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Yesterday, I posted an Explainer on the Iranian political system. Today's post focuses on the sanctions imposed by the United Nations, the United States and the European Union. It also focuses on the impact of such sanctions on the floundering Iranian economy.

Read The Iran Explainer: Backgrounder on Political System

A Brief History of Sanctions against Iran

Punishing Iran for its consistent refusal to stop its nuclear weapons programme, the United Nations imposed punitive sanctions, which are in addition to the sanctions imposed by the European Union and the United States.

The UN sanctions prevent all members and international financial institutions from entering into new commitments for grants, financial assistance, and concessional loans, to the Iran, except for humanitarian and developmental purposes. The UN ratified four rounds of sanctions against Iran between 2006 and 2010; these sanctions include a ban on the supply of heavy weaponry and nuclear-related technology to Iran, a block on Iranian arms exports, and an asset freeze on key individuals and companies, and mandates cargo inspections to detect and stop Iran’s acquisition of illicit materials.

The EU imposed its own restrictions on trade in equipment which could be used for uranium enrichment and put in place an asset freeze on a list of individuals and organizations, who it believed, were helping advance the Iranian nuclear programme. In 2011, the EU also banned the export to Iran of key equipment and technology for the refining and production of natural gas.

In 2012, the EU, which until then accounted for about 20% of Iran’s oil exports, banned the import, purchase and transport of Iranian crude oil. It also froze assets belonging to the Central Bank of Iran, and banned all trade in gold and other precious metals with the bank and other public bodies. It also banned the import, purchase and transport of natural gas from Iran.

As for the U.S. sanctions, they have been in place since 1980. The two countries have had no diplomatic relations since 1980 after the U.S. embassy in Tehran was stormed by Islamist students during the Islamic Revolution. (The 2012 Oscar Award winning film, Argo¸ revolved around this incident.) The U.S. imposed successive rounds of sanctions for Iran’s support for international terrorism, human rights violations and refusals to co-operate with the IAEA.

The U.S. sanctions also ban almost all trade with Iran, including purchase and sale of energy resources. However, the sanctions carry exceptions only for activity “intended to benefit the Iranian people”, including the export of medical and agricultural equipment, humanitarian assistance and trade in “informational” materials such as films.

Impact of sanctions in a nutshell

As always I have used pretty simple language.

~~This weekend, either on Saturday or Sunday~~, Early next week I will post the third part of this four-part series on the Iranian nuclear deal.

16 July 2015

The Iran Explainer: Backgrounder on Iranian Polity

In a major breakthrough, Iran and the P+1 agreed, on 15 July 2015, on a comprehensive nuclear deal, which is designed to halt advancements in Iran’s nuclear programme in exchange for lifting economic sanctions and bringing Iran back into the global political and economic mainstream.

P+1 represents six of the world’s most powerful nations – Britain, China, France, Russia, the United States (permanent members of the UN Security Council) and Germany.

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The original name of the nuclear deal is ‘Joint Comprehensive Plan of Action (JCPOA)’. The official document detailing the JCPOA uses E3/EU+3 (China, France, Germany, the Russian Federation, the United Kingdom and the United States) to describe the negotiating parties that sat at the table with the Islamic Republic of Iran.

In a multi-part explainer series, I will focus on this landmark nuclear deal. In the first part of this Explainer on Iran, I will focus on the Iranian political system.

Brief Backgrounder on Iranian Political System

Iran, the world’s largest Shia Muslim nation, is a powerful force in the Middle East. Iran has the world’s fourth largest reserves of oil and second largest reserves of gas, which make it a formidable power in the global energy market. In a world that is ever thirsty for energy, Iran is often seen as a force with a huge bargaining power.

Iran and its Neighbourhood

Ayatollah Ali Khamenei

Iran

, which sees itself as a regional superpower, aims to become the voice of the highly divisive Islamic world, a status that is now claimed, for all practical purposes, by Saudi Arabia.

In 1979, Iran witnessed an Islamic Revolution, which ousted the pro-West monarchy. The Islamic Revolution brought the clergy to power, which used all possible administrative means to purge the country of pro-West elements.

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Even for an Islamic country, Iran has a highly complex and deeply hierarchical political governance system. The system combines Islamic theocracy with democracy. The State’s Supreme Leader is the Ayatollah, who is appointed by an elected body. For all practical purposes, the Supreme Leader is accountable to none.

With a Clerical Administration in power, the system is peopled in large numbers by ultra-orthodox religious hardliners. In a closely-knit system such as the Iranian Clerical polity, it is important to populate it with the ‘right’ kind of people – people who are loyal to the Supreme Leader and the ‘political and religious beliefs’ that define the State.

To this end, the polity is peopled in large numbers by ultra-orthodox religious hardliners. Religion plays a dominant role in the way the country is governed; in fact, it would not be an exaggeration to say that religion colours everything about the behavior of the Iranian State – towards its citizens and towards the international community.

It is also true that the ultra-conservative Clerical regime is torn by various factions, which are pulling in different directions. The heroes of the Islamic Revolution still control all the key institutions of the State machinery. The hardliners control the judiciary, while the Council of Guardians is the watchdog of the country’s constitution. The hardliners also rule the roost when it comes to controlling other powerful institutions like the Revolutionary Guards and the Ansar-e-Hezbollah (a sort of Islamic vigilante).

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When it comes to domestic affairs, the Clerical administration, dominated by hardliners, uses violence, intimidation, arbitrary detention, and extreme religious laws to silence the voice of its political opponents. In simple words, a once-liberal Iran has now become a laboratory in which the State uses draconian laws to circumvent any kind of dissent against its gross acts.

