Hassan is in his late 40s. He has worked at an Iranian state bank all his life and is about to retire. His son is in his late teens and his daughter is still in primary school. Two years ago, around the same time a fourth round of UN sanctions was imposed on Iran over its nuclear programme, he was diagnosed with stomach cancer. After extensive treatment in Tehran, which included chemotherapy, he beat the disease.
But late this spring, the cancer came back – with a vengeance. Last month, when the New York Times’ Nicholas Kristof argued that he was in favour of sanctions after having toured Iran and wrote about the great generosity and hospitality he had experienced, I got a frantic call from Hassan’s wife. The drugs he needed were nowhere to be found.
I joined her in her hunt all around Tehran for the needed medicines, to no avail. Repeatedly, we were told that there was a shortage of many foreign drugs because of the sanctions, even though the West’s punitive measures don’t directly target supplies such as medicines.
This is only one of the many stories of how ordinary Iranians are bearing the brunt of the West’s economic war against the Islamic Republic. Since Iran came under scrutiny over its nuclear energy programme in 2002, it has come under several sets of UN Security Council sanctions, and life has become progressively more difficult for all but the wealthy. In Tehran, the dominant perception is that the aim of the sanctions is to create pressure from below so the leadership will back down on the nuclear issue. In this context, how are Iranians to interpret the US and the EU’s move to target oil exports and shipping; the main artery of Iran’s economy?
Finding a way around the system
The latest US and EU sanctions on Iran are set to inflict serious hardship on the people. The International Energy Agency estimates that Iranian oil exports have been cut by around 40 per cent this year. Meanwhile, the excision of Iran from many international banking channels means it is finding it difficult to pay for basic items that are not targeted by sanctions, such as food. The pressure Iran is facing is unprecedented. However, things need to be put into perspective. The ruling elite in Tehran has survived eight years of war, punitive measures for decades and most recently, widespread civil turmoil. Suffice to say, the Islamic Republic is resilient.
Banned from dollar transactions, Tehran uses gold, barter and other currencies to settle trade. Excised from the international payment messaging service SWIFT, Iran utilises a South American equivalent and bilateral mechanisms. Some sanctions-busting measures are not novel. Just like the Shah reportedly kept dollars from oil exports to the United States in a US account to purchase arms, the Islamic Republic is keeping yuans from crude sales to China in a Chinese account to buy various goods and services. Most importantly, the Iranian government has enough petrodollars in its coffers to hold out for years.
This is all the natural response of a people ingrained with a mindset based on the notion that if there’s a will, there’s a way. Thus, the objective of the sanctions – to force the Iranian leadership into a corner and eventually back down – was a non-starter from the get-go. Anyone with a remote understanding of the Iranian political elite would have seen this coming. Crucially, one thing the people in charge in Tehran learned from the Shah’s overthrow was never to back down in the face of pressure.
Considering the past experiences of the Iranian government and the way ordinary people are bearing the brunt of the sanctions, the outcome the West seeks with its pressure tactics is unlikely to materialise. It is no coincidence that Supreme Leader Ayatollah Ali Khamenei dubbed the last Persian year as the beginning of a “never-ending economic jihad”.
The Iranian government is unlikely to buckle due to Western pressure. And it is even less likely to back down in the face of domestic pressure. Iranian politicians’ ability to successfully deflect blame for their shortcomings at the West should not be underestimated.
‘A dog-eat-dog world’
Visiting the Ala’eddin Mall in downtown Tehran, a multi-storey building crammed with mobile phone shops, one could be forgiven for not believing that Iran is under unprecedented sanctions. The latest gadgets, including iPhones, which some Iranian-Americans have been stopped from purchasing in the US, are widely on display. Environments such as these vividly illustrate how a select few always thrive, even in the direst of circumstances. The saying “one man’s meat is another man’s poison” comes to mind.
Private importers set prices based on the market rate of the greenback, which has jumped by 50 per cent against the Iranian rial since President Obama signed sanctions on Iran’s Central Bank into law on December 31. This means that many foreign consumer products, from Kellogg’s Cornflakes to cigarettes, have almost doubled in price.
However, the way prices of foreign goods are set is not always straightforward. It seems as if prices – at least at the Ala’eddin Mall – never drop when the dollar drops, as it did ahead of the nuclear talks between Iran and the P5+1 in Baghdad in May. As one shopkeeper at the crowded mall told me, “the others [shopkeepers] check the dollar rate minute by minute to find excuses to increase their prices”.
This phenomenon is not restricted to mobile phones. Rampant inflation largely caused by the government’s subsidy reforms, and fuelled by the rial’s decline is pushing up the cost of living as a whole. In my conversations with experts in Tehran, the psychological factor was repeatedly brought up as a main factor behind the current state of things. In the words of one expert, “when a butcher sees the value of his estate cut in half by inflation, he is bound to increase his prices to compensate for the perceived loss of wealth”. This negative cycle is making it increasingly evident that ordinary Iranians are beginning to face a dog-eat-dog world in which most people focus on fending for themselves.
Losing hearts and minds
It seems as if the government has picked up on what’s going on at the Ala’eddin Mall and other centres of commerce. The Ahmadinejad administration now says inspectors will be sent out to bazaars to make sure that there is no overpricing and that shopkeepers don’t hoard goods.
Iranian officials are also effectively blaming many of the recent maladies ordinary people are facing on the West’s punitive measures. Just last week, Ayatollah Khamenei stated that “the main aim of the sanctions … is the Iranian people, so that the pressure will cause people to become frustrated and separate from the Islamic establishment. However, by God’s grace, they will fail in this conspiracy as they still do not know our people and officials”.
While it is evident that the Iranian leadership is not buckling under the pressure, the crucial question is who ordinary Iranians are blaming for the hardships they are facing. Accurate polls on the popularity of the Ahmadinejad administration are not readily available. However, there are reliable surveys on Iranians’ attitudes towards the West and how the sanctions are affecting their lives.
A Gallup poll carried out earlier this year showed almost half of Iranians didn’t have enough money to buy food their families needed at times during the past year. That proportion is triple the figure when the first UN sanctions on Iran over its nuclear programme were adopted in 2006. The same survey stated that a mere eight per cent of Iranians approve of US leadership, warning that “Western leaders need to monitor the unintended effects sanctions may have on Iranians’ lives”.
To compensate for its slashing of subsidies, the Iranian government is paying many Iranians 455,000 rials per month ($37 at official rate, $24 at market rate) into their bank accounts. When the second phase of the subsidy reforms is expected to come into effect, this amount will reportedly rise to 730,000 a month, or just over 2.9 million rials in total for the average four-person household. To put things into perspective, the minimum wage set by the authorities this year is about 3.9 million rials per month.
The deteriorating economic situation, which is largely self-inflicted but effectively blamed on the sanctions, is thus making ordinary Iranians ever more reliant on the state for survival. This dependency fuels resentment against both the Iranian state and the West. In this equation, however, it is the Iranian government that is increasingly holding the lifeline which keeps a rising number of Iranians above the water. As many governments in the region are aware, people tend not to bite the hand that feeds them. The net result of the sanctions, in the long run, is thus an erosion of the goodwill the US in particular has enjoyed among many ordinary Iranians.
The West lost four hearts and minds in Tehran that day in June when Hassan couldn’t get hold of the cancer drugs he needed. Whatever political victory the US and the EU might imagine as a result of their sanctions, just as in Iraq, their punitive measures are only leading to the loss of the hearts and minds from which they may wish to solicit trust tomorrow.
Mohammad Ali Shabani is a Tehran-based political analyst.