Sanc­tions on Iran eased, but pinch still felt

Relief es­ti­mated at a pal­try $7 bil­lion

The Washington Times Daily - - Business - BY AYA BA­TRAWY JONATHAN FA­HEY

DUBAI, UNITED ARAB EMI­RATES | The sanc­tions relief of­fered to Iran by the U.S. and five world pow­ers has be­gun to get the gears of com­merce slowly turn­ing again in an econ­omy that re­mains in shambles.

The Obama ad­min­is­tra­tion es­ti­mates relief from some sanc­tions in ex­change for a tem­po­rary pause in Iran’s nu­clear en­rich­ment pro­gram will amount to just $7 bil­lion. That’s a mea­ger amount for the econ­omy of a na­tion of nearly 80 mil­lion peo­ple — it’s less than one month’s worth of Iran’s oil pro­duc­tion and just 7 per­cent of Iran’s over­seas cash that re­mains frozen un­der the sanc­tions.

Still, Ira­ni­ans see the move as a much needed step to­ward a more nor­mal econ­omy af­ter years of crip­pling in­fla­tion and job losses.

“Mar­kets op­er­ate on a psy­cho­log­i­cal ba­sis,” said Ray Takeyh, an Iran spe­cial­ist at the Coun­cil on For­eign Re­la­tions and for­mer U.S. State Depart­ment se­nior ad­viser. “The psy­chol­ogy of Ira­nian com­merce has changed.”

Rah­mat De­hghani, a glazier, says he has been in­vited to dis­cuss a new ho­tel project in the north­east­ern city of Mash­had, 550 miles east of the cap­i­tal, Tehran.

“For months, the owner had de­layed any dis­cus­sion about his project since the fu­ture was not clear for any in­vest­ment,” he said.

The Ira­nian econ­omy was al­ready strug­gling un­der the weight of cor­rup­tion, mis­man­age­ment and costly food, en­ergy and cash sub­sides for the poor when the U.S. and Europe broad­ened eco­nomic sanc­tions against Iran to in­clude its cru­cial oil and bank­ing sec­tors in late 2011.

Oil sales plum­meted by about 1.5 mil­lion bar­rels per day, de­priv­ing Iran of about $80 bil­lion since early 2012, ac­cord­ing to the White House. At the same time, much of the rev­enue Iran did earn from ex­ports to a few Asian coun­tries that were al­lowed to buy Ira­nian oil re­mained out of the coun­try. The sanc­tions re­quired oil buy­ers to pay into locked bank ac­counts that Iran can ac­cess only to pur­chase non­sanc­tioned goods or hu­man­i­tar­ian sup­plies.

Man­u­fac­tur­ers found it in­creas­ingly dif­fi­cult to buy cru­cial com­po­nents to make prod­ucts or keep fac­to­ries run­ning. In­fla­tion and un­em­ploy­ment soared and Iran’s na­tional cur­rency, the rial, lost more than half its value.

At the same time, Iran is be­lieved to have pro­vided the regime of Syr­ian Pres­i­dent Bashar As­sad with bil­lions of dol­lars in eco­nomic aid and fuel over the past three years as Syria’s civil war erupted.

Pub­lic grum­bling grew. Prices for sta­ples such as chicken and lamb climbed out of reach of many low-in­come Ira­ni­ans. Late last year, Ira­nian riot po­lice were de­ployed at key in­ter­sec­tions in Tehran af­ter spo­radic protests flared.

That frus­tra­tion led to the elec­tion of Pres­i­dent Has­san Rouhani, who cam­paigned on eco­nomic re­forms. Ira­ni­ans blamed for­mer Pres­i­dent Mah­moud Ah­madine­jad for mis­man­age­ment and cor­rup­tion that many be­lieve was at least as dam­ag­ing to the econ­omy as the West’s sanc­tions.

The bleak con­di­tions may have also forced Mr. Rouhani — backed by Iran’s supreme leader Ay­a­tol­lah Ali Khamenei — to back the nu­clear deal struck Sun­day in Geneva be­tween Iran and the U.S., Rus­sia, China, France, the U.K. and Ger­many.

Mr. Rouhani, in an ad­dress de­liv­ered this week on the oc­ca­sion of his first 100 days in of­fice, said the Ira­nian econ­omy con­tracted 6 per­cent in the last year. He pledged to halt the re­ces­sion by March of next year and re­duce in­fla­tion to 25 per­cent by the end of next year.

The White House says the nu­clear deal keeps in place “the over­whelm­ing ma­jor­ity of the sanc­tions regime.” Al­most all of Iran’s ap­prox­i­mately $100 bil­lion in for­eign ex­change hold­ings re­mains in­ac­ces­si­ble or re­stricted by sanc­tions.

That means for the vast ma­jor­ity of Ira­ni­ans, the deal will do lit­tle to al­le­vi­ate the cost of daily life. In­fla­tion hov­ers around 35 per­cent, push­ing the price of goods ever higher. Of­fi­cially, un­em­ploy­ment is around 13 per­cent, though that num­ber is widely thought by ex­perts to be much higher.

AS­SO­CI­ATED PRESS

Ira­ni­ans walk in a cor­ri­dor of the main old Bazaar of Tehran. The mea­ger amount of sanc­tion relief is less than one month’s worth of Iran’s oil pro­duc­tion and just 7 per­cent of Iran’s over­seas cash that re­mains frozen un­der the sanc­tions.

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