Iran 389

The Currency War on Iran
A collapse in the rial, greeted with glee by some, is a cause not for celebration but for fear

By Peter Beaumont

October 04, 2012 "The Guardian" --  The continuing currency crisis in Iran, which has seen the rial go into freefall, has been cited, with some celebration in certain quarters, as proving that US-led sanctions are "working" against Tehran. Increasingly shut out from international banking and struggling to sell its oil, Iran has been forced to sell more cheaply while buying raw materials at a higher cash price. This, in turn, has led to currency speculation that the government has done nothing to halt, and to sharp devaluation.

But what does "sanctions are working" actually mean? Some hawks have read it as the possible beginning of the end for Iran's nuclear programme and the collapse of the clerical regime. For others, including those anxious to avoid conflict over Iran, it has been seized on as a suggestion that the crisis might be resolved through negotiation and non-military pressure.

The reality is that the political, economic and social impact of sanctions can produce very different results from those allegedly desired, more often than not hurting ordinary people. And there is a third scenario, in which sanctions might actually make the confrontation with Iran more dangerous still.

The increasing popularity of economic sanctions, as Britain's former ambassador to the UN, Sir Jeremy Greenstock, has observed, is due to the perception that no other tool exists "between words and military action if you want to bring pressure upon a government".

When three academics – Gary Clyde Hufbauer, Jeffrey Scott and Kimberly Ann Elliott – examined the history of sanctions between 1914 and 1990, in Economic Sanctions Reconsidered they determined that out of 115 cases that they looked at, only a third had seen any measure of success. The US political scientist Robert Pape has challenged even this measure, claiming that of the 40, only five can be determined genuine successes for sanctions.

As Pape argued in his essay, Why Economic Sanctions Do Not Work, "The … case that we should expect sanctions to be more effective in the future is also flawed, because it relies on the expectation that economic punishment can overwhelm a state's commitment to its important policy goals." Rather, he argues, at times of sanctions, the opposite is often true: "Pervasive nationalism often makes states and societies willing to endure considerable punishment rather than abandon what are seen as the interests of the nation."

Even in cases where economic sanctions are generally considered to have had a positive impact – bringing about the end of white minority rule in South Africa and Rhodesia – there is disagreement over how decisive sanctions alone were in effecting that change. And if there is a disagreement over the efficacy of sanctions, what is also obvious is that they can come at a high price in terms of the impact on populations, and the risk that, far from undermining the legitimacy of regimes, they can entrench power – in a short term at least – around the regime elites being targeted. For Saddam Hussein's Iraq, which lived under a sanctions regime from August 1990 until 2003, that meant a sharp increase in childhood mortality for infants under five years old, even as Saddam's regime used money earned from avoiding sanctions to reward supporters.

There is evidence too that states under sanctions have been able to use the cover provided by them to put the heaviest burden on unpopular groups and minorities.

But one thing should be clear to all from the experience of global recession, ensuing austerity programmes, and recent global disturbances prompted by high grain prices. While it is easy to predict that people may become angry as they feel rapidly poorer, in such times of febrile politics how they will react is far harder to predict.

So to those celebrating Iranian pain, be careful what you wish for in desiring a crisis. It was hyperinflation under a regime of reparations that contributed to the collapse of the Weimar Republic. Few foresaw then what might occur. And few, now, are considering what a sanctions-triggered economic crisis might really mean for Iran and the region.

http://www.informationclearinghouse.info/article32648.htm