Home inContext Sanctions Continue to Hit Iran’s Economy

Sanctions Continue to Hit Iran’s Economy

Michael Johnson

Days after Iranian President Mahmoud Ahmadinejad told the UN that his country is a “great and proud nation,” Tehran’s economy showed new signs of struggling under a heavy international sanctions regime. Plummeting Monday and Tuesday, the Iranian rial has lost a third of its value against the dollar over the last week with its value swinging from 24,600 per U.S. dollar last Monday to a record low of about 37,500 this Tuesday. Over the past year, the rial is believed to have lost 80% of its value, while inflation is estimated to run at an annual rate of 24%.

As part of the sanctions program the EU has moved to embargo imports of Iranian oil, blocking all member states from purchasing oil from Iran since July. As a result, Iran has gone from exporting over 2.5 million barrels of oil per day during months in 2010 and 2011 down to less than one million in July 2012. More than half of Iran’s government revenues come from the country’s energy resources, leading Israeli Finance Minister Yuval Steinitz to conclude that Tehran will this year see close to $45-50 billion in lost revenue.

Iranians count and exchange United States dollars and Iranian rial banknotes. (Photo: Atta Kenare AFP/Getty Images)

The U.S., for its part, has imposed almost a full embargo on Iran, and also enacted sanctions on multinational companies doing business with Iran’s central bank and energy industry.

Supreme Leader Ayatollah Ali Khamenei believes Iranians should embark on an “economy of resistance” and self-sufficiency. Until then, average Iranians are feeling the pinch as the cost of many basic food items has increased dramatically and sanctions are hurting importers’ ability to conduct transactions and obtain credit abroad. Additionally, Iranians have seen their savings erode from high inflation hurting their purchasing power. Many Iranians blame their own government more than the West for these hardships, according to an Israeli Foreign Ministry official.

Yet, the Iranian leadership shows no signs of slowing down its nuclear program. On the contrary, a report this week cites an Iranian source as stating that new employees are brought in every day to work on the nuclear program “non-stop.” Perhaps it’s time the regime in Tehran becomes more concerned with its country’s economic situation than enriching uranium.