Iran’s Economy on “Verge of Collapse,” Facing Domestic Unrest as Sanctions Bite

Sari Weintraub — October 3, 2012 – 3:12 pm | Foreign Policy | Iran Comments (0) Add a comment

Less than a week after the Israeli Foreign Ministry’s report on the impact of sanctions, the economic situation in Iran has tanked even further, according to many reports; Iran’s economy is on the “verge of collapse” and the state is now faced with domestic unrest.

On Sunday, Israeli finance minister Yuval Steinitz told Israel Radio that the Iranian economy is close to collapse, primarily as a result of sanctions. In fact, the value of Iran’s currency, the rial, has dropped as much as 40% against the dollar in the last week,according to Reuters. The decline of the rial, said economists in the Washington Post, is the clearest indication that years of sanctions are taking a significant toll and have “deeply wounded” the Iranian economy.

Further, for the first time, Iranian President Mahmoud Ahmadinejad conceded this week that the difficult economic situation his country faces is due to the U.S.-led sanctions, saying that “external elements” have worked to “pressure the people of Iran,” pointing to restrictions on both the oil and banking industries.

The struggling economy has sparked civil unrest, with Iranians taking to the streets in protest. The main bazaar in the capital city of Tehran was closed today, “reportedly in support of demonstrations, as protesters gathered to rally against government policies” in the streets of Iran, according to the Times of Israel. One gathering, outside the central bank in Tehran, was broken up by riot police as protesters were tear-gassed.

The fallout from the plummeting economy shows that U.S. sanctions are having their intended effect, according to White House spokesman Jay Carney, who said Tuesday,

The Iranian people are aware of who is responsible for the circumstances that have befallen the Iranian economy as a result of the regime’s intransigence and refusal to abide by its international obligations.

David Cohen, the U.S. Treasury Undersecretary for Terrorism and Financial Intelligence, added today,

It is undeniable that the value of the rial is under pressure and will remain under pressure as long as the sanctions remain in place… And just to be clear about this, the sanctions will remain in place and will intensify so long as Iran refuses to engage meaningfully about its nuclear programme.

The past week shows that sanctions against Iran have been biting hard, and there is more to come: the Obama administration authorized another round of restrictions last week.

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