Food Prices Soar In Iran Amid Sanctions, Economic Crisis

Voices outside the government have emerged as several reports in the Iranian media say as the country faces its worst economic crisis ever, a large part of the Iranian population cannot make ends meet. Inflation is at least 50 percent and food prices have claimed even faster.

Former President Mahmoud Ahmadinejad said in an interview with Al-An TV in the United Arab Emirates during his visit to that country last week, "both Iran and the United States have sustained losses during the past 40 years" because of the impasse in their relations, adding that "it is time now for Tehran and Washington to start a dialogue in this direction based on a fair framework."

Speaking also about the impasse in talks to revive the 2015 nuclear agreement, Ahmadinejad said that "the JCPOA was initially intended to solve existing problems between the two countries, but after several years not only it failed to achieve that, but it has led to more complication." Ahmadinejad acknowledged that "This means the agreement was not successful because it was not fair."

"Six countries oppose Iran's nuclear activities and Iran has been holding talks with all of those six countries to reach a settlement. This means Iran will always be the loser because it has one vote against six votes by those countries," Ahmadinejad explained.

"So, what are Iran and those countries going to return to? I do not think any one of those seven parties would want to return to that agreement. The US side might want to return to the JCPOA, but what about the Iranian side," he asked.

However, Ahmadinejad concluded that "the nuclear issue is only a pretext. The differences between Iran and the United States are deeper than that. They have a bigger problem, which the JCPOA failed to solve. Wise men from both sides should sit together and solve that problem."

Meanwhile, Grand Ayatollah Lotfollah Safi Golpayegani, a former Guardian Council member who is said to be 104 years old and has at times offered ideas different from Supreme Leader Ali Khamenei, has called for an end to Iran's isolation in the world and said in a meeting with Majles Speaker Mohammad Bagher Ghalibaf on Frida: "I am seriously concerned about the country's economic situation and the people's problems."

The Grand Ayatollah suggested: "We should maintain relations with all the countries in the world. It is not good to be sulking with many other countries. In order to restore the rights of the people and put an end to the current situation which Iranians do not deserve, we should maintain relations with the world."

Meanwhile former Lawmaker and one of the leaders of Iran's reform camp, Mohammad Reza Khabbaz has said in a commentary published by reformist daily Arman on Thursday that "the people of Iran are waiting for a brave decision to be made by the government in order to solve difficulties people face."

Explaining the economic hardships Iranians are experiencing, Khabbaz said that although the problem is serious, it can still be solved with a surgical operation and the sooner this surgery is done, the less painful it will be. But if remained untreated, more serious and dangerous consequences will follow.

Khabbaz was in fact saying in his cryptic language that if the sanctions are not lifted and the country's economic problems continue to worsen hungry people will take to the streets and endanger the regime's existence. This is what several sociologists and economists have predicted throughout the year.

He said the government's problem is that it is consisting of a bunch of like-minded individuals, and everyone is supporting the government's approach. During the past week, many conservatives have criticized the Raisi Administration's inaction and indecision about restarting the negotiations for reviving the JCPOA.

Khabbaz suggested that the Raisi administration has only two options: waiting and seeing the gradual collapse of the country's economy or surrendering to a surgical operation by experts.

Reports published last week in Iran, including one in the proreform Fararu website said a typical government employee spends one-third of his or her salary to buy for a family's requirements for only a few days. Another report by Nemat Ahmadi, a prominent lawyer in Tehran, which was published in Arman on Thursday, listed the price of some staples and warned that Iran is headed toward a situation that happened during the 1918 famine which killed millions of Iranians.

Indirect nuclear talks that the Biden Administration started in April in Vienna with Iran stopped in June when Tehran arguing that its new president needed time to form a government suspended participation.

There have been references by Iran’s foreign minister and other officials that Washington must “take concrete steps” or “show goodwill” for the negotiation to resume and succeed. Foreign Minister Hossein Amir-Abdollahian even said in early October that while in New York the previous month he had told intermediaries the US should unfreeze $10 billion of Iran’s blocked funds.

