Surviving the sanctions

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Iran will always be remembered as a miracle. Not that it has such an impressive economic growth; its oil subsidies, surpassing 80 billion US$ every year, and also the world’s highest, has disproportionately cramped the growth rate to date. Not that because it has an abundance of oil either; its plentiful resources have been the soft target for numerous emerging powers, particularly US, Russia, and China. And not even that its civilization is brought out of magic.

The miracle itself can be attested to the very fact that despite the malaise yielded by economic sanctions, spiraling inflation, and very high unemployment rate, and to exacerbate the whole matters, numerous natural disasters (most notably mass-killing earthquakes, rehearsing the pattern in an epoch spanning over three millennia, and most recently, its heavily autocratic regime, the whole nation can still survive. ‘Survive’ may not be a pretty word, for that can not describe the insurmountable plight bulk of the populace has experienced. Nevertheless, what that as yet sustains the whole country to this moment is, in short, the strong sense of persistence among much of its people.

Now the country seemingly glitters with hopes. With the appointment of Hassan Rouhani as the new leader of Iran, replacing his hard-line predecessor, Mahmoud Ahmadinejad, and with new possibilities of nuclear talks between Iran and the United States, and with Rouhani’s pro-reform agenda many experts have likened him to China’s pro-reform leader, Deng Xiaoping, the people are waiting for the moments when their plights are gradually taken off their souls. And they are still waiting.

In this October issue, Monocle attempts to document Iranian businesses struggling to survive amid waves of sanctions having been imposed on the whole economic system by the United States. Read the full article here.

Excerpt:

Sanctions are only half the trouble. Eight years of maladministration – under the increasingly unpopular government of former president Mahmoud Ahmadinejad – have devastated Iran’s domestic industries and sent inflation soaring. Ahmadinejad came to power in 2005 during the beginning of a steep climb in global oil prices. The price per barrel jumped three-fold under his watch and Iran made more money than during the rest of its century-old crude export history combined.

The populist newly elected president spent this windfall transforming the Iranian economy. “Ahmadinejad flooded the economy with petrodollars. Cheap loans were given out for almost anything… Exotic fruits from places such as Egypt and Latin America were imported for the first time since the Revolution,” says Houman Dolatshahi, managing director of Tehran-based Atieh Bahar Consulting Group. “The domestic sector died, which caused a spike in the unemployment rate and the liquidity also brought inflation,” he explains. Inflation now stands at 44 per cent, year on year. Several experts put the inflation and unemployment figures even higher.

Ahmadinejad changed Iran’s – particularly Tehran’s – consumer market inexorably. Banned or heavily levied products such as iPhones, Western-branded clothes and large, status-symbol cars found their way into the market via importers with access to cheap foreign currency though government connections. But the sharp drop in the rial since the end of 2011 has exposed the folly of Ahmadinejad’s monetary policies during his first six years in office.