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Inside Story

Iran: The real cost of sanctions

We look at the impact of increased sanctions against the Islamic Republic and ask who it really affects.

Last Modified: 05 Jun 2013 15:02
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The United States has unveiled aggressive new sanctions targeting Iran's currency and car industry that are among the toughest yet. They are aimed at making Iranian money all but unusable outside the country.

Sanctions now make it harder for the compromise we need in a couple of months time when you have a new Iranian president - so they represent an absence of diplomatic nuance within Washington.

Shashank Joshi, research fellow of the Royal United Services Institute 

The White House is increasing pressure on Tehran to stop it from developing nuclear weapons and "meet its international obligations".

The latest measures mark the first time Iran's currency, the rial, has been directly targeted by sanctions.

The sanctions apply to foreign financial institutions making what is described as significant transactions in the rial, and those holding significant amounts of the currency outside Iran. However, the meaning of 'significant' in this case, has not been made clear.

The sanctions also ban the sale of goods and services to Iran's car industry, the second largest employer after the energy sector.

White House spokesman Jay Carney announced the measures: "The steps taken today are part of President Obama's commitment to prevent Iran from acquiring a nuclear weapon, by raising the cost of Iran's defiance of the international community. Even as we intensify our pressure on the Iranian government, we hold the door open to a diplomatic solution. However, Iran must understand that time is not unlimited."

Tehran has always insisted its programme is for peaceful purposes - for generating power and medical devices; but the US claims Iran is working to develop nuclear weapons.

Iran's currency has been in free fall for some time, losing two thirds of its value in the past two years.

The sharpest drop came at the end of September 2012. On September 24, it would have taken 24,600 rials to buy one US dollar. By October 2, the cost of a dollar had risen to 39,000 rials - a 59 percent drop in the value of the currency in just one week.

Like all the [other] sanctions - sanctions it doesn't work - it hurts the common man ... the only thing that it has done is that every year we get more extremists to be elected because they say they are going to fight the US and everything else. 

Bahman Farmanara, Iranian business owner

These latest sanctions are the ninth round of restrictions imposed by the US. Diplomatic ties were broken in 1980 following the storming of the US embassy in Tehran. Successive US measures have prohibited almost all trade with Iran.

The United Nations ratified four rounds of sanctions between 2006 and 2010, over Iran's uranium, enrichment programme.

The European Union has also imposed its own restrictions, most notably, bans on the import, purchase and transport of Iranian crude oil and natural gas in 2012.

The challenge for countries imposing sanctions is to isolate certain rulers without making life too uncomfortable for ordinary people. But this is often difficult to implement.

The UN imposed a near-total financial and trade embargo against Iraq in 1990. But 13 years of sanctions resulted in malnutrition, disease and a lack of clean water and medical supplies.

Humanitarian groups say international sanctions against North Korea are restricting access to cash, and threatening aid programmes.

In 2002, the EU imposed sanctions on Zimbabwe for human rights abuses under Robert Mugabe's rule, which opponents blamed for crippling the economy.

And Myanmar had been largely isolated since a range of restrictions were imposed since 1990. Many have now been lifted as reward for recent reforms.

So, what is the human cost of sanctions against Iran?

To discuss this, Inside Story with presenter Veronica Pedrosa is joined by guests: Bahman Farmanara, the owner of a family-run textile business in Tehran, Raymond Tanter, the founder of the Iran Policy Committee, and author of the book: Arab Rebels and Iranian dissidents; and Shashank Joshi, a research fellow of the Royal United Services Institute, who has also written the book: Permanent Crisis: Iran's Nuclear Trajectory.

"It is true that the sanctions constitute an intricate web but regime has devised an intricate method of getting around the sanctions. For example: there is a food and beverage company in the Gulf, that could be in Qatar or Saudi Arabia, [which[ is in fact making purchases that benefit the petrochemical industry."

- Raymond Tanter, founder of the Iran Policy Committee

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Source:
Al Jazeera
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