Food prices, inflation rise sharply in Iran

Prices for beef and lamb had already soared out of reach, meaning fewer of the kebabs and stews beloved by middle-class Iranians. But when the cost of yogurt spiked this week, Iran’s economic troubles hit home for virtually every household in the country.

“Last year you could buy a carton for 2,000 tomans,” about $2, Mehdi Khalaji, an Iranian-born scholar and blogger now living in Washington, said Thursday, referring to the creamy side dish that is de rigueur at all Iranian meals. “This week the same amount costs 5,000 or even 6,000 tomans.” (Toman is the colloquial term in Iran for 10 rials, as the currency is officially known.)

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Protests over such price hikes brought thousands into the streets this week in central Tehran.

Calm was reported Thursday in the capital, as security forces patrolled key intersections and presided over mostly empty stalls in the city’s largest street bazaar. But the rial remained at near-historic lows, mirroring the fortunes of an economy that appears to be slipping into the kind of crisis that could provide the West with political leverage, economists and Iran experts say.

Analysts say Iran’s problems are only partly because of tough sanctions enacted by the United States and its allies in an effort to force Iran to alter its nuclear policies. Of at least equal importance are domestic policies, advocated by President Mahmoud Ahmadinejad, that led to the phasing out of a popular subsidy program that had kept prices for many staples artificially low.

But whatever the cause, the unrelenting pressure on Iran’s currency appears to be achieving an effect that some U.S. officials have been quietly advocating for years: a kind of widespread economic distress that they hope will lead to changes in Iranian behavior, if not a change in the leadership itself.

“The landscape has changed,” said Cliff Kupchan, a former State Department official and now an Iran analyst for Eurasia Group, a consulting firm. “Iran is in more trouble, and that gives us more leverage, and also more responsibility.”

But, he added, “the West can still find ways not to take advantage.”

Economists have been reporting distress signs in Iran’s economy since the beginning of the year, as new economic sanctions and an embargo began squeezing oil exports, Iran’s chief source of foreign currency. Sales of Iranian crude are down about 40 percent compared with last year, depriving the country of billions of dollars a month, industry analysts say.

Shrinking oil revenue in turn weakened the rial, driving up the inflation rate and joblessness. But in recent weeks, the slow upward creep in prices turned into a gallop, said Steve H. Hanke, professor of economics at Johns Hopkins University and a senior fellow at the Cato Institute. The rial lost 40 percent of its value this week.

Based on an analysis of Iran’s black-market currency exchanges, Hanke said prices in Iran now appear to be doubling every 40 days, depleting both the savings and purchasing power of ordinary Iranians, particularly in the cities.