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Will Western Sanctions Sway The Iranian Elections?

Iranian flags in Tehran
Iranian flags in Tehran
Christophe Ayad

TEHERAN - In the middle of the election campaign, Washington has found a way to remind Iranians that the next president they will elect will have to pull the country out of an unprecedented economic crisis.

The crisis, of course, is largely the result of the tough sanctions imposed by Western countries in response to Iran’s suspected nuclear program. And last week, U.S. President Barack Obama signed an executive order authorizing a ninth round of sanctions. The new measures target foreign banks and institutions that make transactions in the Iran currency – the rial – or keep accounts in rial outside the country. The Iranian currency has already lost two-thirds of its value since the end of 2011. The sanctions also target the auto industry by banning the sale of goods and services to Iran for car manufacturing.

The goal of these new measures is to freeze rial funds abroad, and prevent the use of the currency in transactions around the world. An exemption system is however planned for countries that have significantly reduced imports of Iranian oil – China, India and Turkey.

In April, Iranian crude exports reached their lowest level with only 700,000 barrels per day. A further drop in the rial could lead to a new surge of inflation, already at 30% and – by its own admission – beyond the control of the Central Bank of Iran.

Sanctions targeting the automotive industry could lead to layoffs in one of the most important sectors in the country after oil and petrochemicals. Car sales by Iran Khodro, the state-owned car manufacturer, were halved this year -- from 1.3 million cars in 2012 to 600,00 this year.

“Because of sanctions, a growing number of companies are neither able to import or export,” explains Michel Malinsky, lecturer on Iran at the French School of Business and Management in Poitiers. “They are not able to pay their suppliers, and sometimes not even their workers. They do not lay off workers because the government forbids them to.”

Month after month, Iranians are suffering and seeing their living standards deteriorate. Meat has reached prohibitive prices – around five euros a kilo – beyond the reach of the middle class. There is a severe shortage of foreign drugs, including cancer treatments, because of the lack of currency or financial mechanisms to import them. Hospital equipment is deteriorating as well.

Even though authorities say that they have managed to diversify their economy to counter Western sanctions – especially in the petrochemical industry, targeted by U.S. sanctions on May 31 – the truth is that the country is not doing so well. “The population is really suffering,” says Malinsky. “The only ‘lifebuoy’ keeping people from protesting in the streets are the welfare benefits paid directly by the state to the poorest.”

How the candidates address the sanctions

In the first televised debate, all the presidential candidates made the economy their number one priority. But instead of talking about the sanctions, which would call into question the implicit choice of a hard line on the nuclear issue, they preferred to sharply criticize the economic management of incumbent President Mahmoud Ahmadinejad.

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In Tehran, during Iran's 2009 presidential election - Photo: mangostar

For those who are less educated and less informed, this vision has a disastrous effect, because it leads them to believe that the country is led by incompetents and thieves – although it is subject to the most draconian economic and financial sanctions since the sanctions against Apartheid in South Africa.

The only candidate to have established a direct link between the consequences of the sanctions and the strategic choices of the Supreme Leader, Ayatollah Ali Khamenei, is former chief nuclear negotiator Hassan Rohani, a moderate conservative who is capitalizing on a pro-reform public that has been long neglected. “Economic slogans are not consistent with our economic performance,” says Rohani. “We chant slogans of resistance, but, in practice, there is no resistance at work.”

Saeed Jalili, the current chief nuclear negotiator and frontrunner in the presidential race, has supported in the past “a resistance economy” to counter sanctions. Jalili is a hardliner with close ties to the Ayatollah. He says the sanctions “present an opportunity” because Iran has, according to him, “other advantages than oil.”

Without going as far as Rohani, presidential hopeful Ali Akbar Velayati, a former diplomat, talked about “building better relations with other countries” to solve the sanctions issue.

Another candidate, Mohsen Rezaei, said during a press conference last week that to uproot inflation, he would seek to defuse Western sanctions by launching new negotiations on the nuclear issue. After the latest round of U.S. sanctions, however, it is doubtful that the Supreme Leader -- the only one who makes these decisions -- will agree with the idea of new negotiations.

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