Spokesperson Ned Price who was answering a question from a reporter during his press briefing on Friday said that the United States and other world powers are “united in the belief that diplomacy continues to provide the most effective pathway to verifiably and permanently prevent Iran from obtaining a nuclear weapon, and we are united in the belief that negotiations should resume in Vienna as soon as possible and that they should resume precisely where they left off after the sixth round.”

By rejecting the idea of new demands or changes to the process, Price also used the words “permanently prevent Iran from obtaining a nuclear weapon.” The existing nuclear agreement, the Joint Comprehensive Plan of Action (JCPOA) that Donald Trump abandoned in 2018, has sunset clauses which end in the next few years, theoretically allowing Iran to pursue its nuclear program as it wishes. Critics have always said this constitutes the agreement’s main weakness.

It is not clear if the reference to ‘permanently’ means other, more stringent arrangements have been discussed in Vienna. Those who opposed Biden’s decision to negotiate a return to the JCPOA have been arguing that even if the deal is restored and Iran resumes compliance with its restrictions, in a few years most would go away, and it can do what it wishes.

Price was also asked if a discussion that took place earlier this month between US Special Envoy for Iran Rob Malley and a South Korean diplomat signaled a move to have Seoul free Iran’s $7 billion frozen by two of its banks. If true, this would have meant that Washington was trying to entice Tehran to return to the talks.

Price did not directly address the issue of the frozen funds and argued that Malley is always in touch with US allies, and South Koreans “are important across a range of fronts, and that includes Iran.” He added, “That includes with the enforcement of the sanctions regime that continues to be in place on Iran unless and until there is a negotiated return to compliance with the Joint Comprehensive Plan of Action.”

But South Korea has never been involved with the JCPOA except as an oil customer of Iran that stopped doing business once US sanctions were imposed and froze $7 billion it owed Iran.

"Our military and nuclear industries have been subjected to the worst sanctions, but we have made great achievements because we have acted as if we were doing motivated jihad (effort) to make progress," he said, during a visit to Bushehr province October 8.

Raisi went on to reply to those who he said asked why Iran could build missiles but faced problems with automobiles. "The answer is clear − because we have not invested the technology of the missile industries in the automotive industry.”

Raisi’s comment could have applied to the Soviet Union’s centralized economy where the country could compete with the United States in weapons and space exploration but was unable to produce quality kitchen appliances or cars.

Iran's automotive industry, the county’s largest after oil and gas, employs 700,000. It was valued in 2020 at $26.4 billion by India-based Modor Intelligence, which forecasts 10 percent sectoral annual growth to 2026. This would be possible without sanctions and with new infusion of investments and foreign partnerships. The analysts attributed a recent decline in growth to Covid-19 and United States sanctions.

French companies Peugeot and Citroen withdrew from substantial joint projects in Iran when the US introduced ‘maximum pressure’ sanctions in 2018, but Iran, reports Motor Intelligence, “is taking the necessary actions to boost the production of vehicles and parts locally to meet the demand for vehicles and reduce its import cost.”

Intelligent cars

Speaking to the Iranian Students News Agency (ISNA) Friday, Deputy Chief of Iran's traffic police, Brigadier-General Taymour Hosseini said road accidents were occurring due to inadequate safety standards as Iranian companies struggled to keep up. "Big companies in the world are working on intelligent cars but we have dropped our expectations so much that we are happy with having anti-lock braking systems,” he said.

With around 20,000 annual deaths, Iran has a poor traffic safety record. According to World Health Organization (WHO) data published in 2018, road traffic accidents deaths in Iran reached 21,831 or 6.5 percent of all fatalities.

The WHO said in fact-sheet published in June that93 percentof world road fatalities occurred in low- and middle-income countries, which have only 60 percent of the vehicles. “Road traffic injury death rates are highest in the African region,” with traffic accidents globally “the leading cause of death for children and young adults aged 5-29 years,” the WHO noted.

Iran's trade officials say neighboring Iraq, once along with Syria a thriving market for Iranian vehicles, has rejected Iranian vehicles due to their failure to meet the required standards. Hamid Hosseini, former secretary of Iran-Iraq chamber of commerce told Fararu website that Iraqis were particularly concerned about airbags, fuel consumption and braking systems.

