The assumption in the West is that economic pressure will convince Iranian leaders to bow to the international community and suspend the country's controversial nuclear program. Iran has so far refused to comply with international demands to suspend its uranium enrichment program. Last month, the International Atomic Energy Agency, the United Nations watchdog that supervises Iran's program, reported that Tehran continues to defy international demands by enriching uranium to a grade of 20 percent -- a level that Iran can more easily convert to weapons-grade uranium. At one bunker facility, Iran has also installed more modern centrifuges to enrich uranium faster, the report said. Israel, the United States, and some western countries accuse Iran of having a clandestine weapons program. Iran strenuously denies those charges, saying that its program is strictly for peaceful purposes.
Israel has threatened to launch a military strike against Iran's nuclear facilities before the program reaches a sensitive stage. There are fears that Israel will drag the United States into the war, even though President Obama has said that he wants to exhaust all diplomatic channels first. Iran has vowed to retaliate if it comes under attack.
Iran and the United States severed diplomatic ties in 1979 after Islamist students stormed the U.S. embassy in Tehran and took 52 diplomats hostage for 444 days. Despite Ayatollah Khamenei's opposition, many more are voicing concerns that the nuclear dilemma won't be settled before Iran and the United States engage in direct talks. President Mahmoud Ahmadinejad said last month that the dispute over the nuclear program has become "politicized" and "should be resolved by direct talks between Iran and the United States."
There are other signs that pressure is building among powerful lobbies close to Khamenei. Mohammad Javad Larijani, secretary of Iran's High Council for Human Rights, who is also close to the Supreme Leader, said recently in a televised interview that Iran and the U.S. need to deal directly. "To protect the interests of our system, we would negotiate with the U.S. or anyone else even in the abyss of hell," he said.
Iran's economy is expected to suffer one of its worst contractions. The Economist Intelligence Unit, a London-based think-tank, estimates that it will shrink to $70 billion this year from $80 billion in 2011. Inflation is galloping at 25 percent, according to the International Monetary Fund. The rial has lost 300 percent of its value over the past year.
Putting food on the table has become a challenge for many Iranians. Shirin, a 34-year-old single chemist who lives with her widowed mother in Tehran, said that the rial's drastic loss of value -- 40 percent since August alone -- is making life far harder. "Cabbies ask for a higher fare every morning when I go to work, citing the higher exchange rate," she said. "We've had to cut down on what we eat and replace, for example, meat with more bread. But how long can we continue doing that?"
Faced with a swelling budget deficit, the government has failed to pay private contractors. Heads of several private hospitals warned this month that their hospitals were in verge of bankruptcy because the government was not paying what it owed them. A 15-year old hemophiliac boy died in the southern city of Dezful after his parents couldn't find the vital medicine he needed, a state news agency reported. His is the first civilian death directly linked to the sanctions.