Iran, or the means for Iran to expand its own refining capacity.

December 2011: A raft of new sanctions is passed by Congress, including some targeting Iran's central bank.

January 2012: The EU approves a total oil embargo on Iran, effective July 1.

February 2012: Citing "deceptive practices" of Iran's central bank, President Obama orders a freeze on all Iranian property in the US and closes loopholes used to transfer money.

March 2012: Iran is cut off from the SWIFT system, which facilitates all global electronic financial transactions.

June 2012: US sanctions against Iran's central bank go into effect.


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