The parliamentary revolt, like the rial's loss of two-thirds of its
value against the dollar over the past 15 months, are widely regarded as
victories for the Western sanctions effort. But they also may be signs that the sanctions could disrupt Iran's economic planning in ways increasingly difficult to predict.
"It's not a far-fetched scenario where we end up with mass unemployment,
shut-down in certain segments of the economy, where certain segments
completely freeze, and there is a mass shortage economy where people
struggle to find some basic commodity," warns Merhrdad Emadi, a regional
expert with Betamatrix International Consultancy. He says sanctions are often a risky business that can pose problems both for their targets and their authors.
Tipping Some Scales
The most immediate problem for Iran is how to protect its rial from
further slippage as sanctions limit Tehran access to new hard currency.
The collapse of the rial set off clashes on October 3 between police and
protesters angered by its freefall.
Tehran's strategy for shoring up the rial's value while protecting
hard-currency reserves is to offer different classes of business access
to different state-set rates. Importers of foods and medicines can exchange rials at 12,260 rials to
the dollar compared to this month's all-time low of 35,500. Importers of
basic goods like industrial materials can exchange rials for 25,550. But Tehran's strategy risks injecting still more instability into the
economy if it sets off a scramble among all businesses to get access to
the best rates. That could stoke corruption as well as anger among those
Tehran has sought to assure citizens that Iran's economy can be
self-sustaining if it needs to be. But Edward Bell, who watches Iran for
the Economics Intelligence Unit (EIU), thinks that argument makes
little sense. "There is a lot of talk from Iranian leadership about turning it into a
resistance economy that doesn't need to depend on any kind of trade with
foreign partners," Bell says, "but in reality that kind of policy is
not going to be sustainable for very long and it would do probably
really serious damage to the living conditions of regular Iranians."
But if Iran already looks like it may have trouble coping with a lengthy
sanctions regime, the problems may not stop at its borders. The freefall of the rial has already sent Iranians flocking to
neighboring countries to convert their currency into dollars and euros,
even at exorbitant rates. In the case of Afghanistan, the fall of the
Iranian currency has also hit ordinary Afghans by devaluing the large stocks of rials held by businesspeople who regularly trade with Iran.
More dangerous for Iran's neighbors is the possibility that major shocks
to its economy could cause major unrest within Iran itself. That could
have unanticipated spillover effects in an already unstable region.