According to the New York Times’ Thomas Erdbrink and Clifford Krauss, the oil embargo imposed by the U.S. and EU — which only took full effect last week — is already crippling the Iranian economy:
“After years of defiance and insistence that sanctions were barely being felt at home, Iranians are acknowledging the latest round with growing alarm. President Mahmoud Ahmadinejad said Tuesday that they were “the strongest yet,” they write.
“International oil experts say Iranian exports have already been cut by at least a quarter since the beginning of the year, costing Iran roughly $10 billion so far in forgone revenues. Many experts say the pain is only beginning, since oil prices have been falling and Iran’s sales should drop even more with the European embargo that went into effect on Sunday.
Oil experts estimate that Iran’s oil export revenues are down about 35 per cent compared with the beginning of the year, they report. And Iran’s foreign minister has even compared the pressures Iranian society faces to what the country experienced during its brutal war against Iraq in the ’80s.
The sanctions — which include limits on access to foreign reserves — have also destroyed the value of the Iranian rial. Inflation is up 21 per cent, and the price of staples like bread has increased 40 per cent, according to Yassamin Issapour, a researcher at the American Foreign Policy council, writing in the Wall Street Journal.
What’s more, the West is unlikely to experience an oil price spike rebound effect, given the unusual crude oversupply OPEC is experiencing.
Erdbrink has also reported that the sanctions have magnified earlier economic mismanagement by Iran’s own government.
“Economists also agree that much of the damage to the economy has been self-inflicted, saying that the Ahmadinejad government went on an import spending spree after oil revenues started hitting record levels from 2005 on.”
Because they’ve only just taken effect, it’s still too early to say what impact the sanctions will have on Iran’s nuclear aspirations.
But unlike previous sanction regimes, it seems likely there will be tangible gains.