Iran Hit by Sanctions, Cut Subsidies


Article first published as Iran Hit by Sanctions, Cut Subsidies on Blogcritics.

Iran, facing four rounds of international sanctions imposed by the United Nations Security Council, has decided on Saturday, November 18 to cut subsidies extended to energy and food items. Iran has been under sanctions regime for a long time imposed due to its nuclear programme, which western countries fear aimed at acquiring nuclear arsenal. Iran has repeatedly cleared that its nuclearIran sanctions programme was not intended to build nuclear programme but for peaceful purposes such as energy and medicine.

Unified Sanctions

However, the US along with its western allies has been pressurising Iran to allow IAEA inspectors to inspect its nuclear enrichment facilities. As a member of the IAEA, Iran allowed several times the IAEA inspectors but latter expelled them, saying IAEA was not sending inspectors but spies. As a result, the US lobbied intensively to slap unified sanctions by the UN Security Council and succeeded to convince Russia and China to that effect. Fourth round of sanctions followed in June 2010.

However, Russia and China preserved their business interests with Iran while negotiating with the United States. Many analysts opined the sanctions were substantially weak due to opposition from Russia and China. Some said it was a victor for the United States for persuading China and Russia to impose sanctions. The sanctions resolution was adopted by the 15-nation Security Council in 12-2 vote with Brazil and Turkey casting no vote and Lebanon abstaining.

Deal Ignored

Prior to the Security Council vote, Brazil and Turkey negotiate a truce to shift Iran’s low enriched Uranium to Turkey in a bid to swap it with reactor ready Uranium rods from western countries. However, the truce negotiated by Brazil and Turkey was effectively ignored by the key world powers. Iran President Mr Ahmadinejad described the sanctions as a used handkerchief demonstrating continued defiance of Iran with the western sponsored sanctions.

The US and the EU imposed separate sanctions on Iran latter. Russia criticized the separate sanctions saying they are illegal and against to the spirit of the UN principles.

Sanctions Bite

Though Iran says that the sanctions would not deter its commitment to acquire nuclear technology, the sanctions began to bite its economic interests internationally. Up to 40 individuals including industrialists, scientists were included in the sanctions regime, whose bank accounts abroad are frozen after sanctions to curb Iran’s international trade. Two African countries, Gambia and Senegal, severed relations with Iran recalling their diplomats to Iran in November and December respectively after capturing a ship smuggling arms under building material. It is not known what will happen to Iran investments of $60 million in Senegal. According to the UNSC sanctions, Iran’s shipping vessels can be intercepted and checked to curb weapons’ transportation by Iran.

As a sign of how sanctions affected Iran’s economy, Iran reduced subsidies on energy and food items. As a result, fuel cost will be increased four times. Now, each car will get 60 litres per month at 40 cents (4000 reals) up from 10 cents per litre. Iran said it was paying about $100 billion annually in subsidies of which $4 billion was paid for food subsidies. Price rice will also apply to electricity, water and flour. Economists say the price rise would further increase Iran inflation, which is now at around 20 percent.

Ration on gasoline will be reduced by 15 percent as gasoline imports were sanctioned by the UNSC’s fourth round of sanctions. Iran said poor families would be compensated for reduction in subsidies, with direct cash payments to their bank accounts. Subsidies cut plan is expected to generate revenue of up to $20 billion from which cash payments would be born.

It is learn that Iran deployed additional police to certain centres of Iranian cities expecting the subsidy cut measure would spark unrest. Similar ration reduction of fuel in 2007 had sparked wide spread riots in Iran when people responded by setting fire several petroleum stations throughout the country. It is ironical that the international hegemonic politics are pushing innocent civilians into continued hardships.

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