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FILE: A man counts Iranian rials at a currency exchange shop, before the start of the U.S. sanctions on Tehran, in Basra, Iraq November 3, 2018. Picture taken November 3, 2018. Image Credit: REUTERS/Essam al-Sudani/File Photo

Washington : The United States will continue with its maximum pressure campaign against Iran until Tehran changes its behaviour, and will look for ways to impose even more sanctions, US disarmament ambassador Robert Wood told Reuters on Tuesday.

“We will look to see what more we can do on sanctions,” Wood said as he left the Conference on Disarmament in Geneva, the world’s main nuclear negotiating forum, where he had traded sharp accusations with an Iranian diplomat.

Trump, flanked by Mike Pence (right) and Steven Mnuchin at the White House signs ‘hard-hitting sanctions’ on Iran’s supreme leader. Image Credit: AFP

President Donald Trump on Monday unveiled sanctions on Ayatollah Ali Khamenei and eight senior military commanders that deny him and his office access to financial resources.

Treasury Secretary Steven Mnuchin said financial restrictions would also be introduced against Iran’s Foreign Minister Javad Zarif later this week.

“We will continue to increase pressure on Tehran. Never can Iran have a nuclear weapon. We do not ask for conflict,” Trump said, adding that depending on Iran’s response the sanctions could end tomorrow - or it “can also be years from now.”

“We will continue to increase pressure on Tehran. Never can Iran have a nuclear weapon. We do not ask for conflict,” Trump said, adding that depending on Iran’s response the sanctions could end tomorrow - or it “can also be years from now.”

The latest sanctions follow Iran’s downing last week of a US surveillance drone, worth over $100 million, over the Strait of Hormuz, an attack that sharply escalated the crisis in the Gulf. After the downing of the drone, Trump pulled back from the brink of retaliatory military strikes but continued his pressure campaign against Iran.

What has been the impact of the latest sanctions?

The main impact of the new sanctions may be political. The new penalties are unlikely to have a significant impact on a country that’s already in recession due to stringent US sanctions on its oil sector and has been largely shut out of the global financial system. The US has sanctioned more than 80% of Iran’s economy, according to Secretary of State Michael Pompeo, who is in Saudi Arabia and the United Arab Emirates this week to rally a front against Iran.

However, the overall American sanctions on Iran imposed by Trump have battered nearly all segments of Iran’s economy.

Iran’s economy has been badly affected for several years by sanctions imposed by the international community over the country’s nuclear programme. In 2015, President Hassan Rouhani agreed a deal with the US and five other world powers to limit Iranian nuclear activities in return for the lifting of those sanctions.

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File: This undated US Air Force file photo released on June 20, 2019 shows a photo of a RQ-4 Global Hawk unmanned surveillance and reconnaissance aircraft. The United States launched cyber attacks against Iranian missile control systems and a spy network after Tehran downed an American surveillance drone, according to US media reports. US president Donald Trump secretly authorized US Cyber Command to carry out a retaliatory attack on Iran, The Washington Post reported on June 22, 2019, shortly after the US president pledged to hit the Islamic republic with major new sanctions. Image Credit: Reuters

The following year, after the deal was implemented, Iran’s economy bounced back and GDP grew 12.3 per cent, according to the Central Bank of Iran. But much of that growth was attributed to the oil and gas industry, and the recoveries of other sectors were not as significant as many Iranians had hoped.

The reinstatement of US sanctions last year - particularly those imposed on the energy, shipping and financial sectors in November - caused foreign investment to dry up and hit oil exports.

The sanctions bar US companies from trading with Iran, but also with foreign firms or countries that are dealing with Iran. As a result Iran’s GDP contracted by 3.9 per cent in 2018, according to estimates from the International Monetary Fund. The IMF said in late April that it expected the Iranian economy to shrink by 6 per cent in 2019. However, that projection preceded the expiration of the sanctions waivers.

How has Iran reacted?

Iran on Tuesday sharply criticised new US sanctions targeting the Islamic Republic’s supreme leader and other top officials, saying the measures spell the “permanent closure” for diplomacy between the two nations. Iran’s president described the White House as “afflicted by mental retardation”.

President Hassan Rouhani went on to call the sanctions against Supreme Leader Ayatollah Ali Khamenei “outrageous and idiotic,” especially as the 80-year-old cleric has no plans to ever travel to the United States.

“The futile sanctions against the Iranian leader and the country’s chief diplomat mean the permanent closure of the diplomatic path with the government of the United States,” the Foreign Ministry’s spokesman, Abbas Mousavi, was quoted as saying by semi-official Iranian Students News Agency.

“The Trump government is in the process of destroying all the established international mechanisms for maintaining global peace and security.”

Who do Iranian people blame?

Many blame the US and its maximalist policy on Iran. But alongside Trump, many Iranians blame their own government, which has careened from one economic disaster to another since its Islamic Revolution 40 years ago.

“The economic war is a reality and people are under extreme pressure,” said Shiva Keshavarz, a 22-year-old accountant soon to be married. She said government leaders “keep telling us to be strong and endure the pressures, but we can already hear the sound of our bones breaking.”

Walking by any money exchange shop is a dramatic reminder of the hardships most people are facing. At the time of the nuclear deal, Iran’s currency traded at 32,000 rials to $1. Today, the numbers listed in exchange shop windows have skyrocketed - it costs over 130,000 rials for one US dollar.

Inflation is over 37 per cent, according to government statistics. More than 3 million people, or 12 per cent of working-age citizens, are unemployed. That rate doubles for educated youth.

Depreciation and inflation make everything more expensive - from fruits and vegetables to tires and oil, all the way to the big-ticket items, like mobile phones.

A simple cell phone is about two months’ salary for the average government worker, while a single iPhone costs a 10 months’ salary.

Have ‘war-risk’ insurance premiums spiked?

The cost of insuring Middle East oil shipments is soaring as tensions mount in a region responsible for about a third of all seaborne petroleum. So-called war risk premiums for a standard oil cargo from the Gulf and the tanker hauling it can now cost upwards of $500,000, according to people familiar with the insurance market. Earlier this year, the same premiums would have cost owners less than 1/10 of that.

The vulnerability of maritime traffic to mounting tensions came into sharp focus on Monday when Trump said other nations need to do more to help protect navigation from the Middle East in the wake of six attacks on tankers since early May.

The incidents, which American officials blamed on Iran, prompted an adviser to insurers to classify the entire Gulf as a riskier area for shipping, giving underwriters scope to charge bigger premiums.

“This will get passed on the the customers,” said Sandy Fielden, an analyst at Morningstar Inc.

“Refiners are paying more for crude and they will pass on the cost to customers if they can. If refiners choose not pass that along, their margins would get squeezed.”