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Recurrent Unrest and Reimposed Sanctions Tank Iran’s Economy

Reimposed Sanctions Tank Iran’s Economy

By Mahmoud Hakamian

In 2018, Iran was hit by both a major uprising that swept across the country and continues to today with protests and demonstrations staged nearly daily, but the economy was shaken by the US exit from the Nuclear Deal and the reimposition of sanctions that followed.

The uprising that occurred in late December 2017 and January 2018 began over economic factors — rising inflation, high unemployment — but quickly morphed into protesters chanting slogans against Supreme Leader Ali Khamenei and demanding regime change.

In May, the the Trump administration withdrew the United States from the Nuclear Deal with Iran and announced the re-instatement of crippling sanctions in two phases: initially, in August, and the final phase in November. This sparked massive demonstrations in the Iranian bazaars in Tehran and other major cities.

As analysts pointed at negative signals from Washington about the future of the 2015 nuclear agreement, the Iranian rial fell to a record-breaking low in March. In April, Iran attempted to enforce a “single rate of exchange” of 42,000 rial for U.S. dollar, and the Supreme Leader called for the execution of “a few main foreign exchange dealers” to prevent further devaluation of the rial.

Later in April, Iran’s central bank banned the sale of foreign currencies at exchange bureaus. New government guidelines forbid exchange bureaus to buy, sell, or transfer foreign currencies, and the central bank would no longer provide cash foreign currencies to the bureaus. As well, the Central Bank of Iran (CBI) set strict limits on the amount of foreign cash travelers could take with them out of the country just days after U.S. withdrawal from the Iran nuclear deal was announced. In September and October the rial fell to a historic low with the rate of exchange of over 190,000 rials per dollar.

The Islamic Republic celebrates its 40th anniversary in February 2019, so a semblance of stability in the market will be important to save face for the regime. However, US sanctions have hit many sectors of the economy, and most Iranians’ assets have lost at least two thirds of their value. In fact, the latest report by the parliament's research center says that a further 11 percent of people have fallen below the poverty line in the Tehran region, compared to last year.

Uncertainty over the Islamic Republic's future, vulnerabilities due to U.S. sanctions, and lack of confidence in the government’s ability to cope with the ongoing economic crisis led to intervention of Islamic Republic's Supreme Leader — Khamenei wanted to review the budget himself before parliament took it up.
Iran’s budget is based on selling one to 1.5 million barrels of oil per day at $54 per barrel, but world oil prices have significantly dropped, and Iran’s oil sales may be lower.

In September it was reported that Tehran may have to resort to a plan to ration foodstuffs and other essential commodities, and the parliament discussed a bill that called on the government to import essential commodities and sell the goods at subsidized prices at cooperatives and state-owned shops.

Meanwhile, housing costs in Tehran are are rising, and Iranian workers have lost 90% of their purchasing power, according to the chairman of the Supreme Center of Council's Committee (SCCC), Faramarz Tofiqi.

While economists warn that inflation may soar up to 65 percent, President Hassan Rouhani has called the economists “liars." Rouhani claimed that U.S. sanctions have had no effect on Iran's economy because Washington had already practically reimposed them earlier. "The sanctions have had no impact on our economy because America had already used all the weapons at its disposal and there was nothing new to use against us,” Rouhani said, contradicting earlier remarks by his vice-president, Es'haq Jahangiri, who admitted that U.S. sanctions against Iran have been "highly effective."

Khamenei ordered officials to urgently find solutions to ease an economic crisis spurred by the re-imposition of U.S. sanctions. He said in a speech, “With the help of sanctions and actions directed against our internal security, they want to sow discord, create problem and start a civil war in our country. They have done all they could.” His statements come as Iran experiences labor unrest as a daily problem. The people of Iran have had enough, and are raising their voices for regime change, through their own resistance, and that of the MEK/PMOI and National Counsel of Resistance of Iran (NCRI).

It seems like the situation in Iran will only get worse — according to Iranian auto parts manufacturers, 450 thousand workers in this industry are likely to lose their jobs as a result of Iran's currency losing value.

In a stunning statement, Iran’s Minister of Cooperatives, Labor, and Social Welfare, Ali Rabiei, predicted the country will lose one million jobs by the end of the current Persian year on March 20, 2019.

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