New sanctions hit Iran amid diplomatic stalemate

MAJID ASGARIPOUR/AFP/GETTY IMAGES - (FILES) A picture taken on October 26, 2010 shows the reactor building at the Russian-built Bushehr nuclear power plant in southern Iran, 1200 Kms south of Tehran.

TEHRAN — With negotiations over Iran’s nuclear program stalled, the European Union and the United States moved forward this week with their toughest sanctions to date. But experts questioned whether the financial pain will lead to concessions by Iran’s leaders.

The moves have come during difficult times for Iran’s economy, which is already suffering from previous rounds of sanctions. On the streets of Tehran, the biggest concern is the quickly rising cost of basic necessities, especially bread.

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With public discontent growing, Iranian leaders have taken the unusual step of publicly acknowledging the economic pain.

“Each day I receive around 2,000 letters, e-mail messages and faxes showing people’s concerns, and their main concern is high prices,” an influential hard-line cleric, Ayatollah Nasser Makarem-Shirazi, told a gathering in the Shiite holy city of Qom this week.

In Washington, the Obama administration has sought to tabulate the damage to Iran’s economy, citing oil industry statistics that confirm plummeting exports of Iranian crude in the past year, from 2.5 million to 1.5 million barrels a day. The estimated annual cost to Iran is about $32 billion.

White House officials also cited the ripple effects of sanctions: a shortage of jet fuel and aircraft parts for Iran’s commercial airlines, a virtual boycott of Iranian ports by major cargo lines, an inflation rate that U.S. officials estimate at more than 20 percent.

“In short, sanctions are having a major adverse impact on Iran’s economy, and things will only go from bad to worse unless Iran gets serious about addressing the international community’s concerns about its nuclear program,” said a senior administration official, who insisted on anonymity in discussing U.S. strategy on Iran.

But U.S. officials and Iran experts are divided on whether any amount of economic pain will yield concessions from Iran at the negotiating table. Iranian officials, during three rounds of talks with world powers this spring, rebuffed proposals to curtail production of enriched uranium in exchange for gradual relief from sanctions.

Elliot Abrams, a former adviser on the Middle East to the George W. Bush administration, said Iran’s leaders appear willing to accept economic deprivation rather than budge on their right to enrich uranium.

“They faced a choice between their nuclear program and increased economic difficulty, and now we’ve seen their answer,” said Abrams, now a senior fellow at the Council on Foreign Relations in Washington.

The new sanctions aim to further limit Iran’s ability to sell and transport crude oil, the country’s primary source of income. The European Union’s moves ban all oil imports from Iran and block third parties from insuring Iranian oil shipments. Last year, E.U. countries accounted for 18 percent of Iranian crude exports.

Meanwhile, U.S. sanctions that passed Congress in December and went into effect Thursday focus on Iran’s central bank and seek to punish foreign financial institutions that do business with it “or other blacklisted Iranian financial entities.”

Publicly, Iran’s leadership has remained defiant, insisting that the Islamic republic has learned to deal with punitive measures by the West and that the sanctions have bolstered Iran’s independence from the global economy.

“The sanctions imposed by the arrogant powers mainly target the Iranian people so that pressures wear down the Iranian people’s patience, separating them from the Islamic republic,” the country’s supreme leader, Ayatollah Ali Khamenei, told senior members of Iran’s judiciary Wednesday. “But by God’s will, they will not be successful in this plot because they have not known our people and authorities yet.”

Iran’s position has long been that it is developing a peaceful nuclear energy program and has no desire to build nuclear weapons. The United States and other global powers are suspicious of Iran’s intentions and have sought to block it from developing the technological capacity for weaponization.

Prices for goods in Iran — foreign and domestic — have been steadily rising since the beginning of the year. But Iranians are readying themselves for another possible price jolt in the coming days. Law enforcement authorities this month announced that inspectors would be deployed in the country’s bazaars to watch for hoarding and price gouging.

Members of the Iranian religious and security establishment, meanwhile, have been using the rising prices as ammunition to attack domestic political rivals, with some of the blame directed at President Mahmoud Ahmadinejad and his economic policies.

At the meeting in Qom, Makarem-Shirazi urged politicians to take a stronger role in responding to the public’s concerns. “The high prices have made people angry, and we have to do something about it,” he said.

Iran has been able to keep its economy afloat thus far thanks to relatively high global oil prices and vast gold and hard currency reserves. But declining energy prices in recent months have only added to the strain.

After years of increasing prosperity, standards of living for most Iranians are now in sharp decline. Purchasing power has been especially hard hit, thanks to a spike in inflation in January. While the rial stabilized against the dollar in the months that followed, it began to lose value again this week as the new sanctions took hold.

Last Saturday, the first day of the Iranian work week, the dollar was trading at just over 18,500 rials. But by Thursday it had crossed the 20,000 mark for the first time since late January. With a heavy reliance on imports for most household purchases, the decline in the rial’s value has been keenly felt.

Warrick reported from Washington.

 
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