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Iran Resorts To Ill-Defined Packages, Rationing To Tackle Impact of Sanctions

In this March 19, 2018 photo, Iranians shop for hyacinths, garlic, sprouts and other items used to celebrate the Iranian New Year, ahead of the holiday, at the Tajrish traditional bazaar in northern Tehran, Iran

The head of Iran's Planning and Budget Organization, Vice-President Mohammad Baqer Nobakht says his organization will introduce five economic packages to tackle the impact of renewed US sanctions and to control drastic fluctuations of the exchange rate.

Meanwhile, administration-owned daily newspaper Shahrvand on Saturday August 9 has quoted Anoshirvan Mohseni Bandpey, the caretaker of Iran's Ministry of Labor and Social Welfare as saying that the government is considering several plans including the introduction of "electronic coupons" to help the “fair” distribution of essential commodities; euphemism for "rationing."

The Iranian government has allocated 13 billion dollars to providing 25 essential commodities to low-income people during the rest of the current Iranian year in till March, Nobakht told the Iranian Students News Agency on Friday.

The amount would be spent on purchasing essential commodities from abroad based on a subsidized rate of exchange. However, he did not say whether the government is going to purchase the goods, in which case speaking of a rate of exchange would be meaningless, or private companies are going to get the subsidized foreign currency to import the goods.

The latter case, would inevitably give rise to corruption and mishandling of funds in the same way well-connected profiteers benefitted from the foreign currency allocated for imports during May to July 2018, as reported by Iranian media.

Rice, sugar, meat, bread and dairy products are the most important items on the list of essential commodities.

Iranians have been complaining about the shortage and extremely high prices of everyday household necessities in recent weeks.

Although Iran's controlled media say very little about the daunting impact of sanctions, Iranian on social media have been venting their frustration about shortages and high prices in numerous posts that found their way to foreign-based Farsi media, making everyone aware of the seriousness of economic and financial problems in Iran.

Radio Farda receives dozens of messages daily from Iranian citizens via social media and telephone about the skyrocketing prices and lack of goods.

According to Nobakht, the five packages will help low-income workers, government employees, contractors and producers to cope with the impact of sanctions. However, he did not elaborate on the nature of groups vaguely defined as "contractors" and those working for "institutions," probably meaning the armed forces and the religious bureaucracy.

Two more packages are to help producers and government employees cope with fluctuations in the rate of exchange, he said. In the absence of further details this also seems to be a too broad target and can simply mean subsidizing everything while the oil money lasts.

Just a week earlier, Iran’s central bank chief had announced that the oil income and the bank’s foreign reserves should not be spent on subsidizing the national currency. After that announcement, the rial took a further beating on the open market and prices of every-day goods went up.

Nobakht added, "There is also going to be another package to help low-income individuals," adding that the details of this package have not been determined yet.

What the caretaker labor minister revealed in Shahrvand newspaper, could be what Nobakht was talking about, although it could well be yet another plan that would add more ambiguity to the chaos surrounding the Rouhani administration's ad hoc attempts to counter the impact of US sanctions on the economy.

The key to the Labor Ministry's plan is introducing electronic coupons which would enable everyone to buy their ration of essential goods. Last week the parliament ruled out a plan to introduce paper coupons probably fearing the psychological impact of reminding people of the coupons and rationing during Iran's eight-year-long war with Iraq in the 1980s.

"It is on our agenda to issue electronic coupons to everyone in society to enable them to provide for their essential needs," the caretaker minister said.

Earlier, other Iranian officials had talked about cards with microchips; a smarter way to introduce rationing while looking modern.

Following the U.S. withdrawal from the nuclear deal with Iran in May, U.S. President Donald Trump re-imposed the sanctions against Iran that were lifted after the deal was signed in 2015. More sanctions are to come into effect after November 4, targeting Iran's oil and gas exports and banking transactions.

It is not clear whether and how the sanctions would affect the banking operations that would be part of Tehran's effort to import essential commodities.

An unprecedented rise in the rate of exchange of the U.S. dollar against the Iranian currency, the rial, during the past eight months has made life harder for many Iranians and has led to waves of protests that also had political undercurrents.