Tehran defiant in face of latest US sanctions, despite potentially devastating impact on Iranians

Tehran defiant in face of latest US sanctions, despite potentially devastating impact on Iranians
Ordinary Iranians are already suffering, but the country has experience of surviving under US sanctions regimes, reports Saeed Jalili.
5 min read
05 November, 2018
Ordinary Iranians are set to be hit hard, but Iran's leaders remain confident [NurPhoto]

Less than a hundred metres from the busy Haft-e Tir Square in central Tehran, an 83-year-old street vendor lays out his goods on the pavement.

It is a spot known to local pedestrians by the bars of soap, brushes, scissors and razor blades the elderly man sells each and every day, from 7am to 10pm.

Had you walked past his spot in May 2017, you would have noticed paper signs hanging from his goods: "We will not turn back." It was the campaign slogan of the incumbent President Hassan Rouhani, who was seeking re-election, banking on his landmark foreign policy achievement - the 2015 nuclear deal.

The deal, which gave Iran relief from crippling sanctions, instilled hope among Iranian society for a year or two. But then things changed. Iran, the EU, the UK, Russia and China have all been struggling to keep the deal alive ever since US President Donald Trump took office.

In May 2018, Trump abandoned the deal unilaterally and in August reactivated some of the sanctions which were lifted as part of the JCPOA.

Tougher sanctions take effect on November 5 to put pressure on ordinary Iranians - who have already been feeling the pinch during the past year.

"I am hardly able to make ends meet," the aging street vendor told The New Arab. "I could never imagine I'd have to work so hard at this age. I wouldn't work if I did not have to."

Living costs have skyrocketed in recent months as a result of a 70 percent nosedive in the value of the Iranian rial. Its sharp decline started last winter, in what many attributed to concerns over an unstable economy amid fear of US embargoes.

Strongest to date

The latest sanctions are expected to spark further economic instability. This is Washington's strategy to convince Iran to negotiate its missile programme as well as its military presence across the Middle East. Iran says it is not interested in talks.

"The maximum pressure we have imposed has caused the rial to drop dramatically," US Secretary of State Mike Pompeo has said.

"Rouhani's cabinet is in disarray and the Iranian people are raising their voices even louder against a corrupt and hypocritical regime," he said, referring to sporadic protests which started in early 2018.

The US has said the sanctions on Iran will be strongest to date. They will target "the core areas of Iran's economy". Restrictions will pertain to shipping, banking and energy sectors and will directly target 700 individuals, entities, vessels and aircraft.

Oil, banking

Oil is the lifeblood of Iran's economy. The US has said it intends to bring down the export of Iranian oil to zero.

While Washington has pushed the international community to phase out oil imports from Iran, it says it will grant waivers to eight countries to allow them to continue importing Iranian oil. The US did not name the eight countries that exempt from penalties.

Moreover, banking restrictions are designed to target exports both from government agencies as well as private trading companies.

US Treasury Secretary Steven Mnuchin has warned SWIFT (Society for the Worldwide Interbank Financial Telecommunication) that it could be penalised if it does not cut off financial services to entities and individuals doing business with Iran.

"SWIFT is no different than any other entity," Mnuchin has said. "We have advised SWIFT that it must disconnect any Iranian financial institutions that we designate as soon as technologically feasible to avoid sanctions exposure."

European assurances

By pressuring SWIFT, Washington wants to block Iran's financial channels like it did in 2012, before the nuclear deal. The EU abided by the US demand back then. It forced SWIFT to blacklist dozens of Iranian financial institutions, including the Central Bank of Iran. SWIFT is subject to EU laws.

The situation is a little different this time round, as Iran has pinned its hopes on Europe to keep financial channels open to keep the JCPOA alive.

In a sign of growing divide between Washington and its allies, the EU announced in September that the bloc was creating a new payment mechanism to allow countries to transact with Iran while avoiding US sanctions.

The so-called "special purpose vehicle" (SPV), would aim to "assist and reassure economic operators pursuing legitimate business with Iran", according to a joint statement released by JCPOA signatories France, Britain, Germany, Russia and China.

On Sunday, Iran's Foreign Minister Mohammad Javad Zarif spoke on the telephone with EU foreign policy chief Federica Mogherini, as well as counterparts from Germany, Sweden and Denmark about European measures to counter the US sanctions, seeking assurances.

Old playbook

Meanwhile, Iran has started unconventional methods to keep oil flowing ahead of a new US embargo, drawing on its experience during the first round of energy sanctions before the nuclear deal.

Vessels have already switched off transponders. This might allow Tehran to continue certain levels of exports to its top customers, AFP reported, citing TankerTrackers.com, a new watchdog that monitors global oil shipments.

Another measure Iran has previously used during the previous round of sanctions between 2010 and 2015 was to use huge tankers off the Gulf coast as storage to free up port capacity and allow for quick deliveries.

There are currently six vessels, with a total capacity of 11 million barrels, parked offshore as floating storage containers, according to TankerTrackers.

"It seems Iran's government is taking more risk due to its previous experiences with the US sanctions and overcoming them," Narges Darvish, professor at Tehran's Alzahra University, told The New Arab.

"However, the US is also quite experienced when it comes to sanctions," she said, adding the US might have learned from the flaws in the sanctions designed before 2015.

The impact of the sanctions, however, will be felt most harshly by lower-class Iranians who have already been living in dire straits.

"I'm already fed up," the 83-year-old street vendor said. "If this economic situation persists, I don't know what I should do to survive."

Saeed Jalili is a Tehran-based journalist focused on Iran's economy, politics and culture.

Follow him on Twitter: @sjalilis