Ali Gharib writes: Now is the autumn of Iranian discontent. And who can blame them? Over the past week, the value of Iran’s Rial fell 40 percent against the dollar.

The economic woes drove Iranians into the streets of Tehran yesterday, where they reportedly clashed with riot police during a few modestly-sized and — best as I can tell — relatively isolated protests. The largest, and perhaps most significant, were in Iran’s famed bazaar, which shut down as protesters moved through, and outside the Bank of Iran. At the former locale, the shopkeepers’ closures ostensibly protected their stalls from demonstrators, but that doesn’t seem to be how the story actually played out.

The latest protests seem unlikely to be the spark that brings down the Islamic Republic. Instead, they focused on the government’s mismanagement of the economy — a realm, unlike foreign affairs and the nuclear program, where President Mahmoud Ahmadinejad actually has power to enact policies. But the showing could be a harbinger of what’s to come as Iranians go to the polls next year.

Many analysts and media accounts speculated that the bazaaris had a hand in organizing the protests, a notion confirmed by a source in Tehran who normally keeps abreast of opposition goings-on by social media. The source found out about the protests late, remarking: “This time it’s the bazaar, no need for Facebook or e-mail.” [Continue reading…]

Tony Karon writes: For Iran’s citizens, who have seen the prices of many basic foodstuffs more than double since last year, and who are struggling to access even life-saving medicines, the effect of the sanctions is more than mere “collateral damage.” The sanctions are, as U.S. officials like to point out, designed to put Iran’s economy in a “chokehold”, in the hope that one of the effects will be that the resultant economic pain rouses them to defy and challenge the regime, forcing it to rethink its nuclear program in order to win Iran’s release from the stranglehold of sanctions that are fomenting rebellion. While official statements might insist that innocent Iranians are not the target of that “chokehold,” an unnamed senior U.S. intelligence officer showed no such squeamishness when explaining the sanctions strategy to the Washington Post earlier this year. “In addition to the direct pressure sanctions exert on the regime’s ability to finance its priorities,” the official said, “another option here is that they will create hate and discontent at the street level so that the Iranian leaders realize that they need to change their ways.”

Advocates of that line of thinking may have seen Wednesday’s protests as vindication — but it may not be that simple. While President Mahmoud Ahmadinejad eagerly concurs that it is Western sanctions that are behind the economic chaos in Iran, his political opponents — loyalists of Iran’s Supreme Leader, Ayatullah Ali Khamenei — actually blame Ahmadinejad’s mismanagement of the economy for the precipitous currency collapse. That sentiment appears to have been shared by many on the streets in the series of small demonstrations around Tehran on Wednesday: Most of the protesters’ rage appears to have been directed at Ahmadinejad, who was accused of failing to take measures necessary to protect Iranian living standards. After all, the Iranian economy isn’t exactly on the verge of collapse, and the regime is believed to have a foreign currency reserve of some $100 billion. Indeed, the fact that it is still sending billions in aid to prop up the Syrian regime of President Bashar al-Assad — another sore point with protesters on Wednesday — underscores the fact that is not exactly bankrupt, yet.

So, even if sanctions are fueling the economic pain that is prompting Iranians to return to streets in protest, the expectation that such demonstrations will prompt Iran’s leaders to surrender a nuclear program that has been among their long-term priorities requires a considerable leap of faith. ”It would be optimistic at best to hope that the deteriorating economic circumstances will spur Iran’s leaders to shift their nuclear stance,” said Patrick Clawson of the Washington Institute for Near East Policy last month. “They do not seem to know or care much about the country’s economic situation — their own income has been hurt only a little, if at all, and they appear unconcerned about the prospect of popular unrest given their past success at repressing opposition. For now, they are likely to stay the course on both domestic economic policy and the nuclear issue.” [Continue reading…]

Peter Beaumont writes: The continuing currency crisis in Iran, which has seen the rial go into freefall, has been cited, with some celebration in certain quarters, as proving that US-led sanctions are “working” against Tehran. Increasingly shut out from international banking and struggling to sell its oil, Iran has been forced to sell more cheaply while buying raw materials at a higher cash price. This, in turn, has led to currency speculation that the government has done nothing to halt, and to sharp devaluation.

But what does “sanctions are working” actually mean? Some hawks have read it as the possible beginning of the end for Iran’s nuclear programme and the collapse of the clerical regime. For others, including those anxious to avoid conflict over Iran, it has been seized on as a suggestion that the crisis might be resolved through negotiation and non-military pressure.

The reality is that the political, economic and social impact of sanctions can produce very different results from those allegedly desired, more often than not hurting ordinary people. And there is a third scenario, in which sanctions might actually make the confrontation with Iran more dangerous still.

The increasing popularity of economic sanctions, as Britain’s former ambassador to the UN, Sir Jeremy Greenstock, has observed, is due to the perception that no other tool exists “between words and military action if you want to bring pressure upon a government”.

When three academics – Gary Clyde Hufbauer, Jeffrey Scott and Kimberly Ann Elliott – examined the history of sanctions between 1914 and 1990, in Economic Sanctions Reconsidered they determined that out of 115 cases that they looked at, only a third had seen any measure of success. The US political scientist Robert Pape has challenged even this measure, claiming that of the 40, only five can be determined genuine successes for sanctions. [Continue reading…]

As Iran’s currency crisis escalates, Ali Chenar has spoken to people in and around the bazaar in Tehran.

Many merchants in the bazaar had already shut down their stores since Monday, claiming that they do not know what prices they should be charging their customers. The sudden fall in the rial’s value has brought it to a level unthinkable only a week ago.

