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Ordinary Iranians bear the brunt of international sanctions

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Thousands of Iranians have in recent days amassed by the border with Iraq to buy U.S. currency in their neighboring country, Iranian news website Mashreq reported on Monday, quoting Iraqi sources.

As the Iranian rial has fallen almost 40 per cent against the dollar over the past two weeks, Iranians have been rushing to buy foreign currency.

On January 1 the U.S. enforced new legislation which makes it almost impossible for Iran to sell oil on the international market. The move has sent Iran’s currency into a tailspin, and the matter further deteriorated when EU followed suit earlier this week.

Iran’s leaders say sanctions imposed by the West over the country’s disputed nuclear program will have no effect on the regime but will impact ordinary people who will soon start to feel the bite.

On Monday Iran summoned the ambassador of Denmark, which holds the European Union’s rotating presidency, to complain over the EU oil embargo.
Amid the international political tussle, the economic situation in the country grows increasingly less pleasant for Iranians.

The official inflation rate remains at more than 19 percent, but analysts argue it is significantly higher than that level. Subsidy cuts on food and energy that were pushed through Parliament last year by President Mahmoud Ahmadinejad are very unpopular, and economists warned long before they were enacted that they could further stoke inflation. Since the cuts were implemented, food and energy prices have spiked.

While Iranian economists, for now, argue that the latest sanctions may not be directly influencing the currency, the new measures add to already existing angst in the country.

Banking analyst Farid Ziaolmaleki, in comments echoed by others, told the Associated Press that he believes that more Iranians are turning to the currency speculation, buying up dollars, as inflation has outpaced the 12 to 15 percent interest rates offered by banks.

Compounding the pressure on the rial that such speculation could have, merchants have also taken to calculating the price of their wares in dollars, hoping for a steeper depreciation in the Iranian currency.

Economic daily Donya-e-Eqtesad wrote in its Tuesday edition that “a big portion of merchants are not willing to sell their wares, and prefer to hold onto them until” the dollar strengthens more against the riyal.

Another daily newspaper, Shargh, said that housing prices had increased by 25 percent in recent weeks because of the weakening in the value of the riyal.

A familiar tale

Tehran factory worker Mohammad Varamini lost his job of 14 years when rising energy costs and shrinking sales drove the tile maker that employed him out of business. His tale is a familiar one, repeated across Iran where hundreds of firms have been closed their doors over the past year, a consequence of the international sanctions as well as economic mismanagement.

“The owner closed the factory because he could not afford the electricity, gas and water bills,” says Mohammad’s wife Sedigeh, a mother of four to Reuters. “For a month we managed to pay the rent and other expenses by selling my gold jewelry and using our small savings. But then we had no money and my husband could not find another job. I had to start working as a cleaner.”

Now the family is struggling to keep a roof over its head and to educate the children. When the rent goes up in March, they will move in with Sedigeh’s parents. “Prices are increasing every day. I can only afford to buy meat once a month.”

Few escape hardship these days. The educated liberals who joined the protests against Ahmadinejad’s re-election in 2009, the business elite afraid of upheaval and Ahmedinejad’s natural constituency of poorer, working Iranians are all feeling the impact of galloping inflation, a sinking currency and rising joblessness to varying degrees.

Shahram Alizadeh, 53, a steel merchant at Tehran’s bazaar says he can’t remember a tougher time for his business. “Trading, as far as I am concerned, has dropped to almost zero. There are no building projects because the political situation is so unstable and unpredictable. The situation is no better in other parts of the bazaar.”

Iran’s rulers ignore the mood at the bazaar at their peril despite the fact that its merchants played an important role in mobilizing street protests against the former Shah who was toppled in 1979.

Young, educated Iranians are increasingly looking abroad for their futures. There are currently some 80,000 Iranian university students abroad.

“I always dreamed about returning to Iran after finishing my studies in Greece. But each time I travel to Iran to visit my family, I become more disappointed. Most of my friends here are either jobless or have jobs that they don’t like with a low income. I feel like a stranger in my own country.

There is no hope for the future among young people here. Everybody just wants to leave,” said physics student Ali Qiasi, 29, who left Iran after the 2009 presidential vote.

“How can I live in a country where nothing is stable? Look at prices, look at the exchange rate. I am happy in Greece.”

Iran’s diving currency has forced the central bank to act, pumping in $200 million dollars in early January. Authorities also tightened monitoring of capital leaving the country. Passengers travelling abroad are forbidden from carrying more than $5,000 in cash.

The business elite too are feeling the squeeze.

“Life has become more expensive in the past months. My husband’s business is not affected. My problem is that we are about to lose our credit cards. Because of the sanctions, our bank in Dubai has informed all its Iran-based clients about the closure of their accounts. What will I do when travelling abroad?” said Simin Marzban, 48, whose husband is involved in car manufacturing.

“If this situation continues, I will move to the United States for good. It is like the revolution time.”