Iran Sanctions - Foreign Press Centers

insurance. Further revenue losses are possible if remaining customers, such as
China and India, force Iran to discount each barrel. The sales shortfalls—unless
oil prices escalate more dramatically—will likely hamper Iran’s ability to fully
fund its social spending obligations and defense and WMD programs.
• Iran appears to be so concerned about a loss of sales due to customer purchase
reductions and payments difficulties that, on February 29, 2012, its Central Bank
governor said Iran is willing to accept payment for oil in gold as well as the
national currencies of customer countries. Several weeks later, Iran announced it
is willing to accept payment in local (non-convertible) currencies. As noted
above, many of its oil transactions reportedly are now conducted on a barter
basis, with Iran providing oil in exchange for wheat and consumer imports. On
the other hand, some Iranian importers are circumventing payments difficulties
by using Europe and Asia-based traders who can finance their own operations. 50
• These payments difficulties—and Iran’s acceptance of barter arrangements and
payment mechanisms other than hard currency—have left Iran’s Central Bank
short of hard currency and caused a reduction in the value of Iran’s currency, the
rial. The effects of existing sanctions, and the worry about further sanctions, have
reportedly driven the value of the rial down 40% since early December 2011, to a
level of about 20,000 to the dollar as of late March 2012. The government has
been unable to stanch the decline with measures such as raising official interest
rates. On the other hand, some believe that the regime is not affected by the
currency fall because it still has access to hard currency and can use it to buy
rials—or services denominated in rials—cheaply.
• These difficulties—shipping, currency devaluation, and others—have driven up
the costs to the Iranian trading community by an estimated 40%. 51 Overall
inflation appears to be increasing, causing public dissatisfaction. Some merchants
have reportedly gone out of business in late 2011 and early 2012 because of the
economic conditions, and have had to lay off workers. Other press reports say
that many Iranians are stockpiling staple goods such as rice and cooking oil, and
buying as much hard currency as possible, anticipating further economic
deterioration.
• Still, Iran might be able to cope with a loss of oil sales and other difficulties.
World oil prices have increased since the beginning of 2012—and some of the
price movements are due to the international tensions with Iran. The increase in
oil prices—above $105 per barrel in March 2012—mitigates some of the effects
of international sanctions. Iran is estimated to have earned about $500 billion in
total revenue from oil during 2006-2011.
• Beyond the issue of the cost of imported goods aside, the Treasury Department’s
designations of affiliates and ships belong to Islamic Republic of Iran Shipping
Lines (IRISL) reportedly are harming Iran’s ability to ship goods at all, and has
further raised the prices of goods to Iranian import-export dealers. Some ships
have been impounded by various countries for nonpayment of debts due on them.
A substantial portion of the Iranian economy depends on import-export activity,
Iran Sanctions
50
Valerie Parent and Michael Hogan. “Iran Paying for Grain With Gold, Oil: Traders” Reuters, February 9, 2012.
51
“Iran’s Gateway in Dubai Highlights Sanctions Bite.” Associated Press, February 1, 2011.
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