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Economic sanctions have tangible consequences for average Iranians

February 10, 2014 at 6:23 PM EST
Economic sanctions have been instrumental in getting Iran to the table for negotiations on its nuclear program. NewsHour Weekend correspondent William Brangham takes a closer look how sanctions have affected daily life in Iran, from air quality to health care to the price of a bar of soap.
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JUDY WOODRUFF: Over the weekend, Iran agreed to provide more information to the International Atomic Energy Agency in its long-stalled investigation of suspicions that Tehran may have worked on nuclear weapons, a claim that the Islamic state denies.

The move comes on the heels of an agreement that Iran reached with world powers months ago to curb aspects of its nuclear program, in exchange for limited sanctions relief.  The Obama administration credits so-called crippling economic sanctions with bringing the country to the negotiating table.

Tonight, we take a closer look at the impact of those sanctions as seen inside Iran.

PBS NewsHour correspondent William Brangham reports.

WILLIAM BRANGHAM: One of the first things you notice when you come to Tehran is the air. A thick blanket of smog hovers over the city most winter days, especially when the winds don’t blow. Many believe this pollution is yet another way Western sanctions are impacting Iran.

Of course, Tehran is a busy and congested place, so it’s had pollution for years. But a few years ago, when sanctions squeezed Iran’s ability to import refined gas, the government began refining its own much dirtier gas. Since then, the country’s air quality has worsened. The World Health Organization says Iran’s air is often dirtier than Shanghai’s. Face masks are a regular sight on the streets.

According to The New York Times — quote — “Iran’s Health Ministry has reported a rise in respiratory and heart diseases, as well as an increase in a variety of cancers that it says are related to pollution.”

In other ways, the impact of international sanctions on Iran isn’t so visible. Tehran’s stores are full. Shoppers are out in force. And many Western goods are available for those who can afford them. This electronics mall in downtown Tehran carries every latest laptop, iPad and mobile device imaginable.

But talk to middle-class Iranians on the streets, and you start to hear a different story.

HAMID AKHLAGI, Small business owner (through interpreter): People are walking around, but few are actually spending.

WILLIAM BRANGHAM: Shopkeeper Hamid Akhlagi, who runs a small store in the Tajrish market in Tehran, says, while things may look fine on the surface, he and his customers are reeling from another one of the main effects sanctions have had on Iran, skyrocketing inflation, now estimated by many economists to be over 30 percent.

Prices for everyday staples of the Iranian diet, things like chicken and rice, have risen dramatically, in part because of sanctions.

Akhlagi says the cost of goods in his store never seem to stop going up. One example: A single bar of Dove soap used to cost about 60 cents. Two years later, it’s almost $2.

HAMID AKHLAGI (through interpreter): The price has doubled, twice, three times, four times. So that’s made it harder for people to buy things.

WILLIAM BRANGHAM: As Western powers have ratcheted up sanctions on Iran to force the nation’s leaders to curtail their nuclear program, economists say the nation’s economy has been badly damaged. The World Bank estimates Iran’s GDP contracted 1.5 percent last year and almost 3 percent in 2012.

The official unemployment rate ranges from 10 to 15 percent. But most analysts believe it’s double that, maybe higher for young Iranians. This economic pain is made even worse because the local currency, the rial, lost about 75 percent of its value in 2012, and has scarcely recovered.

SAEED LAYLAZ, Economist: I think that the main problem has been the mismanagement, but the sanctions make the situation much, much harder.

Saeed Laylaz is a prominent Iranian economist. And while he believes the prior administration, the Ahmadinejad administration, badly mismanaged Iran’s economy, he says Western sanctions only compounded the damage. For example, by constraining Iran’s energy exports, isolating the nation’s banks and freezing billions of dollars in Iran’s oil revenues, Laylaz believes sanctions made many middle-class Iranians poorer.

SAEED LAYLAZ: At the moment, the labor force of Iran at the moment is 35 to 40 percent poorer than three, two years ago, in spite of the fact that we have a hundred billion U.S. dollar petro — petrodollars, our income, hard currency income.

