The stranglehold on Iran′s economy | World| Breakings news and perspectives from around the globe | DW | 27.05.2013
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World

The stranglehold on Iran's economy

Unemployment is high, inflation is soaring, consumption is collapsing - Iran's economy is on its knees. Western sanctions are only partly to blame, for many of the country's problems are home-made.

Titel: Basar Bildbeschreibung: Preissteigerung und Inflation macht sich in Basar bemerkbar. Stichwörter: Iran, Land und Leute, KW8 /12, Wirtschaft, Basar Quelle: MEHR Lizenz: Frei

Iran Inflation Markt Preise

Unemployment, poverty, and inflation have fundamentally changed the lives of many Iranians in the past few years. The country is struggling with a drastic inflation rate, and is hurtling ever deeper into crisis. Prices for basic foods and consumer goods are rising almost every day.

"Me and my family can barely maintain the standard of living we're used to," says Mohammad, a young IT specialist from Tehran. "I'm not talking about luxury lives, just about completely elementary things, like for example a simple bottle of milk for breakfast. A lot of families have given up hope. They do without lots of things and then buy less food." Mohammed says he used to go a café with his friends, but now he'd rather save the money.

At the end of March, the Iranian statistics bureau announced that inflation had climbed to over 30 percent - a new record in Iranian history. According to official figures, the food prices have climbed by over 60 percent within a year. But economic experts believe the real figures are much higher.

Nuts in Tehran market Rechteeinräumung: lizenzfrei, borna

Almost all the dried fruit on the Iranian market is imported, says one shopkeeper

Since the EU and US oil embargo came into force in mid-2012, the Iranian national currency, the rial, has lost much of its value. At the moment, one US dollar costs 35,000 rials - nine months ago the rate was at 20,000 rials - and traders in Tehran report drastically reduced buying power among the population.

The currency crisis has had a catastrophic influence on business, says the owner of a Tehran sweets store. "At the moment, 80 percent of the dried fruit on the market is being imported from abroad," the man told DW on condition of anonymity. "The native fruit is just too expensive. I don't think our business will make a profit this year."

Medication shortage

Although medication is theoretically exempt from western sanctions, many international pharmaceutical companies are avoiding business with the Islamic Republic. That is because of international sanctions against Iran's central bank, making money transfers more difficult. For several months, there has been an acute shortage of medication for illnesses including cancer, multiple sclerosis, or diabetes.

That has opened the door for imitation medication from countries like China, Pakistan, and India to take over the black market. But these are unaffordable for many people, one female hospital worker from Tehran told DW, also on condition of anonymity.

Pharmacy in Iran Quelle: ISNA Lizenz: Frei

The shortage of drugs has become acute, even though they are exempt from sanctions

"There are some cases where patients have suffered epileptic fits because they took an imitation tranquilizer," the young medic said. "Or cases where people have died because it turns out that the penicillin they took was fake."

At the end of December 2012, Iranian Health Minister Marzieh Vahid Dastjerdi was sacked after she criticized the government for failing to make money available for the import of medication.

Unpaid salaries

Because of the economic crisis, several factories are unable to pay their workers' wages, often resulting in strikes. The Iranian car industry is particularly affected by sanctions, says Jafar Azimzadeh, board chairman of the Free Union of Iranian Workers. "The money that a factory worker in Iran earns is just about enough to rent a 50-square-meter apartment in the workers' district," he told DW.

Azimzadeh dismisses the state allowance for living costs, which the government has granted for some time, as pure propaganda. "We're a four-person family, and we get 1.8 million rials (around $52)," he said. "That's no more than a young person's pocket money. No father of a family can live on that."

Crisis before sanctions

Workers protesting in Tehran Quelle: http://www.ido.ir/n.aspx?n=13900208116 Angeliefert von Hossein Kermani am 2.2.2013 Rechte: frei / ido.ir

Unpaid wages have led to several strikes in Iran's factories

There's no doubt that the tougher sanctions have put more pressure on the Iranian economy, but experts underline that there was already a deep economic crisis before the sanctions.

"The inflation is due to the false economic policy of Ahmadinejad's government," says Shahin Fatemi, Iran expert and professor of economics at the University of Paris. As far as he is concerned, neither the current government under Ahmadinejad nor any future government is capable of freeing the country from the crisis.

In 2011, the government cancelled the subsidies both for energy and food, measures which sparked the current spiralling inflation. At the same time, billions were invested in increasing the living cost allowance to compensate the poorest.

For a long time, the central bank used the country's oil income to keep the rial's exchange rate artificially low, but the increased sanctions, especially the oil embargo, was a final blow to the Iran's economic situation.

While members of the government and millionaires are barely affected by massive sanctions and hyper-inflation, the bottom layers of society, getting poorer all the time, are left with nothing - and this in a country that owns the third-biggest oil reserves in the world.

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