“The problem is that the exchange rate always sends a signal about market stability and government reliability,” said Muhammad, an economic activist. He adds, “With the rial in freefall, many believe that the situation is simply out of control.”

He explains the dilemma faced by the merchants. “Many in the bazaar save in dollars and need hard currency to import the products they sell. If the products are produced domestically then they need hard currency to import the material needed in the production process. The machinery and other services cost too, and usually we have to pay companies who use the [open-market] dollar-rial exchange rate to estimate their costs.”

Babak, a graduate student, is worried about his upcoming sabbatical trip abroad. “With the hard currency rising so fast, I am not sure if I can afford it anymore.” He also cannot wait much longer to make a decision — the deadline to apply for a visa is fast approaching.

Businesses face similar decisions about whether to renew their orders and sell their inventories. Mahmoud, an apprentice in the bazaar, wants people to know that “we would like to work, but how can you work when you do not know what will happen tomorrow.”

Ahmad Reza, a dealer in Persian rugs, is mad at the government. “They ruined everything. They wasted all the revenues generated by oil and now they are not supplying the market with hard currency…. Every day, something new happens: one day it is sanctions; the next, new banking regulations. The authorities always need to be greased with some extra cash.” The challenge of keeping his business going is making him infuriated. “Some days, I just want to go to the Sahara and just yell. I do not know why I come to this store anymore.”

Hamid, a social science teacher who lives near the bazaar just south of central Tehran, believes that the “bazaaris have always been unhappy and frustrated. Almost every government has found ways to interfere with them and to tell them what to do.” What is different now “is that Ahmadinejad has become more vulnerable.” Hamid observes that criticizing his administration is no longer equivalent to opposing the regime as a whole. On his way home, he saw people had set fire to garbage and other flammables. “Bazaaris usually hate governments, but I think they hate the current administration the most.”

Alireza Nader writes: Iran’s response to Israeli or U.S. air strikes is likely to feature unconventional tactics that would not necessarily lead to battlefield successes, such as defeat of the U.S. Fifth Fleet. But its strategy could theoretically achieve an overall political and psychological victory.

The Islamic Republic’s reaction would incorporate lessons learned from the eight-year Iran-Iraq War in the 1980s and the 34-day war between Israel and Hezbollah in 2006 — two of the defining conflicts of the late 20th century. The Gulf War was the longest and deadliest modern Middle East conflict. And Hezbollah, with aid and arms from Iran, fought the longest modern war with Israel. Iran would almost certainly also factor in past U.S. military operations in the region.

Despite their boasting, Iranian leaders are well aware that they cannot defeat the U.S. military in a face-to-face conflict. But as Hezbollah’s 2006 war with Israel demonstrated, battlefield losses (or draws) can be turned into psychological victories. The Islamic Republic has devoted substantial information and media resources to fight a psychological war (jang e ravani). Hezbollah was able to withstand the Israeli military and shoot missiles into Israeli cities throughout the conflict — and thus convince many Arabs that it had won.

Iran could again try to claim a victory simply by withstanding an assault and retaining much of its nuclear know-how and technology, even if it sustained significant losses. But Israel and the United States have also learned from the 2006 Hezbollah war. Regardless, any war with Iran could be long, costly and ultimately unsuccessful in eliminating Iran’s nuclear drive. [Continue reading…]

Tony Karon enumerates the looming issues: 1. Despite Netanyahu’s Retreat, Avoiding War with Iran Will Get Harder

For all of his summer saber rattling and efforts to pressure the Obama Administration into stating imminent red lines for war with Iran, Israel’s Prime Minister Benjamin Netanyahu effectively retreated at the U.N. General Assembly on Thursday. Despite the familiar apocalyptic rhetoric, Netanyahu took care to signal Israel’s cooperation with the Obama Administration on the issue. More important, he drew his own red line — somewhat confusingly, given the much lampooned graphic on which he relied — at Iran possessing a sufficient stockpile of 20% enriched uranium to reprocess into one bomb’s worth of highly enriched uranium. At present rates of enrichment, he claimed, that point would be reached next spring or summer. Leave aside the considerable body of expert opinion that holds that the U.S. would have a lot more time than Netanyahu suggests to respond to an overt move by Iran to build nuclear weapons, the Israeli leader nonetheless once again wound forward his doomsday alarm clock, setting it to ring sometime early next year.

That seemed to take off the table the threat of an Israeli strike over U.S. objections before November’s election. But the occupant of the Oval Office early next year may face a more acute crisis: sanctions have not so far changed Iran’s nuclear calculations, and such concessions as Iran has offered by way of capping its nuclear work are not ones that the Obama Administration has been ready to accept as a basis for easing sanctions. Iran doesn’t trust the U.S. any more than the U.S. trusts Iran, and Tehran believes the real purpose of the sanctions is to create economic chaos in the hope of provoking an uprising against the regime. Such suspicions will have been heightened by Friday’s U.S. decision to remove the Mujahedin-e-Khalq, an exile armed group that fought for Saddam Hussein against Iran in the 1980s and which is widely reviled even among leaders of the opposition Green Movement, from the U.S. list of terrorist organizations.

And Netanyahu has given notice that he’ll be loudly banging the drum for action by springtime unless, as remains unlikely, Iran effectively throws in the towel on the nuclear standoff before then. Whether it’s President Obama or a President Romney, the White House early next year may face a stark choice between continuing a policy that escalates toward confrontation or trying to avoid one by taking the political risk of initiating a new diplomatic effort with Iran that goes beyond the current nuclear talks. [Continue reading…]