Why Iran is pushing back on sanctions

The newest sanctions on Iran would affect its oil and gas industry. Here, a $2 billion Iranian oil refinery in the main industrial Gulf port of Bandar-Abbas.

Jeremy Hobson: A day on which, as usual, about a dozen oil tankers carrying about 15 million barrels of crude passed through the Strait of Hormuz. That's the narrow passageway ships have to go through to get from the Persian Gulf out into the Indian Ocean.

And it has become the center of a dispute between Iran and the United States. Iran is threatening to shut down the passageway if the U.S. goes ahead with a new round of tough economic sanctions.

For more, we're joined by Mohsen Milani. He chairs the department of government and international affairs at the University of South Florida. Professor Milani, thanks for being with us.

Mohsen Milani: Thank you for inviting me.

Hobson: Why are these sanctions so much worse in the eyes of Iran than the sanctions that they've lived with for years?

Milani: The sanctions that they have lived under for the past three decades are fundamentally different than the possibility of imposing sanctions against Iran's central bank and against Iran's oil and gas industry. If they are implemented, I think this would be considered by Tehran -- and they have declared so publicly nothing short of economic war against Islamic republic, because Iran has an oil-addicted economy and an oil-addicted state. And should there be crippling sanctions against Iranian oil industry, that means Iranian economy will suffer severely and also the Iranian state would be deprived of at least one half of its annual revenue.

Hobson: So you're saying that so far, the sanctions that have already been put on Iran have been targeted so as to not to touch the oil industry, but these ones would?

Milani: Absolutely. And I think they would be much more severe, much more crippling and psychologically, I think it's going to be devastating for the Islamic republic and devastating for most Iranians that rely on oil revenue.

Hobson: Explain the state of Iran's economy right now. How are things going?

Milani: Well, as a result of the threat of a new round of sanctions, rial -- the Iranian currency -- was at the lowest ever against the American dollar in the past two or three days. And the Iranian economy is not doing very well; there is corruption at all levels of the government. And I think even if Iran has received quite a bit of oil revenues in the past eight years, that has not translated into a higher standard of living for most of Iranians.

Hobson: Well let's talk about this threat to close the Strait of Hormuz -- what kind of an effect would that have here in the United States?

Milani: Whether it is a bluff or not, I think what Iran is trying to achieve is to cause an increase in the price of oil as a warning to the Europeans that if you join the United States and impose economic sanctions on our oil and gas industry, we will retaliate and then you will suffer because the price of oil will increase substantially. I think Iran also wants to send a clear signal to the Persian Gulf countries that if they participate in this economic sanction, they will pay the price.

Hobson: Mohsen Milani chairs the department of government and international affairs at the University of South Florida. Professor Milani, thanks so much for your time.

Milani: Thank you very much for inviting me.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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