Iranian woman
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Tehran - One measure of the profound anxiety now coursing through Iranian society can be seen on Manouchehri Street, a winding lane at the heart of this city where furtive crowds of men gather every day like drug dealers to buy and sell American dollars.

The government has raised the official exchange rate and sent police into the streets to stop the black marketeers, but with confidence in Iran's own currency, the rial, collapsing by the day, the trade goes on.

"Am I afraid of the police? Sure, but I need the money," said Hamid, a heavyset construction engineer who was standing by a muddy patch of greenery amid a crowd of other illicit currency traders here. "Food prices are going up, and my salary is not enough." Glancing nervously around him, he added that he had converted almost all of his assets into dollars. Like many Iranians, he had also stockpiled months' worth of rice and other staples.

The fuel for this manic trade is not an actual economic collapse - the new European oil embargo has yet to take effect, and there is plenty of food on the shelves - but a rising sense of panic about Iran's encirclement, the possibility of war and the prospect of more economic pain to come. The White House announced a further tightening on Monday aimed at freezing Iranian assets and constricting the activities of Iran's Central Bank.

Already, the last round of sanctions on Iran's Central Bank has begun inflicting unprecedented damage on Iran's private sector, traders and analysts say, making it so hard to transfer money abroad that even affluent businessmen are sometimes forced to board planes carrying suitcases full of American dollars.

Yet this economic burden is falling largely on the middle class, raising the prospect of more resentment against the West and complicating the effort to deter Iran's nuclear program - a central priority for the Obama administration in this election year.

"For the past few months, our business customers have been coming to us saying their clients are giving up on them, because they believe they will not be paid," said Parvaneh, a 41-year-old woman working at a Tehran bank. Like others interviewed for this article, she declined to give her full name, fearing repercussions for herself and her family. "They are starting to lay off employees. Iran's economy has always been sick, but now it seems worse than ever."

The rising economic panic has illustrated - and possibly intensified - the bitter divisions within Iran's political elite. A number of insiders, including members of the elite Islamic Revolutionary Guards Corps, have begun openly criticizing Iran's supreme leader, Ayatollah Ali Khamenei, in recent weeks. One of President Mahmoud Ahmadinejad's aides indirectly accused Ayatollah Khamenei of needlessly antagonizing the West in ways that pushed down the rial's value, the latest sign of a rift between the president and the supreme leader that is helping to define the parliamentary elections, which are scheduled for March 2.

"They criticize Ahmadinejad and even the supreme leader by name now; it's not like before," said Javad, the 45-year-old manager of a travel agency in north Tehran.

With Iran now importing as much rice and other food staples as it grows at home, trade obstacles could become far more significant in the coming months. Most Iranian traders discount the possibility of real food shortages, saying Iran is already reorienting its trade eastward and has always found ways around sanctions in the past. But with more avenues closing off every month, those evasive measures are likely to be ever more cumbersome and expensive.

Ordinary Iranians complain that the sanctions are hurting them, while those at the top are unscathed, or even benefit. Many wealthy Iranians made huge profits in recent weeks by buying dollars at the government rate (available to insiders) and then selling them for almost twice as many rials on the soaring black market. Some analysts and opposition political figures contend that Mr. Ahmadinejad deliberately worsened the currency crisis so that his cronies could generate profits this way.

Javad's travel agency is a striking illustration of Iran's current plight. With six weeks left before the Persian New Year, the phone should be ringing off the hook with reservations for holiday travel, he said. Instead, "there's been no business for the past three weeks."

It's not just that would-be travelers are frightened. The agency cannot price its holiday packages, because with exchange rates fluctuating wildly, they do not know what rate to use.

"Every day it's something new," Javad said, gazing up at a tourism poster of China on his office wall. Foreign travel to Iran has almost entirely disappeared. Two years ago, Javad's foreign clients were mostly Europeans; now they are entirely Russians and Chinese, and even they have been scared off in recent weeks, with Iranian officials threatening to close the Strait of Hormuz and rising fears of a war. (Russia and China remain Iran's only supporters in the United Nations Security Council.)

"We had a booking for 300 Chinese, for their New Year," Javad said. "Only 30 or 40 came."

Even Iranians who oppose their government tend to see the growing economic pressure as an unfair gesture unlikely to yield any positive results.

"We know they want to pressure us so we rise against our government, but we are not in a position to do that," said Murad, a haggard 41-year-old waiter at a Tehran tea shop. Like many middle- and lower-class Iranians, Murad seemed to blame both his own government and the West for his plight. He makes about $50 a day in the tea shop where he has worked for 25 years, he said, and with three children at home, his life has gotten measurably harder in the past year.

"Prices are going up so much I have to work all the time, and we still can't buy new clothes even once a year," he said. "The rich don't suffer, they are protected. The truth is, we'd like to have good relations with the West. What is the point of 'Death to the U.S.A.'? But what can we do about this?"

The crisis has taken a toll on medical care, affecting the middle class as well as the poor. Because of the ever-tighter pressure on any kind of trade with Iran, the black market price of Herceptin, a breast cancer drug, has nearly doubled in the past year, said Lian, a young nurse who works in the cancer ward of one of Tehran's major hospitals (the government regulates the mainstream supply of such drugs, but supplies are very limited).

The sanctions have also affected medical technology, because radiology machines fall under the "dual use" provisions of laws aimed at keeping nuclear technology out of Iran. At Shohada Hospital, one of the country's premier institutions, about 1,200 cancer patients a year go without radiological treatment, because the radiology equipment is no longer working and replacement parts cannot be brought into Iran, said Pejman Razavi, a doctor at the hospital.

Many Iranians are also skeptical about the Western preoccupation with Iran's nuclear program. "The economic pressure will not push Iran to a nuclear settlement," said Kayhan Barzegar, the director of the Institute for Middle East Strategic Studies, who has taught in the United States. "The nuclear file is a nationalistic issue; it's too late for Iran to backtrack. Domestic politics will react negatively to any negotiation - candidates in the elections will say: you sold the nuclear program!"

In an interview, Ali Akbar Javanfekr, an adviser to Mr. Ahmadinejad, also dismissed the sanctions as counterproductive, saying Iranians had suffered worse isolation during the 1980s and had always found ways around them. "This is not the way to approach us," Mr. Javanfekr said. "You should instead speak to us with respect. You should win our heart."

Some Iranian businessmen make similar comments, noting that there are always ingenious new ways to sell oil and to transfer money, and that the people who will suffer most from sanctions are not the ones who can pressure the government for change. "So you kill the pistachio trade in Iran," one businessman said. "How does that stop nuclear enrichment?"

But the businessman also noted that when Iran last suffered similar privations, in the 1980s, the economy was far smaller, and the revolutionary zeal for self-sacrifice far greater. Iran's leadership was also far more unified than it is today.

"The question is, when this panic translates into a real diminution in the living standard, will Iranians be willing to take it?" the businessman said. "That's when these guys will really be in trouble."

Source: New York Times