Western sanctions on Iran are compounding the country's economic woes, sending the national currency tailspinning, making dollars hard to come by and forcing ordinary citizens to rush to stockpile staples, the Guardian writes.
Iranian officials have in the past been quick to play down the impact of the raft of sanctions imposed on Tehran because of its nuclear programme, arguing they have in fact made the regime "self-sufficient" in many areas.
But the latest US and EU embargo on the imports of oil from Iran introduced in the past five weeks has left the leadership little choice but to admit the severity of the problem. In a recent speech at the Iranian parliament, president Mahmoud Ahmadinejad described the embargo "the heaviest economic onslaught on a nation in history".
Iran relies on crude sales for 80% of its exports revenue and also providing most of the foreign currency in the country. The full impact of the embargo is likely to be felt in summer when the new sanctions kick in properly, but evidence of knock-on effects through the Iranian economy are multiplying. The initial impact was felt on the local currency market where a shortage of foreign exchange caused a looming crisis. As a result, the value of Iran's rial against the dollar has fallen to a record low, even experiencing devaluation of more than 50%.
Exchange bureaux in Iran are reported to have closed down temporarily or even refused to buy or sell foreign currency on official rates in response to the crisis and ordinary people waiting to travel abroad have serious difficulties in finding foreign currencies prior to their departure. Many could only obtain dollars from government exchange bureaux located in the waiting lounge of the airport.
The government of president Mahmoud Ahmadinejad has struggled to control the depreciation of rial by issuing an order for an imposed exchange rate to be used both in banks and open market. But despite help from the police to implement the order, it has proven impractical. Faced with public panic, a hesitating Ahmadinejad last week allowed banks to sharply raise interest rates on deposits in a desperate attempt to curb the crisis. Despite this, currency fluctuations continue. It has not helped that the government that sanctions have come amid an internal power struggle and fears of popular unrest before the parliamentary elections in March.
Iran's economic weaknesses - perpetually high unemployment and government mismanagement - have been masked in recent years by the high price of oil but its very dependency on oil means an embargo, if fully implemented, has the potential to bring the country's economy to its knees and leave long-term crippling effects on the lives of the masses.
