How could the expansion of UN sanctions affect Iran’s domestic affairs?
A. Iran is conducting negotiations with the World Trade Organization (WTO) for membership since 2005. Moreover, although Iran has a government-led economy, economic liberalization and the privatization of many state enterprises have expanded the number of foreign firms operating in the Islamic Republic. Foreign direct investments have similarly grown from $ 4.2 billion in 2005 to nearly $10 billion last year. But since late 2006, the specter of further sanctions and the actual increase in financial sanctions (two of Iran’s major banks – Bank Melli and Bank Mellat – are now blacklisted in the European Union) is shaking investor and consumer confidence. The price spikes in crude oil have boosted petrodollars that the Iranian government receives, but that has left the country with an annual inflation rate of over 30% because of excessive public spending. At the moment, it is the Islamic Republic’s lower and middle classes that are deeply affected from the rapid inflation. Looking at this
