By Roshanak Astaraki
The new set of U.S. sanctions which went into effect on November 5 has worsened the economic crisis in Iran. The government and the Islamic Republic regime have failed to tackle unemployment, inflation, the high cost of living and the volatile currency market. The Iranian economy took a nosedive after the U.S. withdrawal of the 2015 Joint Comprehensive Plan of Action (JCPOA) in May.
Meanwhile, Tehran has been desperately trying to find ways to circumvent U.S. sanctions. Iranians, however, started to feel the effects of the new sanctions long before they were re-imposed due to President Hassan Rouhani and his government’s failure to put effective measures into place to protect the economy.
The term “rent-seeking” has become part of the everyday Farsi vocabulary nowadays. It involves seeking to increase one’s share of existing wealth without creating new wealth. Rent-seeking results in reduced economic efficiency through a poor allocation of resources.
Another word that is frequently used by people these days is “Aghazadeh.” It refers to children of the privileged class who excel in life not based on merit but due to their family’s political clout and connections.
The Central Bank of the Islamic Republic of Iran’s vice-governor in charge of foreign exchange Ahmad Araghchi is a case in point. He is the nephew of Abbas Araghchi, the spokesman for the Ministry of Foreign Affairs. Despite his youth and inexperience, Mr. Araghchi was in charge of the most sensitive and vital component of the Iranian banking system.
The volatile foreign exchange market in recent months and the sharp drop in the value of the rial against the U.S. dollar has been detrimental to Iran’s import, manufacturing, and retail industries.
Poor planning, ineffective management, and corruption had severely damaged the Iranian economy long before the devastating U.S. sanctions went into effect. In the past four decades, we have witnessed the rift between the Islamic Republic and the Iranian people widen, resulting in nationwide civil disobedience and strikes by teachers, truckers, merchants and pensioners in recent months.
The new U.S. sanctions, which target Iran’s oil exports, shipping and banking sectors, could send the country’s economy into a death spiral. Mr. Rouhani and his cabinet, however, remain defiant and insist that Iran will be able to survive and continue to sell its oil.
Iran’s Foreign Minister Mohammad Javad Zarif has argued that the new and tougher sanctions will not help the U.S. achieve its goals. “Nothing extraordinary will happen after November 5,” Mr. Zarif said recently. It is evident that the Iranian regime has buried its head in the sand.
Meanwhile, Mr. Rouhani has been pleading with Russia and China to step in and provide economic relief to Iran. Tehran has also pinned its hopes on the European Union’s efforts to create new payment channels to preserve oil and other trades with Iran.
Curiously enough, the Islamic Republic regime continues its age-old anti-American propaganda instead of trying to solve the country’s economic crisis and ensuring the welfare of its people.
In a coordinated effort, the government and the Islamic Revolutionary Guards Corps (IRGC) have used social media to try to convince the public that the U.S. is targeting the Iranian people and not the regime.
However, more than 70 foreign companies have canceled their contracts and left Iran in the last six months. The rial has dropped in value by 300 percent. The purchasing power of the working class has lowered by 90 percent.
Meanwhile, the regime’s supporters continue to lambaste the U.S. for depriving the Iranian people of food and medicine. However, Washington has repeatedly said that sanctions don’t apply to food products and medicine.
The truth is that the country is gripped by an economic crisis that includes the high cost of goods and the shortage of many products including medicines. The sharp drop in the value of the rial has impacted all imports including medicine as well as domestic manufacturers that purchase their raw material from foreign countries. Some prescriptions have tripled in price in the past year.
It is the failed policies of the Islamic Republic in the past four decades and not President Donald Trump’s hostile stance towards Tehran that are the actual cause of the economic crisis that has gripped Iran. There is ample evidence to suggest that many Iranians hope sanctions will lead to regime change.
We can expect more instances of civil unrest, protests and strike action in the coming days, weeks and months by the disillusioned working and middle classes who have lost faith in a regime that many of them had once wholeheartedly supported.
Translated from Persian by Fardine Hamidi