Teaching Comparative Government and Politics

Tuesday, October 19, 2010

Sovereignty and sanctions

If Iran is to maintain its sovereignty, it has to overcome the problems of outside forces trying to get the government to change its policies.

Sanctions begin to bite

SANCTIONS imposed by the United States have long made it a bother to use credit cards in Iran…

That neat trick has now grown trickier. Complying with recently tightened international sanctions, financial regulators in the United Arab Emirates (UAE), which includes Dubai, have frozen dozens of Iranian bank accounts and clamped strict controls on currency transfers to the Islamic Republic…

[O]rdinary Iranians are increasingly worried and indeed hurt by sanctions. These now take many forms, from an outright ban on the import of Persian carpets to America that took effect last month to the targeting of individual officials for alleged human-rights abuses, the stopping of Iranian operations by big multinational firms and a growing reluctance by shipping and insurance companies to service Iran-bound cargoes.

Even taken together, the sanctions are unlikely to bring the world’s fifth-biggest crude-oil exporter to its knees. The loopholes remain big enough, and the attraction of Iran’s 75m-strong market strong enough, to keep goods and money flowing…

Yet the sanctions… are inexorably adding to the cost and hassle of doing business…

The sanctions have also stemmed the flow of much-needed foreign investment and skills, particularly to the energy sector that accounts for 80% of Iran’s export earnings…

None of this has dented the exuberance of Mahmoud Ahmadinejad, Iran’s president, who recently repeated his prediction that capitalism is doomed. Instead he has trumpeted minor achievements...

Perhaps the president is right to believe that foreign challenges are not Iran’s biggest worry. After crushing its reformist opponents, his conservative faction has broken out in increasingly rancorous internal wrangling. The biggest looming issue is Mr Ahmadinejad’s plan to slash consumer subsidies that cost his government $70 billion-100 billion a year, a quarter of GDP. Already lumbered with feeble economic growth and high unemployment, Iranians now face the prospect of sharp rises in prices of food, fuel and transport. The coming winter looks set to be harsh.