Reel­ing: How U.S. sanc­tions are af­fect­ing Iran’s econ­omy.

Ci­ti­zens, al­ready deal­ing with sky­rock­et­ing costs for ba­sic goods, brace for the next big hit

The Washington Post Sunday - - FRONT PAGE - BY RICK NOACK, AR­MAND EMAMDJOMEH AND JOE FOX [email protected]­post.com ar­[email protected]­post.com [email protected]­post.com

The Trump ad­min­is­tra­tion an­nounced more sanc­tions Fri­day on Iran, mark­ing the lat­est move in a series of U.S. fi­nan­cial pun­ish­ments that have left the Ira­nian econ­omy reel­ing and its ci­ti­zens un­der ex­treme pres­sure. ¶ The lat­est U.S. sanc­tions will tar­get Iran’s metal in­dus­tries, as well as eight se­nior mil­i­tary and na­tional se­cu­rity of­fi­cials. The new penal­ties came af­ter the U.S. killing of a top Ira­nian com­man­der in Bagh­dad last week, which trig­gered re­tal­ia­tory Ira­nian strikes Wed­nes­day on bases hous­ing U.S. mil­i­tary per­son­nel in Iraq. ¶ Within three years, cau­tious hope­ful­ness on im­prov­ing U.S.-Ira­nian re­la­tions has turned into es­ca­lat­ing hos­til­ity — with or­di­nary Ira­ni­ans say­ing they once again will bear the brunt of a U.S. re­turn to sanc­tions.

“Ev­ery sin­gle day, as soon as peo­ple open their eyes, they face a dark and vague fu­ture,” wrote Ira­nian mu­si­cian Me­hdi Ra­jabian, 30, an in­de­pen­dent protest artist and fre­quent critic of the Ira­nian regime, in a text mes­sage in re­sponse to the lat­est U.S. sanc­tions an­nounced on Fri­day.

When the Iran nu­clear deal was reached in 2015, Pres­i­dent Barack Obama wel­comed it as be­ing “not built on trust,” but rather “on ver­i­fi­ca­tion.” The agree­ment — one of his sig­na­ture for­eign pol­icy achieve­ments — was im­ple­mented in early 2016.

Sud­denly and largely un­con­strained by in­ter­na­tional sanc­tions, for­eign com­pa­nies flocked into the coun­try. Whereas Iran’s real gross do­mes­tic prod­uct growth rate stood at -1.3 per­cent in 2015, it surged to +13.4 per­cent in 2016.

But Pres­i­dent Trump’s elec­tion in Novem­ber 2016 and his new pol­icy di­rec­tives up­ended that. Iran’s real GDP growth rate tum­bled.

Through­out his cam­paign, Trump had ar­gued the United States should leave the Iran agree­ment, call­ing it a “ter­ri­ble one for the United States and the world. It does noth­ing but make Iran rich and will lead to catas­tro­phe,” he tweeted in 2015.

On May 8, 2018, Trump fol­lowed through, an­nounc­ing that the United States would aban­don the deal. “It didn’t bring calm, it didn’t bring peace, and it never will,” he said. Trump’s sup­port­ers ar­gued that Iran had de­ceived the in­ter­na­tional com­mu­nity and that it con­tin­ued to desta­bi­lize the Mid­dle East un­de­terred, via prox­ies in Ye­men, Le­banon, Syria and other parts of the re­gion.

Other Western par­ties to the deal — Ger­many, France and Bri­tain — coun­tered that stop­ping Iran’s re­gional in­ter­fer­ence was never its aim and that their own in­tel­li­gence sug­gested Iran was in com­pli­ance with the agree­ment. All sig­na­to­ries apart from the United States stuck to the agree­ment. Europe an­nounced it would es­tab­lish a mech­a­nism to shield com­pa­nies will­ing to con­tinue trad­ing with Iran from re­in­stated U.S. sanc­tions.

Once key U.S. sanc­tions were re­in­stated by Novem­ber 2018, how­ever, the Euro­peans’ an­nounce­ment had lit­tle im­pact. The Ira­nian rial con­tin­ued to rapidly lose value against the dol­lar.

The Trump ad­min­is­tra­tion’s threat to also im­pose sanc­tions on coun­tries that pur­chased Ira­nian oil hit Iran es­pe­cially hard. Iran’s oil ex­ports plum­meted af­ter the sanc­tions took ef­fect.

Ini­tially, the United States agreed to grant some of Iran’s cus­tomers a six-month waiver, mean­ing they could con­tinue to im­port Ira­nian oil with­out fear of U.S. sanc­tions. In the fol­low­ing months, Ira­nian oil ex­ports be­gan to in­crease as a re­sult of the ex­emp­tions.

Once the waivers ex­pired in May 2019, Ira­nian ex­ports fell to new lows.

There have been signs of re­cent frus­tra­tion be­tween Tehran and the Euro­pean Union, too. Ira­nian of­fi­cials have blamed their Euro­pean coun­ter­parts for sup­pos­edly be­ing too slow in im­ple­ment­ing mea­sures to shield com­pa­nies from U.S. sanc­tions.

In re­sponse to the U.S. killing of Maj. Gen. Qasem Soleimani, com­man­der of Iran’s elite Quds Force, Tehran dou­bled down by an­nounc­ing last Sun­day that it was sus­pend­ing its com­mit­ments un­der the nu­clear deal.

For now, the Euro­pean Union has re­sisted U.S. pres­sure to de­clare the nu­clear deal dead, say­ing in­stead that it will “spare no ef­fort” to keep it alive.

A key ques­tion, how­ever, is whether ad­di­tional sanc­tions would even have a sig­nif­i­cant im­pact. An­a­lysts say ex­ist­ing U.S. sanc­tions have left lit­tle lee­way for Iran, which saw the cost of ba­sic goods sky­rocket over the past year.

Over the course of one year, the price of beef and veal has risen nearly 50 per­cent, and the cost of milk has al­most dou­bled.

Ira­nian gov­ern­ment lead­ers “keep telling us to be strong and en­dure the pres­sures, but we can al­ready hear the sound of our bones break­ing,” Shiva Ke­shavarz, a 22-year-old ac­coun­tant, told the As­so­ci­ated Press last sum­mer.

Since then, liv­ing con­di­tions have only got­ten harsher for many Ira­ni­ans, who “strug­gle to sur­vive,” wrote Ra­jabian, the mu­si­cian.

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