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Saturday, Oct. 13, 2012

EDITORIAL

Tehran feels the squeeze

Iran is hurting. Economic sanctions imposed by Western governments designed to push Tehran back into nuclear negotiations have triggered a virtual collapse of Iran's currency, and the effects are being felt throughout the entire economy. While there are reasons to be concerned about the impact of sanctions on ordinary Iranians, the pressure should be maintained. At the same time, it must be made clear to the Iranian government and public that they have the power to end the squeeze: Cap the nuclear program, return to international inspections and help end the doubts about Iranian intentions.

Iran's nuclear program has been shrouded in uncertainty for years. Western governments and the International Atomic Energy Agency (IAEA), the world's nuclear watchdog, have harbored suspicions about Tehran's goals, openly questioning Iran's claim that its nuclear program is peaceful and not the cover for a nuclear weapons program. Years of international negotiations to resolve the uncertainties have failed. Indeed, while those discussions have proceeded — without resolution — Iranian capabilities have slowly but steadily increased and there is very real concern that Tehran is moving toward the capacity to construct a nuclear weapon.

Such a move would transform the regional security environment, and could trigger a nuclear arms race throughout the Middle East and beyond. Israel considers an Iranian nuclear capability an existential threat and has vowed — most recently at United Nations General Assembly meetings the week before last — to prevent such a scenario, by force if necessary. An Israeli attack could trigger a wider conflict throughout the Middle East, with potentially global consequences.

The lack of progress, and the potential consequences, obliged Western governments to impose economic sanctions on Iran. The United States has had several efforts in place since 2005, when President George W. Bush passed executive orders freezing the assets of individuals associated with Iran's nuclear program. President Barack Obama has since overseen the imposition of tougher measures that reduced imports from Iran and, most significantly, cut virtually all contacts between the Iranian financial system and the U.S. Washington has also pressed most of Iran's customers to stop buying oil from Tehran, and that effort has had a powerful impact.

It is reckoned that those sanctions have cut the Iranian government's oil income in half — from $85 billion annually to about $42 billion. The reduction has deprived the government of the reserves it has traditionally used to support the value of Iran's currency, the rial; as a result, the currency's value has plummeted, losing 40 percent of its value against the dollar in a week alone — and that street price remains two to three times the value of the official exchange rate. Prices for basic goods and services inflated 55 percent, on an annual basis, and should climb still higher. Youth unemployment already exceeds 28 percent.

The erosion of the economy has triggered some of the worst unrest in Iran since political demonstrations last year after the contested elections. The week before last, the government set up an "exchange center" to provide dollars to importers of basic goods. It was unable to keep up with demand, and the government ordered the arrest of money changers in Tehran's main bazaar on charges of speculation. That triggered violent clashes and the closure of the bazaar. The location of the protests is significant: Bazaar merchants played a key role in the 1979 revolution in Iran. Images of protestors shouting "death to the traitor" and Mahmoud [Ahmadinejad, Iran's president] the traitor — you've ruined the country" are incendiary — especially in a country whose leadership is accused of stealing the last elections. Pictures of riot police wielding batons and arresting merchants as speculators could fan the flames or wider instability. Mr. Ahmadinejad has publicly acknowledged the impact of the sanctions, insisting that his government has no responsibility for the hardships most Iranians now face.

That is not true. Economic mismanagement has been a long-standing charge against the current Iranian government, with conservatives staking their claim to some of the most profitable parts of the economy. Ordinary Iranians struggle to get by as their living standards decline and the job market dries up.

While many hope for political changes in Tehran, less drastic solutions can also suffice. The West must hold out hope to Iran that a reversal of course on its nuclear program will win it relief. U.S. Secretary of State Hillary Clinton sent that very message last week, noting that sanctions "could be remedied in short order if the Iranian government were willing to work with the ... international community in a sincere manner."

The steps Iran must take are clear: Make a complete declaration of all nuclear activities, open all facilities to IAEA inspection, cap enrichment efforts and produce for inspectors all enriched uranium. Of course, the West must also ensure that Iran has the uranium it needs for lawful activities — a guaranteed supply must be provided. It must also follow through on the promise to lift sanctions if Tehran meets its international obligations. The squeeze on Iran has additional impact when it is the result of the Tehran government's actions. Pressure from inside and outside of Iran is the best way to achieve enduring results.



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