WILLIAM BRANGHAM: But people are 35 to 40 percent poorer than they were?

SAEED LAYLAZ: Poor, yes, the labor force.

WILLIAM BRANGHAM: Even though the country has all this money?

SAEED LAYLAZ: Yes.

MARK DUBOWITZ, Foundation for the Defense of Democracies: I think that sanctions always disproportionately impact the most disadvantaged people in a society.

WILLIAM BRANGHAM: Mark Dubowitz heads the Foundation for the Defense of Democracies in Washington, D.C. He believes that economic pain has served a purpose. He points out that Iran’s new president, Hassan Rouhani, was elected in large part to fix the economy and to reduce sanctions.

And while Iranian leaders deny it, Dubowitz argues it was the pain from sanctions that brought Iran to the negotiating table in Geneva over its nuclear program and Dubowitz argues sanctions should be increased.

MARK DUBOWITZ: The goal of these sanctions in Iran is to put Iran’s supreme leader at a fundamental choice between the survival of his regime and a nuclear weapon. And at the very least, those sanctions have now gotten the Iranians to the table. And I think most people agree that but for those tough sanctions, Iran’s leader wouldn’t be negotiating with the United States and our allies right now.

WILLIAM BRANGHAM: But as we saw on our recent visit, many Iranians believe sanctions have impacted them in ways beyond just their wallets.

At the Dr. Sapir Hospital in South Tehran, a Jewish charity hospital that cares for mostly poorer Iranians, we met Dr. Ciamak Moresadegh. He runs the hospital and also represents Iran’s Jewish community in the Iranian Parliament. Though his hospital got a donation of several hundred thousand dollars from the Rouhani government a few weeks after our visit, Moresadegh told us because of inflation and Iran’s sagging economy, which he blamed in part on sanctions, his hospital was deep in debt.

DR. CIAMAK MORESADEGH, Dr. Sapir Hospital: Since last year, our loss was something about $1 million per year.

WILLIAM BRANGHAM: One million U.S. dollars?

DR. CIAMAK MORESADEGH: Yes.

This year, we are more than two million U.S. dollar loss, because we want to protect the patients who cannot pay.

WILLIAM BRANGHAM: Dr. Moresadegh says those patients are the real victims. He says sanctions have hurt his ability to get crucial medicines for them. He says drugs for geriatric patients, those with multiple sclerosis and those with certain cancers, including childhood leukemia, are extremely hard to get.

Even though the U.S. Treasury Department, which oversees sanctions in the U.S., specifically allows for the sale of humanitarian goods like food and medicine, Moresadegh says that repeated warnings and crackdowns about violating sanctions like the ones announced just last week have scared many companies away from doing any business with Iran.

DR. CIAMAK MORESADEGH: They say that something doesn’t affect food and drugs, but many banks and most of the banks in the world are scared from the USA. They say that if we transact with Iran, even for drug and food, they would punish us and the USA would punish us. So, it’s better for us to be safe, since have no transaction with Iran. So we cannot find a way to have our drugs.

WILLIAM BRANGHAM: A senior Treasury Department official told us the U.S. doesn’t target any companies doing legal business with Iran. Furthermore, the department argues that sanctions are not responsible for these drug shortages that are being reported in Iran. They point to data indicating that exports of pharmaceuticals to Iran are rising, and not declining. They argue that, if there are any shortages in Iran, it’s more likely caused by something within Iran itself.

Back in Iran, the economy has shown small signs of recovery. Inflation dropped a few points in recent months, and the nation’s stock exchange has come to life.

Despite that, the Rouhani government last week was compelled to hand out millions of free food packages to help counteract still sky-high prices.

Whether the economy continues to improve and what affect it has on Iran’s negotiations with world powers remains to be seen.

JUDY WOODRUFF: Representatives from the United States and other world powers are expected to meet with an Iranian delegation in Vienna next week to begin talks aimed at reaching a final agreement over the country’s nuclear program.