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In Iran, US sanctions are being felt, with harsher measures to come

Why We Wrote This

Do sanctions on countries hit the right targets? While humanitarian goods are exempt from US sanctions, one Iranian charity says it’s struggling to buy medicine because of restrictions on banks.

Courtesy of Mahak charity
A psychologist and a volunteer work with a patient at a Mahak hospital. A private charity that is Iran's largest charity for children with cancer, Mahak says supplies of certain imported medicines are dwindling because pharmaceutical companies and banks fear running afoul of US sanctions rules.

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Across Iran’s economy, United States sanctions reimposed after President Trump withdrew from the multinational nuclear deal are being felt. Prices on some goods are sharply higher, imported inventories are drying up, Western firms are pulling out, and jobs are disappearing. And more is coming. Iranians are bracing for the next round on Nov. 4, with Washington set to impose broad new measures designed to bring Iran’s lifeblood oil exports to zero. The government of President Hassan Rouhani, a reformist who once championed outreach to the West, has announced food aid for low-income families and sought to reassure panicking Iranian consumers that shortages will be overcome. US efforts are “definitely doomed to failure thanks to our great nation’s spirit of resistance,” Mr. Rouhani declared on Oct. 23 – even as Iranian newspapers reported skyrocketing inflation the previous month. His hard-line foes are drawing different conclusions about the “economic war,” however. “We believe the current situation is good for Iran. Why? The idea that we need to solve our economic problems through the Europeans – even the US – is gone forever,” says the editor of a hard-line newspaper. “This is a big achievement.”

One sign of the impact of stepped-up American sanctions on Iran can be found on the northeast edge of Tehran: anxiety at Iran’s largest charity for children diagnosed with cancer.

Mahak, a private charity with a $60 million annual budget that cares for 17,500 patients across the country, free of charge, is deeply concerned that crucial drug supplies from abroad are already dwindling as foreign banks and suppliers cease doing business.

While humanitarian goods such as medicine are exempt from US sanctions, which were reimposed after President Trump withdrew the United States from the multinational deal to curtail Iran’s nuclear program, the severe banking restrictions that are part of the sanctions regime have just as negative an effect.

Even with a specific license from the US Treasury to transfer charitable donations to Mahak, banks normally used by the Iranian charity in Europe won’t forward the cash, it says.

“You want to talk about realities?” asks Arasb Ahmadian, the chief executive officer of Mahak. “The reality is that no companies, no banks want to be involved in any operation with Iran’s name, because they don’t know what will happen to them.”

While the charity has successfully imported a year’s worth of some medicines, Mr. Ahmadian says, inventory is empty of four specific drugs that have short expiration dates and therefore can’t be stockpiled. And pharmaceutical companies and banks abroad are not filling those gaps, fearful that they will incur mammoth US fines, he says.

“Can you ask these sanctions designers what we should do?” he asks.

When Mr. Trump unilaterally withdrew from the landmark 2015 nuclear deal, it was despite continued support for the deal from European countries, Russia, and China, which have all vowed to help Iran soften the sanctions blow in order to keep Iran committed to the accord.

Firms pulling out

Now Iranians are bracing for the next round of US sanctions, with Washington set to impose broad new measures on Nov. 4 designed to bring Iran’s lifeblood oil exports to zero.

The European Union is creating a mechanism it calls a “special purpose vehicle” to circumvent the US measures, under which Washington can cut off or fine any bank that enables transactions with Iran.

But for months, big Western companies that signed lucrative deals with Iran such as Boeing, Airbus, and European vehicle manufacturers, as permitted and encouraged by the 2015 nuclear accord, have been pulling out of Iran.

And the White House has made clear that its new sanctions, which Trump says will be “tougher than ever before,” aim not just to compel Iran to negotiate a broader deal that limits its ballistic missile program and support for regional proxy forces – a concession that Tehran rejects outright – but also to deepen antigovernment anger among Iranians themselves.

Scott Peterson/Getty Images/The Christian Science Monitor
An Iranian couple in a Tehran supermarket Sept. 16, 2018, shops for diapers that have tripled in price as US sanctions have led to shortages and the tumbling value of Iran's currency.

Indeed, the sanctions are biting at the same time that Iran’s economy has reeled this year, with a collapse of the currency, soaring inflation, layoffs and widespread protests, all combined with the expectation of more sanctions-induced hardship.

One joke told pithily by Iranians sums up what it’s like to be caught in the US-Iran sanctions stranglehold.

Mushak hast, pushak nist,” the joke goes: “Missiles we have, diapers we don’t.”

Silver lining for ideologues

To help Iranians brace for the added hardship, the government of President Hassan Rouhani has announced plans to provide food packages to 9 million people from low-income families.

Officials have also tried to reassure panicking Iranians that current shortages will be overcome, and high prices will be checked. Iran has stockpiled enough wheat for a year. And the head of the “Supreme Council for Cyberspace” has even floated the possibility of creating a digital currency that would bypass US sanctions rules.

US efforts are “definitely doomed to failure thanks to our great nation’s spirit of resistance,” Mr. Rouhani declared on Oct. 23.

But Khorasan newspaper last week reported a 47.5 percent price rise for basic goods in a single month ending Oct. 20, attributing it to the looming US sanctions.

Regime ideologues say Iran is locked in an “economic war” and see a silver lining in the renewal of US sanctions, because they force Iran to be self-sufficient, despite the economic pinch.

“We believe the current situation is good for Iran. Why? The idea that we need to solve our economic problems through the Europeans – even the US – is gone forever,” says Hossein Shariatmadari, editor of the hard-line Kayhan newspaper. “This is a big achievement.”

But that is far from the majority view. In mid-October, four newspapers that span Iran’s political spectrum published a joint editorial, in which they cited the Declaration of Independence to decry US sanctions as an assault on the “certain unalienable rights” of Iranians to “life, liberty, and the pursuit of happiness.”

The editorial read: “Sanctions have brought about destructive repercussions for the lives of millions of Iranian citizens who legitimately enjoy the right of life.”

Less inventory, fewer jobs

As the new energy sanctions loom, it’s not just a charity like Mahak that is feeling the pinch. On the opposite side of Tehran, on its western outskirts at a sprawling modern supermarket, for example, retail salespeople hired to sell foreign appliances have been losing their jobs by the dozen as inventories are depleted.

“They told me at the end of the month they don’t need me,” says a young salesman with an industrial design degree, who has sold food processors and microwaves there for two years and asked not to be named.

The number of sellers on the floor went from 70 last March to 45 in late summer. Soon the eight or nine rows now stacked with appliances will shrink to one or two.

Stealing has become an increasing problem, says the salesman, who has a thin beard and worn black shoes. Someone tried to walk out the door the night before with a small food chopper that was on display.

Indeed, the Tehran police have warned that robberies are increasing in the capital, because so many Iranians are hoarding gold and cash dollars at home, as a hedge against economic disaster.

“My grandfather always said: ‘If your stomach is empty, you have no religion,’ ” says the salesman. He mentions one Iranian food company that fired 100 people in one week, and another rice wholesaler that let 700 people go.

Job losses are growing and were one reason for widespread protests that erupted last winter and continue episodically around the country.

One factory owner who asked not to be named says he fired 50 people three months ago, out of a workforce of 250. He says his brother, who owns a cardboard factory south of Tehran, recently planned to fire most of his 300 workers. But intelligence officers came and told him to keep them on the payroll because it was a “national security issue.”

“All these companies are at the end, all are waiting,” he says.

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