Are sanctions starting to sting the Iranians?

According to AKI they are:

Iran's hardline president Mahmoud Ahmadinejad has dismissed fresh UN Security Council sanctions imposed on his country this week over its nuclear programme as "waste paper". But the various measures are bringing the Iranian economy to its knees.

An ever growing number of foreign banks have severed ties with Tehran, denying credit letters to companies that do business with Iran. The countries include China, which has until now taken a lenient approach to Iran's uranium enrichment programme.

At the beginning of the year, the four main Chinese banks, which number among Iran's principal commercial partners, decided to freeze relations with Iranian firms, losing deals worth millions of dollars.

Iran's car industry has been the first to feel the effects of the Chinese move.

"The boycott put in place by Chinese banks has scuppered a deal that we were due to sign with the Chinese automobile industry," Manoucher Mantechi, managing director of Iran's main car manufacturing group, Iran Khodro, said in February.

The deal, which China pulled out of, would have brought 300 million euros of Chinese capital into Iran.

Another deal, between Iran's Pars Oil and Gas company and its Chinese counterpart was due to be signed on 27 February, but the Chinese delegation failed to show up. Banks in Malaysia and Singapore have decided to halt all...

...commercial dealings with Iran, while in Europe the measures adopted by various governments appear in some cases to be harsher than the UN sanctions.

On Monday, the UN Security Council authorised the inspection of cargo suspected of carrying prohibited goods, the tighter monitoring of Iranian financial institutions and the extension of travel bans and asset freezes, after Iran failed to comply with its requests to suspend uranium enrichment activities.

The latest sanctions follow ones imposed on Iran in 2006 and 2007. Among the first European credit institutions to boycott Iran were the Union of Swiss Banks, Credit Suisse, and Iran's key trading partner Germany's Deutsche Bank and Dresdner Bank.

Following these measures, Germany's exports to Iran fell 16 percent in 2007. Italy's export credit agency Sace, has also stopped covering companies that intend to operate in Iran. Sace has given Iran 6 on a risk scale that runs from 1 to 7.

Since conservative Nicolas Sarkozy was elected France's president last year, his country's official position towards Iran and its nuclear programme has hardened. He has pushed for the European Union to adopt a package of sanctions gainst Iran, while France's main credit insitutions, such as BNP Paribas and Union de Credit Agricole have begun to turn away clients who invest in Iran.

Most banks in the Gulf have considered it wise to follow the example of western countries. The credit institutions of the United Arab Emirates, the second most important economy in the region, after Saudi Arabia, has stopped issuing credit letters to Iranian companies.

The National Bank of Fujairah, based in Dubai, stated in recent weeks that due to "the uncertain situation" in Iran it was cutting off commercial ties with the country.

In Bahrain, the Ahli United Bank has severed all relations with Iran, following pressure from the government.

In this scenario, the United States has shown itself to be taking a "hardline" approach with Tehran. Last October, Washington included four Iranian banks (Melli, Mellat, Saderat and Seph) in its blacklist of financial institutions with which it is forbidden to trade.The World Bank's decision to suspend payment of 5.4 million dollars was the first catastrophe for Iran.

It received a further blow when just a few days ago, the US Treasury Department announced it was launching an investigation into whether Iran's central bank was helping the country's credit institutions to avoid international economic sanctions.

If the results of the probe are positive, even stiffer sanctions will be imposed.The Iranian economic situation has become critical.

With the progressive disappearance of foreign capital, inflation is hitting a new record each month, and so is unemployment. Iranian economist Mohammad Gholi Yousefi, while speaking in Tehran to Iranian news agency Iskanews, defined Iran's economic situation as "extremely critical".

"Sanctions have stopped foreign investments and have forced the fleeing of local capital," he said.Yousefi's worries are shared by Tahmaseb Mazaheri, head of Iran's central bank.

"The vertiginous increase in money circulation has increased the levels of attention, triggering inflation", warned Tahmaseb, speaking to Iranian daily Etemad Melli. According to the latest official data, Iran's money supply has increased by 48.8 percent, pushing inflation up to 17.5 percent. But according to non-Iranian sources, inflation is running above 25 percent.

Ouch.