"Special attention should be paid to safety issues and quality if this administration seriously wishes to export automotive products,” Hosseini said. “Otherwise exporting vehicles will not happen," he claimed. Hosseini also said that higher standards in Iraq meant that it would no longer be possible to produce vehicles in Iraq even if US sanctions were lifted.

According to the latest figures, in the past five months Iran has exported only 514 vehicles due to various reasons, including international banking issues resulting from US sanctions.

The 2nd US Circuit Court of Appeals said even if the Foreign Sovereign Immunities Act shielded the bank, the charge against Halkbank falls under the commercial activity exception.

Prosecutors accused Halkbank of converting oil revenue into gold and then cash to benefit Iranian interests and documenting fake food shipments to justify transfers of oil proceeds.

They also said Halkbank helped Iran secretly transfer $20 billion of restricted funds, with at least $1 billion laundered through the US financial system during international sanctions from 2011-2015.

Halkbank has pleaded not guilty to bank fraud, money laundering and conspiracy charges over its alleged use of money servicers and front companies in Iran, Turkey and the United Arab Emirates to evade sanctions.

The bank had argued that it is immune from prosecution under the federal Foreign Sovereign Immunities Act because it was "synonymous" with Turkey, which has immunity under that law.

Halkbank had been appealing an Oct. 1 ruling by US District Judge Richard Berman allowing it to be prosecuted.

Berman has overseen several related cases, including the conviction of a former Halkbank executive and a guilty plea by Turkish-Iranian gold trader Reza Zarrab.

Halkbank's case has complicated US-Turkish relations, with President Tayyip Erdogan backing Halkbank's innocence in a 2018 memo to then-US President Donald Trump.

Reporting by Reuters

An exchange rate of 42,000 rials to the dollar is applied to imports of ‘essential’ commodities while the dollar trades in the open market at over 270,000 rials. The hugely discounted dollar for importers of essential goods was meant to keep down the cost of the commodities facing consumers.

In April 2018, as the United States readied ‘maximum pressure’ sanctions and as the rial fell to a then record market low of around 60,000 against the dollar, the government of President Hassan Rouhani introduced a rate of 42,000 rials to the dollar to facilitate imports of essential goods.

The government's foreign exchange subsidy not only failed to prevent the further fall of the rial or stabilize the market but also it soon became a new problem as allegations of corruption in the distribution of the cheaper dollar began to haunt the government in a matter of months. Much of the valuable was being spent on importing luxury items, from cars to household appliances while subsidized food, medicine, and animal feed was being smuggled out of the country.

According to the Tasnim news agency, Economy Minister Ehsan Khandouzi this week said the government's economic team was considering allocating the resources currently channeled into supporting essential imports into direct payments to citizens.

Such a move could bolster the ability of recipients to pay higher prices, but economists have argued in recent days that price inflation will accelerate if cheap dollars stop, and the cash handouts would never make up the difference.

That would carry a serious risk of political unrest for the government, as events in November 2019 showed. A sudden hike in gasoline prices led to spontaneous widespread protests. Security forces used military weapons to fire on unarmed protesters, killing hundreds in three days.

The government of President Ebrahim Raisi faces a budget deficit of around $12 billion. A recent report from the Planning and Budget Organizationput Iran’s debt at 30 percent of GDP: this compares to 40 percent in Turkey, 67 percent in Egypt, 117 percent in the US, and 171 percent in Lebanon, but is onerous where denominated in dollars.

Due to demand on foreign exchange − and with the rial at a market rate of 140,000 against the dollar − a meeting of the president with the heads of parliament and judiciary in April 2019 fixed the subsidized rate at 42,000 and limited its allocation to imports such as food and medicine.

The Central Bank, accordingly, constrained the allocation. By July 2021, reports emerged that 1.3 million metric tons of ‘essential’ goods in Iranian ports could not be unloaded because importers lacked dollars to pay foreign vendors.

Sugar was dropped from the list of eligible items in November 2020, while cooking oil remained. Since late March the government has allocated at least $6.9 billion for importing ‘essential’ goods at the set rate, including $1.5 billion for cooking oil.

Nonetheless the price of cooking oil has almost doubled in a year, given rising inflation put at close to 50 percent annually by the Statistical Center of Iran. The IMF projects consumer price inflation of 39 percent in 2021, and 28 percent in 2022.