Since 1979, the Iranian Clerical regime has exhorted the ordinary Iranians against the United States, who it calls “The Great Satan”. In fact, the post-Revolution generation of Iranians, also called the War Generation (born during the 1980-88 war between Iran and Iraq) displays a marked resentment toward the U.S. for its alleged duplicity. They accuse the U.S. of having turned a Nelson’s Eye when Iraqi dictator Saddam Hussein used chemical and biological weapons against Iran during the eight-year war.

Tomorrow: A Brief History of Sanctions in The Iran Explainer: History of Sanctions.

12 July 2015

Sunday Reads

Return of the Sunday Reads.

The rise and fall of Quaaludes. (BBC)

The lost boys of Mogadishu. (AlJazeera)

How leaders can remain optimistic during tough times. (Fortune)

App to the mark. (New Indian Express)

Read The Explainer: Cash Reserve Ratio.

25 June 2015

Things You Should Know - Episode XIX

This installment comes after several weeks.

This day, i.e., June 25, 32 years ago, India, led by Kapil Dev, won the Cricket World Cup for the first time. In the final of the third World Cup, India defeated two-time champion West Indies.

The Parliament of India comprises the President, the Rajya Sabha (Upper House, or House of Elders), and the Lok Sabha (Lower House, or House of Representatives).

The term ‘Green Revolution’ was first used in 1968 by former United States Agency for International Development (USAID) director William Gaud.

A. S. Kiran Kumar, Chairman, ISRO

Alur Seelin Kiran Kumar is the Chairman of the Indian Space Research Organisation (ISRO). He obtained his Physics (Honours) degree in 1971 and Master’s degree in Electronics in 1973 from Bangalore University. Two years later, he received M. Tech degree in Physical Engineering from the Indian Institute of Science, Bangalore. He began working for ISRO by joining Space Applications Centre (SAC) in 1975. Later, he became its Associate Director and in March 2012 took over as the Director of SAC.

With 610,577 inhabitants as of the 2011 census, Sikkim is the least populous state in India and the second-smallest state after Goa in total area, covering approximately 7,096 km. It also has the only open land border between India and China.

14 June 2015

The Explainer: Zimbabwe Currency Crisis

Zimbabwe is in news, as usual, for all the wrong reasons. Zimbabweans will start exchanging 'quadrillions' of local dollars for a few US dollars next week as the country's government, led by President Robert Mugabe, discards its virtually worthless national currency. For example, bank accounts with balances of up to 175 quadrillion Zimbabwean dollars will be paid U.S.$5 while those with balances above 175 quadrillion dollars will be paid at an exchange

Robert Mugabe has ruled Zimbabwe with an iron fist.

rate of U.S.$1 for 35 quadrillion Zimbabwean dollars.

I became interested in African countries, like Zimbabwe, Namibia, and South Africa when I was around 13. A land's physical geography, history, people, culture, and polity have always fascinated me.

I share an Explainer on Zimbabwe's Currency Crisis.

What do we know about Zimbabwe's political system?

The history of Zimbabwe since its independence from Great Britain in 1980 runs parallel to the history of the presidency of Robert Mugabe, one of the world's longest serving heads of state.

Under Mugabe, Zimbabwe has turned into an international basket case. Polity-wise, Mugabe has, with an iron fist, turned the country's sham democratic system into a one-man rule. There is press censorship, political repression, and arbitrary detention of political rivals. In fact, several of Mugabe’s biggest political rivals have been arrested on trumped charges, like treason.

Why did the Zimbabwean economy collapse?
The Reserve Bank of Zimbabwe (RBZ) stopped issuing currency in 2009; the last time the RBZ printed a currency banknote—100 trillion Zimbabwe dollars—was also its biggest banknote. The purchasing value of the currency had plunged so much so that it was issued with expiry date. By the way, the 100 trillion Zimbabwe dollars banknote was barely sufficient to buy ten decent meals. The RBZ has announced a new scheme to convert currency: a Zimbabwean would get one U.S. dollar in exchange for 100 trillion Zimbabwe dollars.

Robert Mugabe has systematically, and, to the dismay of ordinary Zimbabweans, 'successfully' destroyed the country's economy. He pursued radical and arbitrary land reforms, which saw the transfer of land from white farmers to blacks. Like his other corrupt policies, the end beneficiaries here were not the poor Zimbabweans but Mugabe’s political supporters. (Come to think of it, politicians everywhere are the same.)

Let me add that while the white farmers had great interest in farming (it was their livelihood), the blacks who secured control of such land (from the whites) had little interest in farming; farming collapsed and the hitherto employed farm labourers (almost exclusively blacks) were rendered unemployed. No employment (meaning no income generation) and steep decrease in farm output (leading to high inflation) have piled untold misery on the hapless Zimbabweans.

To this add another economy misstep: until early 2009, the RBZ printed money to fund the high budget deficit, which caused hyperinflation. Today, Zimbabwe has the world’s highest inflation rate – about 500 trillion per cent!

As hyperinflation began to eat into the purchasing value of the Zimbabwean dollar, the Robert Mugabe Government allowed the U.S. Dollar, South African Rand, and the Botswana Pula to be used as legal currency in Zimbabwe.

At the beginning of 2015, the Zimbabwean Government expanded its basket of acceptable currencies to include the Indian Rupee, Chinese Renmimbi, Australian Dollar, and the Japanese Yen.

Foreign investment has dried up. Unemployment is peaking. Power supply is almost non-existent. Infrastructure is crumbling. In short, Robert Mugabe has destroyed Zimbabwe.

So, this is the story behind the currency crisis in Zimbabwe.