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US increases pressure of economic war on Tehran - The Times of India
TEHRAN: All over this city of 12
million people, high-rises are
under construction, local
engineers and Chinese
contractors are rushing to finish
a multilevel highway, and the streets are lined with billboards
promoting the latest tablets and
washing machines made by
South Korean companies like
Samsung and LG. Supermarkets
are fully stocked, and it seems as if new restaurants and fast food
joints are opening up every day,
and never lacking for customers. In short, you would not know
that oil exports from Iran have
dropped by a million barrels a
day, and that the free fall in the
currency has caused huge
inflation a result of American- and European-led sanctions as
well as economic
mismanagement by the Iranian
government. The west escalated
the economic war another notch
on Wednesday, imposing a new set of restrictions intended to
force Iran into what amounts to a form of barter trade for oil, because payments
for oil deliveries can no longer be sent to
accounts inside Iran. A senior Obama administration official called the
latest step "a significant turning of the screw,"
repeating the administration's four-year
argument that the mullahs here face a "stark
choice" between holding on to their nuclear
program and reviving their oil revenue, the country's economic lifeblood. However, there is little confidence among
American officials in Washington and little
evidence on the streets of Tehran that even
newly stringent sanctions have much chance of
forcing Iran's supreme leader, Ali Khamenei, into
striking the deal that most Americans and Europeans, and even some Israelis, say could
defuse the crisis. The sanctions, while the source of constant
complaint and morbid jokes, have not set off
price riots or serious opposition to the Iranian
government. In fact, the past year has not been
all that bad, as Saeed Ranchian, 39, a shopkeeper
peddling perfumes in Tehran's Grand Bazaar, said the other day while he was sipping tea and as
droves of shoppers strolled by on newly paved
sidewalks. Surrounded by colognes with
elaborate foreign names like "Le Chevalier
Primero," Ranchian admitted that with prices
doubling and Iran's currency crashing, "you would expect people to buy less." "But in Iran, when prices go up, people start
buying more, fearing even higher prices," he said,
adding with a laugh that the country's economy
"has rules that no one understands." Obama administration officials were disturbed by
a new analysis, prepared for the president and
his staff, that paints a picture of the supreme
leader as so walled off from what is happening
with his country's oil revenues that he is telling
visitors that the sanctions are hurting the United States more than they are hurting Iran. "The people may be suffering in Iran," one senior
official involved in Iran strategy said last week,
"but the supreme leader isn't, and he's the only
one who counts." The outlines of a nuclear deal have been clear for
months: an Iranian agreement to limit the
number of centrifuges that produce uranium, a
cap on the amount of fuel in Iranian hands, and
an agreement to ship its most potent stockpiles
the stuff that can be quickly converted to bomb fuel out of the country. It would also
have to agree to expose its history of nuclear
work, including any on weapons technology,
which it has refused to show international
inspectors. In return, Iran would get an
acknowledgment that it has a right to peaceful nuclear enrichment, and a gradual lifting of the
sanctions. The Iranians have insisted that the
sanctions be lifted first. Instead, Iran announced last week that it would
deploy a new generation of centrifuges, four to
six times as powerful as the current generation.
And, while the United States, its European
partners and Russia and China agreed to resume
talks with the Iranians at the end of the month, administration officials have low expectations for
the results. "The Iranians didn't want to be in these talks, and
it's hard to imagine any kind of a deal before
their elections" in June, said one senior official,
referring to the coming presidential vote. "Maybe
if they had to put up with two more years of
pain." R Nicholas Burns, who as under secretary of state
helped push through many of the early sanctions
resolutions against Iran during the Bush
administration, said, "Even the tough Obama
sanctions on their own are unlikely to work as
Khamenei is dug in and obdurate." Burns added that for diplomacy to succeed "the US must
remain patient and commit to direct talks at the
highest levels. But, ultimately both Obama and
Netanyahu also need to make the threat of force
more credible to Tehran. Combined with
sanctions, this may be the most effective way to convince Iran to agree to a peaceful, negotiated
settlement." That does not necessarily mean the sanctions
have failed to have any effect. All financial
transactions have been cut off, making it
extremely difficult for Iranians to make overseas
payments. Europe for the first time is boycotting
Iran's crude, which is costing the country $4 billion to $8 billion each month. The existing sanctions on financial transactions
have also forced Iran to engage in unfavorable
oil-for-goods barter trade with its biggest
customers, China and India. Chinese goods and
medicine from India are prominently featured in
stores and pharmacies across the country. And now Iranian economic ingenuity will be
tested again. Under the new crackdown, the
United States is tightening the rules governing
countries it has allowed to keep buying Iranian
oil, as long as they show they are weaning
themselves of it. From now on, when China, Japan, South Korea and India, among others, pay
for oil deliveries, they will be required to put that
money into a local bank account, which Iran can
use only to buy goods within that country. It is a way of keeping the money from ever
