Iran’s Economy on the Verge of Collapse, People Suffering Due to Sanctions

“Sanctions are affecting the entire country, but it is the people that bear the brunt and have the least ability to protect themselves from this pressure.” Trita Parsi, President of the National Iranian American Council

In the wake of heavy sanctions from the United States and the European Union, Iran’s economy is very near to failing. The Iranian rial hit an all-time low this morning, trading at 32,000 per U.S. dollar, a drop of more than 9% since last Monday.

Four people have died in Tehran in the last month due to medicine shortages caused by tough sanctions.

The rial has been dropping steadily in value over the last nine months as more and more sanctions have been imposed. Iranians are dealing with food and medicine shortages while the E.U. and the U.S. prepare to impose even tougher restrictions.

Earlier this week the Iranian government established a new three-tiered currency system and opened “exchange centers” in an attempt to stabilize the failing currency. The system allows importers of high priority goods like meat and grains to buy dollars at the official “reference” rate of 12,260 rials to the dollar.

Those who import other basic goods are allowed to buy dollars at a “non-reference” rate 2 percent less than the open market value of the rial. Last Thursday, Iran’s central bank stated that the rate was 23,927 rials to the dollar.

However, this move doesn’t seem to have done anything to uphold the value of the rial. In fact, the effort seems to have backfired, contributing to the current market drop. According to an article on, the open market appeared to be “resisting” the change.

Governor of the Central Bank of Iran (CBI) Mahmoud Bahmani

Mahmoud Bahmani, Iran’s central bank governor, believes that the resistance will end if people see that the rial is backed by strong currency. However, this is the same central banking system that has recently been accused of mismanagement of the situation by President Mahmoud Ahmadinejad.

Iranian legislators continue to be optimistic. Some are not trying to play the”blame game” with the E.U. and the United States. Legislator Ezzatollah Yousefian stated that international sanctions were not a major cause of the economic crisis in Iran.

“The first approach today is that authorities accept their mistakes and failures, second, that they not blame their mistakes on others, and third, that they invite all the pundits and experts to find a way to solve the problems of the economy,” said Yousefian.

According to an article in the Jerusalem Post, Iran’s oil losses could be devastating. By the end of the year, Iran may have lost 45-50 billion dollars in oil sales.

Israel’s Foreign Minister, Avigdor Lieberman, warned that continued sanctions could create an uprising in Iran, much like the one in Egypt last year that removed Mubarak from power. In an interview with Haaretz, a Israeli newspaper, Lieberman said that he believed that Iranians would stage their own version of the Tahrir revolution.

“The situation in Iran, and the feelings of the man on the street, is one of economic catastrophe,” he told Haaretz.  “Just this week there was another devaluation of the Iranian rial …. There’s a shortage of basic goods, a rise in crime, and people are trying to flee the country, sending money abroad.”

“The young generation is sick of being held hostage and sacrificing their future,” Lieberman said.

An Iranian boy takes a tray of eggs at a grocery store in Tehran on September 30, 2012. . (AFP/Getty Images)

The Iranian people are the ones who feel the brunt of sanctions. In the past year, the value of the rial has fallen more than 75%, and food prices have skyrocketed more than 50%. A bad harvest coupled with tougher restrictions has left many facing the fear of grain shortages. Over the summer, queues were formed for government subsidized chicken. As reported by Reuters, one cleric suggested that Iranians meet their protein needs with egg soup if they could not afford meat.

Karim Sadjadpour, an Iran expert at the Carnegie Endowment for International Peace in Washington, said that the situation now is much different from the war between Iran and Iraq in the 1980’s, when similar shortages were faced. “They (the government) will certainly attempt to recreate this narrative of Iran versus the world, but at the end of the day far more Iranians care about the price of chicken than they do enriched uranium.”

Speaking to the United Nations last Thursday,  Israel’s Prime Minister, Benjamin Netanyahu, called for international “red lines” in regard to the nuclear program in Iran and urged U.S. officials to do the same.

Netanyahu, in his speech, said, “For nearly a decade, the international community has tried to stop the Iranian nuclear program with diplomacy.

That hasn’t worked.

Iran uses diplomatic negotiations as a means to buy time to advance its nuclear program.

Photograph: Richard Drew/AP

For over seven years, the international community has tried sanctions with Iran. Under the leadership of President Obama, the international community has passed some of the strongest sanctions to date.

I want to thank the governments represented here that have joined in this effort. It’s had an effect. Oil exports have been curbed and the Iranian economy has been hit hard.

It’s had an effect on the economy, but we must face the truth. Sanctions have not stopped Iran’s nuclear program either.

According to the International Atomic Energy Agency, during the last year alone, Iran has doubled the number of centrifuges in its underground nuclear facility in Qom.

At this late hour, there is only one way to peacefully prevent Iran from getting atomic bombs. That’s by placing a clear red line on Iran’s nuclear weapons program.

Red lines don’t lead to war; red lines prevent war.”

An anonymous official told Haaretz that Israel has stepped up its efforts to put pressure on the European Union to impose further sanctions on Iran.

Iranian President Mahmoud Ahmadinejad told CNN that he hoped talks would be more productive after the U.S. presidential election. “We have seen during many years that as we approach the United States presidential election, no important decisions are made,” Ahmadinejad in an interview that was published Saturday.

“Following the election, certainly the atmosphere will be much more stable, and important decisions can be made and announced.”

Ahmadinejad intimated that meetings over Iran’s nuclear program with the five permanent members of the United Nations Security Council, plus Germany, will result in “a very important decision” following the November election.

“We have set forth proposals, we are holding dialogue,” he said in the CNN interview.“We do hope to be able to take some steps forward.”

Iran continues to deny any attempts to produce nuclear weapons and says that their intent is peaceful and for civilian purposes. The West is adamant that Iran is developing weapons of mass destruction. Meanwhile, the Iranian people are starving and dying because of lack of medicine. Where do we, as Americans, draw our “red line” on the acts against other countries under the guise of humanitarianism?

“Iran’s leaders should understand that I do not have a policy of containment. I have a policy to prevent Iran from obtaining nuclear weapons.”

Barack Obama

About angiedavidson75

mama,political activist, cat lover, free thinker
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5 Responses to Iran’s Economy on the Verge of Collapse, People Suffering Due to Sanctions

  1. Pingback: Today One Dollar Equals 33,000 Iranian Rials: Dismantling Iran’s Currency – Will It Work in Time? « 21st Century Screenshots

  2. Pingback: How Politics Nuked Iran’s Economy « pundit from another planet

  3. Andrey says:

    Nice) I think I will visit your blog more often)

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