July 2 (Bloomberg) -- Maryam Taghavi is feeding her family more pasta and grinding vegetable filler into her chopped meat as she seeks to cope with international sanctions that are taking their toll on the Iranian economy.
“These days, I mince meat with vegetable protein because we can’t afford as much meat as before,” said the 53-year-old retired accountant and mother of two. Taghavi said her monthly budget of 6,000,000 rials ($488) for food and utilities now “is nothing.”
European Union sanctions against Iran took effect yesterday, banning imports of the country’s crude, restrictions that build on earlier U.S. and United Nations measures limiting trade with the Islamic Republic.
Iran’s economy has deteriorated amid the sanctions, which have weakened the national currency and pushed up costs that were already surging after the government started removing energy and food subsidies a year and a half ago. Inflation accelerated to 22.2 percent in the 12 months ended May 20, the Central Bank said.
The EU embargo on Iranian oil purchases comes as three rounds of negotiations this year between Iran and world powers over the country’s nuclear-enrichment program failed to reach a breakthrough. Iran rejects allegations by the U.S. and its allies that its nuclear program is aimed at developing weapons.
Iranian officials have remained defiant, repeatedly saying the punitive measures won’t make the country abandon its atomic program.
“The Iranian nation will never stop on its path of progress and will stand firmly in the face of all the greedy demands and oppressive sanctions” Vice President Mohammad Reza Rahimi said yesterday, according to the website of state television. “We are faced today with the most severe sanctions and we are asking people to help their officials so that they are not swayed from the path of progress due to some temporary confusion in the market.”
Iranian central bank Governor Mahmoud Bahmani said the country has a “very suitable” $150 billion in foreign currency reserves to help weather the crisis.
“We have programs to fight the sanctions, and we will confront hostile policies,” Bahmani said yesterday, according to the state-run Mehr news agency.
Iranian officials seem to have shelved plans to further increase energy and food prices this year as part of a five-year program started in December 2010 to gradually remove subsidies.
“The adoption of a next step in reforming subsidies by increasing prices has been completely taken off the agenda,” Economy Minister Shamseddin Hosseini said, the state-run Iranian Students News Agency reported yesterday.
The government also said it’s combating high prices and shop owners’ hoarding goods by sending inspectors to the bazaars. Merchants selling goods at inflated prices will be fined and their businesses will be closed if they receive three citations, said Nematollah Torki, Tehran’s deputy governor for planning, the state-run ISNA news agency reported today.
The Iranian rial has lost about half its value on the open market, reaching 19,950 rials to the dollar today from 13,200 on Nov. 2.
Iran’s economy will shrink 1 percent this year, the World Bank said in a June 12 report. The $480 billion economy is expected to contract 0.7 percent in 2013, it said.
Supreme Leader Ayatollah Ali Khamenei told Iranians in a speech marking the start of the March 20 Iranian New Year that the best way to combat the sanctions was to shun imports and buy domestic goods.
Mohammad Mousavi, managing director of a company that imports and manufactures parts for the energy sector, said he’s increasing his focus on local production though “it’s also difficult to produce most of the required industrial items due to sanctions.” Mousavi, a 41-year-old petroleum engineer, said that’s due to a lack of local expertise and difficulties in importing raw materials for manufacturing.
Oil and its derivatives account for nearly 80 percent of Iranian exports and about half of government revenue, according to the U.S. Energy Information Administration, which estimates the country’s 2010 net oil export revenues at $73 billion.
Iran was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year, the Paris-based International Energy Agency forecast in a June 13 report.
Babak Qomi, an importer and distributer of tires for heavy vehicles, said he’s been losing both customers and competitors this year.
“Less customers means less income and profit, and this comes right at a time when the prices of all goods are going up,” Qomi, 30, said, speaking in his office in downtown Tehran.
Qomi, who six years ago imported goods from Germany, Italy and Spain, said trade restrictions have left him with few suppliers willing to do business.
“Now only Chinese companies are willing to trade with Iranians,” Qomi said.
To contact the reporter on this story: Ladane Nasseri in Dubai at firstname.lastname@example.org; Yeganeh Salehi in Tehran via Dubai.
To contact the editor responsible for this story: Andrew J. Barden at email@example.com