Iranians anxious over sanctions and mismanaged economy

Shoppers at a supermarket in north-western Tehran (3 February 2012) The cost of living in Iran is soaring in the wake of the latest sanctions

"The smoke of the fire of sanctions gets in people's eyes," says Ali Arsalan in a supermarket in Valiasr Square in the Iranian capital, Tehran.

Mr Arsalan is stocking up on food for Iran's New Year celebrations in late March.

Here, a litre of milk costs $0.65 (£0.41), a kilo of rice goes for $1.30 - the best rice sells for $1.94/kg - and a kilo of apples costs $1.

Mr Arsalan buys his groceries as two new rounds of Western sanctions against Iran begin to take effect.

The first was announced on the last day of 2011, when US President Barack Obama signed a law aimed at cutting off Iran's central bank from the world's financial system. The central bank is the principal clearing facility for Iran's oil exports.

The second came on the 23 January, when the European Union announced its own oil embargo against Iran. The EU accounts for around 20% of Iran's oil exports.

Oil embargo

One former Western diplomat who worked in Tehran describes these two moves as the big cards that the West always carried in reserve just in case dramatic action needed to be taken against Iran. Now those cards have been played.

President Mahmoud Ahmadinejad visits an industrial site in Kerman province, Iran (26 January 2012) Iran's leaders remains defiant, despite the impact of sanctions on their country's industry

The US and the EU say that their respective sanctions have been imposed because Iran has failed to answer questions over the nature of its nuclear programme.

Iran insists that its nuclear ambitions are entirely peaceful.

The new Western measures take aim at the source of Iran's money - the sale of oil.

Iran holds the world's fourth-largest proven oil reserves and its sales of crude account for about 80% of public revenue.

The export of oil helps to keep Iran's government in money and in power. It is now trying to make sure that its four key customers China, India, South Korea, and Japan keep buying.

"It is the West that needs Iran and the Iranian nation will not lose from the sanctions," said President Mahmoud Ahmadinejad in response to the US and EU measures.

Start Quote

We have always been under sanctions... If our officials and statesmen act better, they can curb their effect”

End Quote Ali Arsalan

His government insists that the sanctions will have no effect.

But a Gallup Poll conducted after the announcements showed that 65% of Iranians believed that the sanctions would affect their lives either somewhat or a great deal.

Subsidies

The Western measures hit Iran as its people feel the stinging effects of a shift in the way its economy is run.

In 1980, Iran's new Islamic government began subsidising fuel, food, medicine and utilities for its entire population.

Over time, the country got used to buying cheap goods. But by 2009, these subsidies cost the government up to $100bn (£63bn) every year - or around 25% of Iran's GDP.

Iranians walk past the entrance to Tehran's old bazaar (2 February 2012) On the black market, the Iranian rial, has halved in value against the dollar over the last year

President Mahmoud Ahmadinejad, who came to office in 2005 as a populist, decided that these subsidies were too expensive to maintain. So in 2010, he announced a gradual phasing-out of government subsidies.

In their place, Iranians would be given a monthly cash handout of $38. But this handout does not make up for the rising cost of unsubsidised goods. For some, the price of electricity, water, and natural gas has now tripled.

Inflation in Iran now stands at around 21%. On the black market, the Iranian rial, has halved in value against the dollar over the last year. The official unemployment rate is 11.8%.

'Nothing new'

These figures make the country nervous.

On 7 February, Iran's parliament summoned President Ahmadinejad to answer questions about a number of subjects, including his handling of the economy.

ELECTION IN FACTS AND FIGURES

  • Population 75m. Eligible voters 48m. Minimum voting age 18 years
  • Number of seats: 290 seats from 30 provinces. About 60 deputies represent the 10 largest cities
  • 207 Constituencies with 47,000 voting stations
  • First round 2 March, one quarter of vote is required to win, if not, vote goes to second round. Date unannounced
  • Number of candidates before vetting: 5,395, after vetting 3,444, ie 36% were disqualified
  • 8 women and 44 clerics elected to the 2008 parliament
  • Official turnout in 2008 61%

But it is difficult to measure precisely how many of Iran's economic problems are caused by the government's own economic policies and how many are caused by the effect of international sanctions.

"We have to tolerate it," reflects Mr Arsalan at the supermarket. "The increase in prices is more because of mismanagement than sanctions."

"Sanctions are not new to us. We have always been under sanctions. If our officials and statesmen act better, they can curb their effect. Sanctions become effective if we act imprudently, otherwise we can manage them," he adds.

At a cafe in central Tehran many people say they are angered both by the new sanctions and also by what they see as the Iranian government's mismanagement of the economy.

They fear that the prospect of increasing conflict between Iran and the West will make their economy - and their lives - much worse.

"I think dialogue is the best way," says Mahsa Teimouri, a student of cinema and theatre. "We are fed up with all this war-like news. All these problems can be solved via talks, so why war?"

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