‘We Need Bread and Butter’; Iranians Under Pressure in Flailing Economy
Tehran moves to contain economic crisis that is slashing buying power even before new U.S. sanctions
By Sune Engel Rasmussen in Beirut and Aresu Eqbali in Tehran
25 July 2018
Iranian leaders are pushing to contain a deepening economic crisis that is slashing the buying power of Iranians and pressuring Tehran’s ruling elite even before the bite of looming US sanctions.
President Hassan Rouhani on Wednesday replaced the head of the country’s central bank, who had come under harsh criticism for failing to stem a steep drop in Iran’s currency Ninety members of parliament signed a petition this week to impeach the economy minister, according to the semiofficial Mehr News Agency.
The moves came in the wake of hundreds of protests in recent months over rising prices, corruption and environmental damage, and as the Trump administration prepares to impose sanctions that will target
Iranian purchases of US dollars.
Iranians say they are worried about being able to pay rent or buy food. Inflation is running at 12% and the price of imported items such as medicine is up markedly. Iran’s oil exports have dropped 8% in the past two months, and youth unemployment stands at around 30%.
“One item that I used to sell three units per day is now sold three per week,” said Ali, a shopkeeper who declined to give his last name and said the government should take care of low-income families. “There are people who have eaten no meat in weeks.”
The economic situation is a more pressing concern for some Iranians than the sharp words between their leaders and President Trump. “We need bread and butter,” said Mostafa Bayat, a 30-year-old Tehran resident. “I am not worried about a war – I don’t have anything to lose.”
Iran has a nearly 40-year history of withstanding economic and political isolation, dating back to the 1979 revolution. While public discontent is common, protests rarely aim to topple the regime.
But the flailing economy has exacerbated a political crisis for Mr. Rouhani, a moderate who has gradually fallen into step with the country’s hard-liners in the face of mounting domestic and foreign pressure, asking Iranians to unite in defiance of the US.
Mr. Rouhani’s replacement of Valiollah Seif, the central bank chief, is an indication of how dire the situation is, Mr. Seif, who had a few weeks left of his five-year term, was central to the government’s drive to root out unlicensed financial institutions, many of which are run by religious and military bodies.
That drive triggered a backlash, with some of the targeted institutions flooding the Iranian currency market to discredit the government, exacerbating the devaluation of the rial, said Bijan Khajehpour, managing partner of Atieh International, a Vienna-based consulting firm specialized in building cooperation with Iran.
The unofficial value of the Iranian rial has roughly halved since the start of the year, to 95,000 to the dollar. Trade in the official rate, unavailable to most Iranians, is a major source of corruption.
The government has taken other recent steps to crack down on sources of discontent. Five officials from the Ministry of Industry were arrested on charges of corruption and abuse of funds to import thousands of luxury cars, local media reported on Wednesday.
BMI Research, a sister company of Fitch Ratings, predicts 1.8% economic growth in 2018, down from the 4.3% growth it projected before Mr. Trump withdrew the US from the 2015 Obama-era deal that imposed curbs on Iran’s nuclear activity in exchange for sanctions relief.
On Aug 6, new U=2ES=2E sanctions will target Iranian purchases of USdollars, among other things, and on Nov 4, sanctions on Iranian oil and foreign financial institutions dealing with Iran’s central bank will come into effect.
The sprawling bazaar in Tajrish, in northern Tehran, remains busy with shoppers browsing colorfully pickled fruits and Chinese knockoff clothing. Yet, sales are down significantly, say shopkeepers, some of whom recall the impact of earlier US sanctions from 2011 to 2015.
“The first round of sanctions was difficult, too, but people had a stronger economic ground to walk on,” said Mehdi Aliari, whose shop sells electrical devices. “But today, we are economically exhausted.”
Mojgan Mostashari, a 45-year-old homemaker, seemed to find some hope in Mr. Trump’s latest Twitter salvo, which was addressed to Mr. Rouhani by name.
“I think Mr. Trump is provoking Iran to open a dialogue. They are practically talking to each other now. Mr. Trump wants to negotiate with Iran and this is his style,” Ms. Mostashari said.
The Trump administration says it is applying as much economic pressure on Iran as possible to force changes in its military posture in the region and end its support for groups the US considers terrorists.
Iran has turned to the European Union, which remains supportive of the nuclear deal. Iran says it will continue curbing its nuclear activities as long as Europe helps it export oil and repatriate funds.
But most European commercial banks won’t open Iranian accounts to avoid their access to dollars being cut by US authorities, and the US has declined to give European companies exemptions from sanctions.
The best opportunity for Iran now is to attract smaller and medium-sized European companies, which don’t rely on business with the US, said Mr Khajehpour.
“But the big question is, will Europe be able to offer the protection these companies need, especially in terms of transactions,” Khajehpour said.
Original article published in The Wall Street Journal
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