Snap Fact #270 - Iran's Smugglers Feel the Squeeze of Obama Administration & EU Sanctions!

United States President Barack Obama is a master of the long term chess game. People who want instant solutions to long festering problems just don't understand his effective strategy that so often turns out to be the winning one. They are baffled by Obama's clever and patient drive towards a check mate - and when the opposing king ultimately falls they have no idea how it happened. Past SNAP-CAPS have addressed this frequently repeated phenomena. Today's entry is one more example. It is too early to claim the oppositions king, but if one looks they can see the momentum of the game is going in our direction.

Specifically, our President has carefully and convincingly used his gifts of suasion and reason to craft what is arguably the broadest coalition of aligned countries in history. These countries represent all manor of politics, financial interests, and philosophies. They have come together to prevent Iran from developing a deliverable atom bomb that will destabilize the region and endanger the world. Almost the whole world stands together in this effort, not by accident but singularly because of the persuasive leadership of our President. 

There are many signs that the Obama Sanctions are working. Today's SNAP-CAP will address one of these less visible signs that is not making headlines but surely is being recognized by those on the front line, and most certainly is apparent to the citizens of Iran.

A European Union ban on Iranian oil purchases in July has added to the Obama-led trade, banking, and energy sanctions designed to force the Islamic Republic to curb its nuclear program. On July 3, 2012 Iranian President Mahmoud Ahmadinejad has himself admitted that the measures are “the harshest ever imposed on a country” and urged Iranians to keep their “heads high.”One of the things that has made Iranian life tolerable under sanctions has been the flood of smuggled foreign goods. Each year about $5 billion worth of goods are smuggled into Iran. About 80 percent of cell phones sold in the country are brought in illegally. Other smuggled goods include Nike (NKE) shoes, clothes, textiles, cigarettes, wristwatches, and food. Prices of basic goods, including meat, rice, and bread, have spiked as the national currency has lost about a third of its value against the dollar since November, when the U.S. and the EU began to tighten sanctions.

Food has become a safer cargo than manufactured goods since Supreme Leader Ayatollah Ali Khamenei named the 12 months starting March 20 the “Year of Domestic Production and Support for Iranian Labor and Investment.” The Customs and Excise Department says that every $1 billion in smuggled goods costs Iran 50,000 to 60,000 jobs, according to the Mehr News Agency.

Fishermen by day, Iran’s black marketers make the risky two-hour journey on ill-equipped boats across the Strait of Hormuz after dark to Oman to bring back flat-screen televisions, cell phones, food, clothing and other foreign goods. It seems that Iranian smugglers are feeling the pinch of US and EU sanctions as well, and are barely turning a profit. One smuggler who was interviewed said that his profit dropped to $80 per month. To cope with lower profits from rising fuel prices and the weak devalued Iranian currency, smugglers are finding it much harder to pay suppliers, and need to make more trips for more cargo to sell, crossing every other day rather than three or four times a month with the risk of getting caught by Iranian police higher.

With energy and food subsidies gradually being removed as part of a five-year Iranian government plan launched in 2010, the trips have become more expensive for black marketers. Gasoline prices have risen more than fourfold since subsidies were cut. To cope with lower profits from rising fuel prices and the weak devalued Iranian currency, smugglers are finding it much hard to pay suppliers, and need to make more trips for more cargo to sell, crossing every other day rather than three or four times a month with the risk of getting caught by Iranian police higher. Each fishing boat needs 250 liters (66 gallons) of gasoline for a round trip, at a price of about $60. 

One smuggler who was arrested was accused by a judge of damaging the Iranian companies by smuggling in foreign textiles and was fined $765. Apparently smuggling is so pervasive, that despite cracking down extensively on imported goods, the Iranian government can do little to stop it. 

This means that the US and EU tough sanctions against Iran are working efficiently.