Economists and businessmen say that after years of erratic economic policies by the government of President Mahmoud Ahmadinejad, each new round of sanctions aimed at Iran’s key oil income increases fears of an overall economic meltdown.
“It’s basic economic law,” said Jamshid Edalatian, a retired professor of economics, former banker and member of Iran’s chamber of commerce. “When people start worrying about the future, they start buying strong currencies to use in difficult times, and right now everybody is baffled and confused over the future.”
Confusion abounded this week in the Paytakht shopping center, which is Tehran’s main computer bazaar. The price of the Apple iPhone 4S, reexported from nearby Dubai, United Arab Emirates, and highly prized by many young Iranians, had surged, like most other imported products. The phone now costs 35 percent more.
The money changer involved in most of the merchants’ purchases from Dubai also had disappeared with more than a million of their dollars after the rial suddenly collapsed. “Nobody is buying or selling,” said Nader Kamali, who owns a cellphone shop. “How can we live like this?”
The pain extends to the country’s large industries. According to the Iranian Labor News Agency, high prices for commodities and raw materials, caused by the rial’s plunge, have led to the closure of 50 percent of businesses in the biggest industrial zone near Tehran.
The rial slid as the government ended another year of record oil sales that have brought in nearly $500 billion over five years. Authorities have sought to distribute some of the wealth, bringing liquidity to unprecedented levels.
Ahmadinejad has allowed domestic energy prices to rise and ended massive state subsidies. But, at the same time, he has sought to ease the pain through direct state aid, paying 60 million Iranians nearly $40 a month.
The moves have spurred inflation over the past year, raising the prices of food, rent, utilities and highway tolls, squeezing the average urban family’s monthly income of about $550.
Edalatian, the economist, called for harsh measures to weather the storm caused by the sanctions and erratic government policies. He said the government should restrict nonessential imports such as cars and televisions and take over the foreign-currency market.
“More sanctions are coming,” he said. “We must be prepared.”
Among those complaining about the rial’s drop were producers of medicine, importers of foreign cars and food, and truck drivers on international routes. In some cases, they decided to stop working because they could no longer make a profit.
Siavash Saadat said he did not know how he was going to pay for the goods he ordered from India for his Mina pharmaceutical factory.
“We either have to close down or I will be forced to lay off workers,” he said.
Warrick reported from Washington. Special correspondents Somaye Malekian and Ramtin Rastin contributed to this report.
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