Michael Theodoulou reports: International sanctions targeting Iran’s oil exports are inflicting economic pain but may well fail to force Tehran to compromise on its nuclear ambitions and could even make the regime more intransigent, analysts said.
The unprecedented measures could also boomerang by driving up oil prices, hitting the jittery global economy, they said.
“In the process of hunting for alternative sources to Iranian oil, it’s virtually certain that the price of oil is going to rise,” said Gary Sick, an Iran expert and former White House policy adviser at Columbia University in New York.
Ordinary Iranians complain that they, rather than their defiant and resilient regime, are bearing the brunt of sanctions that are compounding problems caused by the government’s economic mismanagement.
US financial sanctions imposed at the beginning of this year are playing havoc with Iran’s ability to receive payments for its oil exports. But they are also causing serious disruption to Tehran’s imports, with a real effect on the Iranian street where prices for basic foodstuffs are soaring. Malaysian exporters of palm oil, critical to Iran’s food industry, have halted sales to Tehran because they could not get paid.
A margarine factory owner in Iran told Reuters: “The way things are going, I predict that over the next three to four months our edible oil will run out because of sanctions.”
A default by Iranian buyers on purchases of 200,000 tonnes of Indian rice is potentially more crippling, and imports of tea from India, Iran’s favourite beverage, are facing similar payment hurdles. Iran, meanwhile, is reportedly seeking to close grain purchases using gold and oil as payment.
The Iranian rial has lost half its value against the dollar in recent weeks. The official inflation rate stands at 20 per cent but it is thought to be much higher, and the same applies to the official unemployment rate of 14.6 per cent.
With the rial plummeting, the price of rice, a main dietary staple of Iran’s 74 million people, has more than doubled in a year to $5 a kilo. The cost of meat has almost tripled to about $30 a kilo, beyond the budget of many middle-class families.