WASHINGTON—No one knows if the international sanctions against Iran will persuade the Islamic Republic to back away from making a nuclear weapon, but there is no doubt that the sanctions are having a big impact on life in Iran.
The precipitous fall in value of Iran’s currency, the rial, and the loss of oil customers have to be unsettling to the country’s leadership. Recent protests on the streets over the currency plunge indicate that sanctions are taking a heavy toll on ordinary people.
The economic sanctions on Iran are “the single most comprehensive sanctions ever imposed on any country in peacetimes,” said Stuart Eizenstat, co-chair of the Iran Task Force at the Atlantic Council think tank.
The sanctions on Iran are without precedent, “far greater than those imposed on South Africa, for example,” Eizenstat, former Deputy Secretary of the Treasury under President Clinton. He spoke Oct. 4 at the Atlantic Council when he introduced an expert panel to discuss “Rethinking Policy Towards Iran.”
Eizenstat outlined the consequences if Iran were to get a nuclear weapon. The nuclear non-proliferation would be shredded. It would set off a nuclear arms race in the Middle East. Iran could provide a nuclear umbrella to support terrorist groups.
Eizenstat said that the sanctions are in many ways a “test whether the sanctions can be an effective use of nonmilitary means to achieve a political end.”
Eizenstat pointed out that Europe is taking this matter seriously. Medium-range missiles can already reach parts of Eastern Europe and Israel. The European Union tightened its energy sanctions, barring 18 percent of its total oil imports.
Suzanne Maloney, senior fellow at the Saban Center for Middle East Policy at the Brookings Institution, said that in the last 33 years—since the founding of the Islamic Republic in 1979—there has never been such a consensus of the international community and willingness to enforce sanctions.
Europe is “jeopardizing its financial ties and future business relationships as well as its own economy” in order to achieve the objective of thwarting Iran’s nuclear program, she said.
On Monday, the EU expanded its restrictive measures when the Council of the EU announced that all transactions, with special exceptions, between European and Iranian banks are prohibited, according to the press release.
Measures against the Central Bank of Iran were strengthened. Materials useful to Iran’s nuclear and ballistic missile program, such as graphite, aluminum, and steel, are banned. The Council also banned the import of natural gas from Iran.
Trade is being restricted, too. Ships owned by European companies or persons may no longer transport or store Iranian oil.
“For the first time [the sanctions] are really having an effect and impact that are undeniable and not easy to hide anymore,” said Ali Vaez, senior Iran analyst at the International Crisis Group.
Both Eizenstat and Vaez said that oil exports are down more than 1 million barrels per day. Vaez said that the loss in oil exports and production is costing the regime $3 to $5 billion in monthly revenues.
Inflation is officially at 25 percent, but some say that it is much more, said Vaez. The most devastating of all is the nearly 80 percent devaluation of the rial in the last nine months, said Vaez.
This forum discussion took place on the day following demonstrations that broke out in Tehran, protesting the high prices of goods and food. The protesters blamed President Mahmoud Ahmadinejad for the drop in value of the rial. A CNN report showed hundreds, perhaps thousands, of protesters via amateur video.
CNN also reported that the price of the popular barbari bread has gone from about 1,000 rials each to about 5,000 rials.
Forum panelist Barbara Slavin, senior fellow at the Atlanta Council’s South Asia Center, said that the protests were the first street demonstrations since February 2010.
Maloney said that the effect of the rial depreciation is not just economic hardship, but it has a psychological component as well. Fear, panic, and desperation are beginning to take hold.
Slavin made a recent trip to Iran and said that her impression is that the citizens are demoralized, and that they are beginning to blame the United States and the West for their problems.
With sanctions clearly having an effect, and Iran’s economy seemingly on the verge of collapse, the U.S. government is hopeful that the regime will come back to the negotiating table and suspend enrichment for perhaps three years.
The United States has made it clear that it will not “contain” Iran with a nuclear weapon, however, it intends to not let Iran acquire a nuclear weapon. All options are on the table, according to information coming out of Washington, which indicates that one option in particular—a military strike—is on the table and will be used if necessary.
But Vaez said that the U.S. government’s view misperceives the way the regime sees the situation.
Iranian leadership does not perceive their situation to be so dire. The sanctions are far from crippling, from their standpoint. Sanctions are not new; the Islamic Republic dealt with sanctions twice before—during the Iraq-Iran war in the 1980s and during the Asian financial crisis.
Iranian leadership thinks that they can hunker down, “reduce unnecessary imports,” boost central productivity, and become more self-reliant, said Vaez, adding that Iran equates its survival with victory.
The leadership sees Iran’s predicament as an opportunity. Iran’s Supreme Leader Ayatollah Khamenei advocated in late August an “economy of resistance” as the only way for the regime to make progress and protect its economy from the sanctions.
An economy of resistance does not indulge in luxuries and is not dependent upon oil. Their attitude is, “What doesn’t kill you makes you stronger,” according to Vaez.
Compromising under pressure invites more pressure in their worldview. The pressure would continue and not end if they were to compromise. So, “in the sea of sanctions, sink or swim is the only option,” said Vaez.
Furthermore, Iranian leadership sees the motive behind the sanctions as not to change behavior, but to change regime, according to Vaez. Their view is that the nuclear issue is being used to topple the regime.
The U.S. response to the latest street protests confirmed their view. U.S. State Department spokeswoman Victoria Nuland said about the recent street protests that the Iranian people “are speaking out against gross mismanagement of the economy,” and that the United States is “watching the situation very closely.”
The regime is not worried about a military strike, said Vaez. The United States lacks the will, and Israel lacks the means, he said. Certainly, the United States is in no mood at this time for fighting another Middle East war. The leadership regards an Israeli strike as limited; it could delay their nuclear program but not end it.
During the Iran-Iraq war (1982-88), senior Iranian leadership said that they would not agree to end the war until Saddam and the Baathist Party were eliminated. But the Ayatollah Khomeini accepted a cease-fire, likening it to drinking a chalice of poison.
However, today’s conditions are not like the 1988 war period when the existence of the regime was threatened and the population was willing to endure tremendous deprivation, said Maloney. Iran does not see the nuclear issue in the same way. She heard that the regime badly wants a deal with 20 percent enrichment.
Vaez said that given the Iranian mentality, the “take it or leave it” format of negotiations is bound to fail. He recommended that “sanction relief” be on the table, and that the United States negotiate and agree to remove a sanction as a bargaining chip for Iran to provide more transparency or establish a cap on its nuclear program.
Maloney disagrees with the “horse trading” mentality that the Iranians prefer. The idea of rewarding Iran for obeying agreements, which they agreed to in the first place, is morally repugnant, she said.
Observers of this standoff all agree that the stakes are high.
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