Instead of “Allah Akbar” a southern Iranian crowd interrupted Ahmadinejad with chants of “We are Unemployed.” Official Iranian unemployment stands at 11%; unofficial at 25% and the country suffers from a double-digit inflation (about 20%). The drop in oil prices and production hence, income is a major problem for a government which subsidizes everything from electricity to gasoline, from bread to other food staples.

 

“Oil production capacity has dropped by probably about 300,000-400,000 bpd,” a former senior official in Iran’s government told the Financial Times.The drop in Iran’s oil production is primarily the result of a decision by some of the world’s largest oil companies to sever economic ties with the Islamic Republic due to US pressure and the impending sanctions.

Nothing would undermine the regime faster than the belief that Ahmadinejad is responsible for their economic duress. That is the reason the Iranian regime tries so hard to convince its own subjects as well as the rest of the world of Iran’s resiliency in face of sanctions:

 

Ebrahim Hosseini-Nasab, economics professor at Tehran’s Tarbiat Modares University, also played down the impact of sanctions on the economy.”Iranian policy makers have learned from experience how to deal with these sanctions,” he said. “The Iranian economy has always had a great deal of resilience … I don’t believe it will have any crippling effect on the Iranian economy.”

But Morteza Masoumzadeh, a shipping line executive and vice president of the Iranian Business Council in Dubai, a transit route for many Iranian imports, said sanctions had hurt.

“The sanctions clearly have affected our business and already our business is down by 70 percent compared to three years ago,” Masoumzadeh told Reuters in Dubai.

U.S. sanctions imposed in 2007 targeting two Iranian banks with branches in Dubai had been particularly painful, he said. But that did not mean new U.N. measures would make things worse.

“The sanctions have already hit us so I don’t think anything of this nature will hit us further,” he said.

Ali Ansari, an Iran expert at St Andrews University in Scotland, said the new sanctions could have a psychological impact and, if properly targeted, could hinder the powerful Revolutionary Guards, the elite military force which has become a major economic player.

“However, I have always felt that the sanctions will be a minor irritant as compared the Ahmadinejad government’s own mismanagement of the economy and the lifting of subsidies,” Ansari told Reuters.

The truth is that much more can and should be done. For a new study reveals a more troublesome pattern:

 

While the international sanctions regime prohibits contact with banks in Iran, 18 US banks have indirect financial connections with the Islamic Republic. In this manner, Tehran succeeds in getting its hands on the money needed to finance its nuclear program and to provide aid to terrorist organizations, including Hezbollah and Hamas.Avi Jorisch, a former US Treasury Department analyst in charge of fighting money laundering for criminal and terrorist purposes, scans in his new book, “Iran’s Dirty Banking - How the Islamic Republic Skirts International Financial Sanctions”. . . .

Jorisch’s main claim is that no less than 18 American banks have an indirect relationship with three Iranian banks on the US’ black list and another one subjected to UN sanctions. By using various banks around the world as intermediaries, Tehran carries out its finances unhindered, even though three of the prohibited banks funnel money into the nuclear program, the ballistic missile program, and the terrorism network.

Let’s hope a miracle will occur, a tipping point will be reached and the regime will be overturned. Further international sanctions with an addition of Congressional mandated ones may just provide the right push. Unfortunately, g unilateral sanction must be delayed until the passage of UN ones. Otherwise, Moscow, which would rather keep the Mullahs in power and the Iranian nuclear crisis simmering to keep oil prices up and Washington weak looking.

Of courses, the slower the building up of the pressure, the more effective Iranian counter measures. As I wrote, we need a miracle.

Also see my HNN blog Deja Vu

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