Sanctions put the squeeze on Iranians

Leila is getting pretty good at playing Angry Birds on her imported iPhone. Sitting behind her desk in an idle travel agency in central Tehran, she often has nothing better to do these days. "As you can see, business isn't so good," she says, gesturing at the drab, empty office. "Last summer, I was constantly on the phone arguing with customers why there were no last-minute tickets available. Now, on a good day -- if we're lucky -- we might barely get to sell to capacity on a flight." Leila is a 26-year-old with a mechanical engineering degree who is overqualified for her job. Like other Iranians interviewed for this story, she declined to give her last name. She is one of a legion of young Tehranis whose struggle to stay in Iran's middle class is becoming increasingly more difficult because of the country's economic straits made much worse by EU and US sanctions. Travel is one of the first luxuries the middle class is sacrificing. "It's the price of the dollar. A lot of people can't afford to travel as frequently," Leila says, explaining that tour prices have doubled since a year ago and the number of travellers has fallen to a third. Iran has been losing ground in its constant battle to keep a lid on inflation after its currency, the rial, lost more than half of its value against the dollar over the past year, a slide accelerated in the first few days of 2012 after the sanctions were announced. Iranians travelling abroad often have no access to internationally accepted credit cards because of sanctions restricting financial transactions. Instead, they have to take dollars in cash -- and are restricted to some 1,000 dollars a year at the official bank rate of 12,260 rials to the dollar, instead of the much pricier 20,000 rials found with street money-changers. Many Iranians are divided between blaming the West or their own government's economic policies for their predicament. A 2010 decision by President Mahmoud Ahmadinejad to scrap subsidies for fuel and other basic needs, tempered by cash hand-outs to most of the population, is pointed to by some as a key driver of inflation, officially at 20 percent but put by independent analysts at much higher. Ardeshir, a 60-something former artillery officer in the 1980-1988 Iran-Iraq war, says "the world powers are bullying us" over Iran's nuclear programme, which is generally supported by the population. But the veteran, who now makes ends meet by driving a scuffed Kia for a private taxi service, also has some criticism for the provocation Ahmadinejad frequently lobs at the West and Israel. "Since Mr Ahmadinejad started that fiasco about the Holocaust -- saying it didn't exist, that it was a myth -- he gave them a convenient excuse," he says as he inches forward in the city's brutally dense traffic. The United States and its Western allies "now say Iran wants to build a bomb and use it to destroy Israel," he says, deliberately moving his knee injured in the war. "It's a dilemma really. I despise bullies, but I don't know if I should be angry with the statesmen pulling the strings or not. "Now, I have to work for 12, sometimes 15, hours a day if I want to continue to pay for my daughter's university fees," he says angrily. --- Cost of basic items rising --- Manijeh, a 43-year-old housewife in an obligatory long coat and Islamic headscarf, spreads three big, hot-out-of-the-oven pieces of bread to cool on a wooden board outside a traditional bakery. "The bread is more expensive, cheese is more expensive, and so is milk," she complains. "It is because of the sanctions," she states decisively. "I have to cut on expenses that now seem, well, luxurious," she says. "We used to have (the imported chocolate and hazelnut spread) Nutella present at breakfast every morning. My six-year-old daughter loves it. But now I buy it only once a month." As the cost of even staples weighs ever more heavily, complaints are rising to the ears of Iran's politicians, where they fuel factional in-fighting. Parliamentary speaker Ali Larijani, a vocal critic of Ahmadinejad, said this month the rising prices were causing "psychological problems" for society. "If a sound plan existed, the situation of our economy would be different, considering the resources in our country," he said. Iran's reliance on its oil exports to fund its economy is taking a blow this week, with US sanctions punishing foreign companies doing business with Iran's central bank unless exemptions are granted, and an EU embargo on Iranian crude. The measures will tighten an already draconian sanctions regime drawn up by the UN Security Council and Western governments that is aimed at persuading Tehran to abandon the most sensitive part of its nuclear programme: uranium enrichment. Tehran, which insists its nuclear programme is exclusively peaceful, insists it will forge ahead with its atomic activities with even more determination, to show that the sanctions are pointless as a tool of leverage. But despite repeated assertions by Iranian officials that sanctions are bound to fail, central bank chief Mahmoud Bahmani admitted Friday the rial devaluation was affected by the punitive measures, the ISNA news agency reported.