Is Iran More Susceptible To International Sanctions? High inflation has forced Iran's government to enact an emergency currency reform, and new geopolitical factors could make an international sanctions regime more effective. One example: A less hospitable environment in the emirate of Dubai, long an important trading center for the Iranian Revolutionary Guard Corps and its affiliated businesses.
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Is Iran More Susceptible To International Sanctions?

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Is Iran More Susceptible To International Sanctions?

Is Iran More Susceptible To International Sanctions?

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China's foreign minister was in Paris today to discuss whether his government would back broader sanctions against Iran over its nuclear program. His answer: Not yet. But a key Russian lawmaker today said Iran, quote, "is beginning to alarm us more and more." He also said Russia's support for sanctions has increased.

The renewed focus on Iran comes just as that country is appearing more vulnerable to economic pressure, as NPR's Tom Gjelten reports.

TOM GJELTEN: This should be a time when sanctions against Iran might actually work. The country is facing some of its worst economic difficulties in years.

Dr. SUZANNE MALONEY (Senior Fellow, Middle East Policy, Brookings Institution): Inflation has been a real problem.

GJELTEN: Suzanne Maloney monitors the Iranian economy at the Brookings Institution.

Dr. MALONEY: Persistent unemployment, particularly for the two-thirds of the population that is under the age of 30.

GJELTEN: And President Mahmoud Ahmadinejad's management of the economy has been highly controversial. He recently ordered that three zeroes be dropped from the country's currency because the money had lost so much value. The average Iranian is not likely to be impressed by that move, says Mark Fowler of the Booz Allen Hamilton consulting firm.

Mr. MARK FOWLER (Associate, Booz Allen Hamilton Inc.): It is a reminder to the people on the street. You know, they're looking at their money and this, it's worth much less than it used to be worth.

GJELTEN: With its abundant oil reserves, Iran should be a rich country, but economists say it has squandered much of its wealth. The government has subsidized Iranians' food and fuel purchases. It's now trying to reduce that spending, but Suzanne Maloney suspects the effort could just make things worse.

Dr. MALONEY: This very significant subsidy reform proposal may only create further internal economic problems and certainly leave Iran more vulnerable to economic pressures including sanctions from outside the country.

GJELTEN: In fact, U.S. officials argued that Iran right now is an ideal place for sanctions. Much of the economy is controlled by the Revolutionary Guard, which also happens to be the institution behind the recent political crackdown. So a sanctions program that targets the Revolutionary Guard should be effective, and now more than ever, thanks to recent developments in a nearby country.

A little background: To get around sanctions, Iranian firms have foreign governments to help them import the goods they need. Western intelligence agencies track those transactions, the trail leads to one place in particular, or so says Ian Bremmer, president of the Eurasia Group.

Dr. IAN BREMMER (President, Eurasia Group): When you talk to the CIA and you ask them who they're monitoring in terms of illicit financial transactions coming out of Iran, they will tell you it's Dubai

GJELTEN: Dubai, the tiny Arab Emirate on the Persian Gulf, an important trading and financial center for many years. But risky transactions brought Dubai to the brink of financial collapse last fall. It was rescued by more conservative emirate brother, Abu Dhabi. And Ian Bremmer says Abu Dhabi is likely to crack down on Dubai's dealings with Iran.

Dr. BREMMER: There is no question in my mind that the fall of Dubai and Abu Dhabi assertively taking over, in terms of the levels of transparency that they will have over Dubai, ensuring that they dont take inordinate risks. This is going to hurt Iran. This is meaningful.

GJELTEN: And yet, maybe the picture is not so clear. Dubai nearly went bust. Can Abu Dhabi really afford for Dubai to turn its back on all that business with Iran?

Suzanne Maloney Brookings is skeptical.

Dr. MALONEY: Its own financial situation is precarious enough that they will be that much more averse to measures that restrict their ability to do business, even with a country as problematic as Iran.

GJELTEN: And Maloney points to another problem: The Revolutionary Guard companies targeted for sanctions are accustomed to working in the shadows of the economy.

Dr. MALONEY: It is precisely the Revolutionary Guard who will find ways to get around the sanctions, who will reap economic benefits from the black market and other smuggling networks that exist in the region.

GJELTEN: Mark Fowler, the Iran expert at Booz Allen Hamilton, knows how to hard it is to work against the Iranian regime. He spent more than 20 years as an undercover CIA officer working on Middle East issues.

Mr. FOWLER: I've followed Iran many, many years, and they're extremely resilient in the sense of, you know, being able to withstand a lot more pain than we might. They've sort of built up their economy since the revolution under one sanction or another.

GJELTEN: So while they might not be experts at economic efficiency, the Iranian leaders do know how to survive in a hostile world.

Tom Gjelten, NPR News, Washington.

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