being repatriated to Iran, even through third
parties. Under American law, violators would be
denied access to the United States banking
system, though as a political matter it is difficult
to imagine that ever being enforced. Meanwhile, President Mahmoud Ahmadinejad has asked
Parliament to approve more cash handouts for
most Iranians as a cushion for tougher times to
come. "Of course, the situation could be much better,
people are stretching their financial limits,"
Ranchian said. "But for now, at least, they are
coping." The Iranian economy's resiliency could surprise
Westerners. The way Iran's economy is
structured, with strong links between state
bodies and semiofficial and private businesses,
helps shield the country, said Saeed Laylaz, an
economist and columnist for the Sharq newspaper, which is critical of the government. Laylaz, who spent several months in jail after the
2009 protests against President Ahmadinejad's
re-election, explained how Iranian importers and
exporters are constantly shifting between
buying and selling products, making profits on
exchange rates. Regional trade is up because of the low rial, he said. "Some are making a fortune
these days." Others are more pessimistic, saying the effects of
the sanctions have still not been fully felt. "If the sanctions, government mismanagement
and inflation continue naturally in the future, we
will encounter serious difficulties," said Mohsen
Farshad Yekta, a professor of economics at the
University of Economic Sciences in Tehran. Right now, Obama's aides seem content with
stalemate. They believe that Ayatollah Khamenei
is proceeding with the nuclear program in the
most incremental way, carefully avoiding going
above, at least for now, a stockpile of more than
250 kilograms of medium-enriched uranium enough to make a single bomb. However, to try to demonstrate its seriousness,
the American military and two dozen allies are
running an exercise this week in the Persian Gulf,
practicing how to intercept banned technology
and weapons heading into, or out of, Iranian
ports. (Thomas Erdbrink reported from Tehran, and
David E Sanger from Washington. Rick Gladstone
contributed reporting from New York, and Thom
Shanker from Washington.)
TEHRAN: All over this city of 12
million people, high-rises are
under construction, local
engineers and Chinese
contractors are rushing to finish
a multilevel highway, and the streets are lined with billboards
promoting the latest tablets and
washing machines made by
South Korean companies like
Samsung and LG. Supermarkets
are fully stocked, and it seems as if new restaurants and fast food
joints are opening up every day,
and never lacking for customers. In short, you would not know
that oil exports from Iran have
dropped by a million barrels a
day, and that the free fall in the
currency has caused huge
inflation a result of American- and European-led sanctions as
well as economic
mismanagement by the Iranian
government. The west escalated
the economic war another notch
on Wednesday, imposing a new set of restrictions intended to
force Iran into what amounts to a form of barter trade for oil, because payments
for oil deliveries can no longer be sent to
accounts inside Iran. A senior Obama administration official called the
latest step "a significant turning of the screw,"
repeating the administration's four-year
argument that the mullahs here face a "stark
choice" between holding on to their nuclear
program and reviving their oil revenue, the country's economic lifeblood. However, there is little confidence among
American officials in Washington and little
evidence on the streets of Tehran that even
newly stringent sanctions have much chance of
forcing Iran's supreme leader, Ali Khamenei, into
striking the deal that most Americans and Europeans, and even some Israelis, say could
defuse the crisis. The sanctions, while the source of constant
complaint and morbid jokes, have not set off
price riots or serious opposition to the Iranian
government. In fact, the past year has not been
all that bad, as Saeed Ranchian, 39, a shopkeeper
peddling perfumes in Tehran's Grand Bazaar, said the other day while he was sipping tea and as
droves of shoppers strolled by on newly paved
sidewalks. Surrounded by colognes with
elaborate foreign names like "Le Chevalier
Primero," Ranchian admitted that with prices
doubling and Iran's currency crashing, "you would expect people to buy less." "But in Iran, when prices go up, people start
buying more, fearing even higher prices," he said,
adding with a laugh that the country's economy
"has rules that no one understands." Obama administration officials were disturbed by
a new analysis, prepared for the president and
his staff, that paints a picture of the supreme
leader as so walled off from what is happening
with his country's oil revenues that he is telling
visitors that the sanctions are hurting the United States more than they are hurting Iran. "The people may be suffering in Iran," one senior
official involved in Iran strategy said last week,
"but the supreme leader isn't, and he's the only
one who counts." The outlines of a nuclear deal have been clear for
months: an Iranian agreement to limit the
number of centrifuges that produce uranium, a
cap on the amount of fuel in Iranian hands, and
an agreement to ship its most potent stockpiles
the stuff that can be quickly converted to bomb fuel out of the country. It would also
have to agree to expose its history of nuclear
work, including any on weapons technology,
which it has refused to show international
inspectors. In return, Iran would get an
acknowledgment that it has a right to peaceful nuclear enrichment, and a gradual lifting of the
sanctions. The Iranians have insisted that the
sanctions be lifted first. Instead, Iran announced last week that it would
deploy a new generation of centrifuges, four to
six times as powerful as the current generation.
