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 Iran Moves to Shelter Millions as U.S. Sanctions Bite DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

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Iran Moves to Shelter Millions as U.S. Sanctions Bite

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 Iran Moves to Shelter Millions as U.S. Sanctions Bite Empty Iran Moves to Shelter Millions as U.S. Sanctions Bite

Post by GirlBye on Sun Oct 28, 2018 12:21 pm

Tehran promises handouts to insulate a restive population while prices climb and the economy sags.

 Iran Moves to Shelter Millions as U.S. Sanctions Bite B3-CC852_IRANEC_12S_20181022145426

Residents of Tehran and others in Iran are contending with the impact of U.S. sanctions and a weakening currency, as the U.S. prepares measures to target Iran's oil revenue in November. SCOTT PETERSON/GETTY IMAGES

As Iran braces for U.S. sanctions that target its financial lifeline—oil sales—it is resorting to a series of extraordinary steps to try to insulate the country’s increasingly restive working class from the likely economic fallout.

The Iranian government is moving ahead with plans to provide financial support to 20 million lower-income people, or about a quarter of the population, and extra relief to 11 million of the country’s poorest.

As a second round of U.S. sanctions is set to come into effect on Nov. 5, Iran is standing over a precipice. With an unsteady economy, a sharp drop in the value of the currency and the prospect of more economic pain ahead, the cost of living in Iran has soared.

 Iran Moves to Shelter Millions as U.S. Sanctions Bite B3-CC865_IRANEC_H_20181022145720

“Everything is expensive,” said a 68-year-old man selling chewing gum and tissues on the street in Tehran. “At this age, I still have to do something to survive.”
The U.S. measures come after President Trump withdrew the U.S. in May from a multinational accord that lifted sanctions in exchange for curbs on Iran’s nuclear activity. A first round in August targeted Iran’s foreign-currency trade, auto industry and other sectors; the next round, targeting the oil industry, will follow a 180-day wind-down period set by the Treasury Department to give companies time to get out.
After that period, anyone trading oil with Iran without a waiver from the U.S. government could face penalties.

Mr. Trump has been under pressure to take action against Saudi Arabia, a key partner in U.S. efforts to isolate Iran, over the disappearance this month of Saudi journalist Jamal Khashoggi, potentially complicating the sanctions effort.

But the sanctions plan has already had an impact. The International Monetary Fund now expects Iran’s economy to shrink by 3.6% next year, in an Oct. 9 forecast that drastically reversed the prediction it made in April, before Mr. Trump pulled out of the nuclear accord, of more than 4% growth.

The economy had been shaky even before the sanctions, mainly because of inflation, which the IMF forecasts at almost 30% this year. But the U.S. measures aggravated the fall of the Iranian currency against the dollar; it takes roughly 138,000 rials to buy a U.S. dollar today, compared with 42,000 in January.

Many Iranians have had to cut back as the cost of food, medicine and other staples rapidly rises. The strains have stoked discontent: Iran’s widest street protests in nearly a decade broke out in December, centering initially on the government’s economic management before morphing into a criticism of the ruling system.

The unrest fizzled after a security crackdown in January, but with many of the economic pressures unaddressed, occasional protests still erupt.
Iran’s leaders blame U.S. “economic warfare” for the cratering economy and currency. But President Hassan Rouhani’s government has struggled to find effective way to damp the impact.

 Iran Moves to Shelter Millions as U.S. Sanctions Bite B3-CC868_IRANEC_H_20181022145720
President Hassan Rouhani, at center at an event at Tehran University on Oct. 14, has struggled to effectively damp the impact on Iranians of a weaker economy and currency. PHOTO: IRANIAN PRESIDENCY/AGENCE FRANCE-PRESSE/GETTY IMAGES

Some of Iran’s poorest are waiting for the government to expand the social safety net; the government has said it aims its relief packages to help those who earn less than 30 million rials ($217) a month.

Tehran has a long and checkered history with rations and subsidies. Iran turned to rationing in the 1980s after an expensive war with Iraq forced it to cut back on imports, resulting in a black market for food as stocks ran short. In 2010, the government slashed longstanding subsidies on energy and instead started giving most Iranians monthly cash payments—currently 455,000 rials a person; that was equal to about $10 in January, but about $3.30 today.

 Iran Moves to Shelter Millions as U.S. Sanctions Bite B3-CC869_IRANEC_H_20181022145720

A hospital pharmacy in Tehran last month, after the International Court of Justice ruled that Washington must suspend barriers to certain Iranian imports, including medicine; the U.S. said the ruling wasn’t binding. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

The planned support for Iran’s poorest is aimed at helping them buy subsidized rice, bread and meat.
Subsidies, however, have been a drain on government finances, and Mr. Rouhani had led a charge to scale them back before the latest bout of economic turmoil.

Iranian authorities are looking for other ways to cushion the blow of U.S. sanctions, and have been huddling with European parties to the nuclear deal to keep the pact alive. Iran is deploying a $5 billion state fund for overseas investments and introduced enticements for foreign investors.

Authorities have also introduced tighter financial controls to give comfort to European partners who are setting up a special payments channel to continue trade with Iran.

In parallel, Tehran formed special courts for economic crimes in August, following a call by Supreme Leader Ayatollah Ali Khamenei for legal action against financial wrongdoing. Late last month, those courts sentenced three people to death.

Some Iranians doubt whether the government’s latest efforts to ease the pain will work.

 Iran Moves to Shelter Millions as U.S. Sanctions Bite B3-CC867_IRANEC_H_20181022145720

A currency board at the Tehran Grand Bazaar in early October. The Iranian rial is far weaker against the dollar than it was at the start of the year. PHOTO: FATEMEH BAHRAMI/ANADOLU AGENCY/GETTY IMAGES

“I don’t think these measures will work out in the long term,” said a money-changer in Tehran, pointing to the government’s struggles to bolster the currency. The rial recovered in early October after the government gave the central bank free rein to intervene in currency markets, but lost value again within days.

“The sanctions have 100% had an impact on my work,” said Ali Ghasemi, 32, a Tehran hardware merchant who has had to triple his prices. In one case, he said, a supplier withheld goods and demanded more money for goods he had already paid for, because the dollar rate had gone up. “But we have to buy,” he said.

Bread and cereal prices were up nearly 17% year-over-year in urban areas as of August, while eggs and dairy climbed more than 28% and fruits were 85% more expensive, according to central bank figures.

Mehri Rezai, 50, a resident of Tehran who has suffered since childhood from rheumatoid arthritis, is in line for extra financial help from the government.

With food and medicine prices rising, current state aid for poor and disabled people like her is no longer enough, Ms. Rezai said. To make matters worse, she said, her landlord sold her apartment, forcing her to find a new place when rents are also climbing.

“You have no idea what hardship I live with,” she said.

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