Living with sanctions

An EU embargo on Iranian crude takes effect on July 1 - a further tightening of the financial screws the international community has placed on Tehran.

It has already started to take its toll. According to analysts, Iran's oil exports fell by some 25 percent in April alone and losses in revenue since January 2012 amount to an estimated $10 billion (7.9 billion euros). The leadership in Tehran is taking pains to demonstrate compusure.

At a recent meeting of the Organization of Petroleum Exporting Countries (OPEC), Iranian Oil Minister Rostam Qasemi called the EU's move "unfortunate", a step that would "affect the stability of the oil markets and the global economy." But Mahmoud Bahmani, the head of Iran's Central Bank, spoke of an "absolute economic war", pointing out the country's situation is much more difficult under the constraint of international sanctions than an actual war.

Bartering

A drop in oil revenues isn't the only problem. Being cut off from SWIFT, a system that facilitates international bank transfers, has also affected Iranian trade. But as the saying goes, necessity is the mother of invention: China and India partially pay for Iranian oil with their national currencies, yuan and rupees respectively. In turn, Iran uses the yuan to purchase goods from China. It's a form of barter that has strange consequences. Iranian customs authorities recently published a list of products imported from China, including prayer beads, prayer rugs, whips and gravestones - articles imported at low prices that are also produced in Iran and thus endanger local manufacturers.

It is not just the religious paraphernalia sector that suffers from trade restrictions, industrial production is also affected. "We need raw materials from abroad; from Germany, actually, and currently that is a problem," the manager of a Tehran foundry told DW. "If we're working at 50-percent capacity - at best - we're forced to fire employees," he added. According to official sources, at least 100,000 factory workers lost their jobs between March 2011 and March 2012.

Restrictions on imports and processing payments have forced many businesses to reduce or abandon production. The only way to keep going, they say, is to buy vastly overpriced supplies via third parties.

Even the music industry has been hit by the sanctions. Hermes Records, an Iranian label that is active worldwide and also releases albums by European musicians, says there's an immediate suspicion of money laundering when a business is forced to name a private account to conduct business at all. "That's harmful to the company's reputation," the manager told DW.

Inflation reigns

Meanwhile, Iranians suffer from high inflation. According to official figures, the inflation rate hovers at about 20 percent, but observers say it is much higher. The official currency, the rial, has been devalued by nearly 50 percent since the beginning of the year. According to statistics issued by the central bank this month, prices for some groceries have risen within a year by between 39 and 78 percent; fruit has become a luxury.

The tightened sanctions are not the cause for the deep-seated crisis in the Iranian economy. But they make people's lives harder. It remains to be seen whether it's enough to impress the political leadership.

Author: Shahram Ahadi / db
Editor: Nicole Goebel