And, while the United States, its European
partners and Russia and China agreed to resume
talks with the Iranians at the end of the month, administration officials have low expectations for
the results. "The Iranians didn't want to be in these talks, and
it's hard to imagine any kind of a deal before
their elections" in June, said one senior official,
referring to the coming presidential vote. "Maybe
if they had to put up with two more years of
pain." R Nicholas Burns, who as under secretary of state
helped push through many of the early sanctions
resolutions against Iran during the Bush
administration, said, "Even the tough Obama
sanctions on their own are unlikely to work as
Khamenei is dug in and obdurate." Burns added that for diplomacy to succeed "the US must
remain patient and commit to direct talks at the
highest levels. But, ultimately both Obama and
Netanyahu also need to make the threat of force
more credible to Tehran. Combined with
sanctions, this may be the most effective way to convince Iran to agree to a peaceful, negotiated
settlement." That does not necessarily mean the sanctions
have failed to have any effect. All financial
transactions have been cut off, making it
extremely difficult for Iranians to make overseas
payments. Europe for the first time is boycotting
Iran's crude, which is costing the country $4 billion to $8 billion each month. The existing sanctions on financial transactions
have also forced Iran to engage in unfavorable
oil-for-goods barter trade with its biggest
customers, China and India. Chinese goods and
medicine from India are prominently featured in
stores and pharmacies across the country. And now Iranian economic ingenuity will be
tested again. Under the new crackdown, the
United States is tightening the rules governing
countries it has allowed to keep buying Iranian
oil, as long as they show they are weaning
themselves of it. From now on, when China, Japan, South Korea and India, among others, pay
for oil deliveries, they will be required to put that
money into a local bank account, which Iran can
use only to buy goods within that country. It is a way of keeping the money from ever
being repatriated to Iran, even through third
parties. Under American law, violators would be
denied access to the United States banking
system, though as a political matter it is difficult
to imagine that ever being enforced. Meanwhile, President Mahmoud Ahmadinejad has asked
Parliament to approve more cash handouts for
most Iranians as a cushion for tougher times to
come. "Of course, the situation could be much better,
people are stretching their financial limits,"
Ranchian said. "But for now, at least, they are
coping." The Iranian economy's resiliency could surprise
Westerners. The way Iran's economy is
structured, with strong links between state
bodies and semiofficial and private businesses,
helps shield the country, said Saeed Laylaz, an
economist and columnist for the Sharq newspaper, which is critical of the government. Laylaz, who spent several months in jail after the
2009 protests against President Ahmadinejad's
re-election, explained how Iranian importers and
exporters are constantly shifting between
buying and selling products, making profits on
exchange rates. Regional trade is up because of the low rial, he said. "Some are making a fortune
these days." Others are more pessimistic, saying the effects of
the sanctions have still not been fully felt. "If the sanctions, government mismanagement
and inflation continue naturally in the future, we
will encounter serious difficulties," said Mohsen
Farshad Yekta, a professor of economics at the
University of Economic Sciences in Tehran. Right now, Obama's aides seem content with
stalemate. They believe that Ayatollah Khamenei
is proceeding with the nuclear program in the
most incremental way, carefully avoiding going
above, at least for now, a stockpile of more than
250 kilograms of medium-enriched uranium enough to make a single bomb. However, to try to demonstrate its seriousness,
the American military and two dozen allies are
running an exercise this week in the Persian Gulf,
practicing how to intercept banned technology
and weapons heading into, or out of, Iranian
ports. (Thomas Erdbrink reported from Tehran, and
David E Sanger from Washington. Rick Gladstone
contributed reporting from New York, and Thom
Shanker from Washington.)
