Humanitarian items such as food and medicine are not listed under the sanctions. But the lack of funds and the shortage of foreign currency mean that Iran is struggling to import them, triggering a major health care crisis. (The image above shows a woman buying medicine in a Tehran pharmacy.)
"The situation will get worst than you can imagine," said a Tehran-based economist who spoke on condition of anonymity for fear of retribution. "Inflation feels like 50 percent. This is already affecting the healthcare, education, and social security in addition to production of all kinds of goods. Even if the sanctions are lifted tomorrow, it will take a long time to fix the damage that has already been inflicted."
The current hardship feels especially severe since it follows a period of economic prosperity. In 2005, oil prices topped $100 a barrel, triggering unprecedented windfall revenues for the Iranian state. $531 billion poured into state coffers in the years following -- roughly half the entire amount earned by Iran from its oil reserves since petroleum was first discovered in the early twentieth century. Ahmadinejad did his best to spread the wealth through government entitlements. The poverty level dropped from 40 percent in 2002 to 18 percent in 2007, enabling the population to spend on Chinese goods imported with petrodollars. But now poverty is on the rise again. Ahmadinejad announced in a televised address in October that the Foreign Currency Reserve, the account set up for rainy days, had reached an all-time low.
Starting on October 15, the EU banned the export of metals like aluminum and steel to Iran. Given steel's central role in the economy, the disruption in supply is causing wide-ranging problems. Construction workers across the country have suspended work due to a shortage of steel, newspapers have reported. In addition, car manufacturing, previously one of the country's most robust industries, has dropped by more than 60 percent.
"Iran is losing its modern sector," said Djavad Salehi Isfahani, professor of economics at University of Virginia. "It is the creative and innovative Iran that is collapsing because it cannot attract technology and investment."
No one expects the sanctions to lead to a complete collapse of the Iranian economy. The regime still receives enough funds from the sale of oil (both legal and illegal) to keep going. "The economy will limp along," said Kamran Dadkhah, an associate professor of economics at Northeastern University in Boston. "Life will become more difficult, especially for those who have a fixed income, but the roof will not come down."
Yet frustration continues to build. Factories are being forced to shut down for lack of capital and raw materials. Workers are staging regular protests due to lay-offs or interruptions in salary payments. Public complaints by industrialists suggest that they are not willing to embrace austerity.