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New U.S. Economic Sanctions Against Iran Will Backfire

New America Media, News Analysis, William O. Beeman Posted: Sep 24, 2009

The U.S. Congress, with the support of the Obama administration, may think it is getting tough with Iran through a series of resolutions supporting increased economic sanctions against the Islamic Republic. The effect of these measures will be exactly the opposite of what Congress intends. In fact, besides having no tangible effect, they are actually being welcomed by Irans leaders.

The U.S. sanctions provide cover for stern, unpopular economic measures the Iranian government wants desperately to enact, but cant in the current political climate. Having the United States to blame makes these moves justifiable to the restive Iranian public, already in turmoil over the contested July 12 presidential election.

The most foolish of the U.S. measures is a proposed resolution to embargo gasoline imports to Iran. Lobbyists who oppose Iran and its policies have told Congress that Iran does not produce enough gasoline for its internal needs, and must import it from abroad. This is true.

What the U.S. Congress does not understand, however, is that the Iranian government subsidizes the gasoline it imports so the cost to the public is roughly 10 cents per liter, or just short of 40 cents per gallon. The cost is ruinous and the government has acted to curb the costs. In 2007 the government imposed rationing on the public -- 100 liters per month for individuals and 600 liters per month for taxicabs and other transport vehicles. Moreover, a program of equipping vehicles for natural gas is well underway. The free market is also active. For those who need more than the allotted 100 liters of gasoline, it can be purchased on the open market for approximately $2 (U.S.) per gallon.

The Iranian government aims to completely eliminate gasoline imports by 2013, and it is making significant progress toward that goal. In order to progress, they would like to introduce further rationing, and transfer gas purchases gradually to free-market prices. However, they know that they will meet tremendous public resistance. When rationing was initially introduced, there were public protests, and threats of public transportation strikes.

In this light, the U.S. Congress call for sanctions allows the Iranian government to further ration gasoline and blame America for the need to do it.

Of course, American calls for an embargo are futile anyway, and the Iranian leaders know very well that pointing fingers at the United States to justify rationing would be a cynical charade. Gasoline is sold through independent brokers worldwide. These are private entrepreneurs operating under very few restrictions. The idea that any U.S. measure would stop gasoline imports into Iran is a practical absurdity, short of blockading the Straits of Hormuz, the entrance to the Persian Gulf.

Other sanctions have made life somewhat more uncomfortable for the Iranian middle and lower economic groups, but they have not stopped banking or trade. Anything available in the United States is also available in Iran, albeit at elevated prices. When prices go up in Iran due to inflation resulting from bad government economic policies, once again Iranian leaders blame the United States.

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