New signs are emerging that international sanctions are taking a deepening toll on Iran's economy — putting billions of dollars in oil money out of the government's reach. Yet there is no indication the distress is achieving the West's ultimate goal of forcing the Islamic Republic to halt its nuclear program.
Iran has proved adept at working around sanctions and if oil prices don't plummet, U.S. analysts say the country probably has enough economic stamina to reach what the West suspects is its true intention — producing nuclear weapons.
"They can hang on for a long time," said Steve Hanke, a professor of applied economics at Johns Hopkins University who follows Iran's economy. "The sanctions as a deterrent for nuclear ambitions are more or less futile because all the experts will tell you they can (make a weapon) in a couple years."
The piles of frozen cash accumulating in foreign accounts are almost certainly cutting into Iran's accessible foreign reserves — money that can be critical to pay for imports to Iran. If foreign reserves run short, it could also limit Iran's ability to prop up the rial and keep it from collapsing.
Mark Dubowitz, director of the Foundation for Defense of Democracies and an advocate of tougher sanctions who has testified before Congress, said the amount of accessible reserves is "the single most important piece of intelligence that U.S. policymakers today need to know." He said that will determine whether "the Iranians drop dead economically before or after they reach undetectable nuclear breakout."
A widely cited report last month by the Washington-based Institute for Science and International Security concluded that Iran will be able to produce enough weapons-grade uranium by mid-2014 for a nuclear breakout, or a quick dash to a bomb, possibly within weeks. The breakout could be so fast that international watchdogs and Western intelligence might not be able to detect it.
Proponents of sanctions hope that the drag on the economy will force Iran to switch course. But trying to discern the true dimensions of the economic impact is almost impossible because authorities either release data with long lag times or do not report numbers accurately.
Outside sources of information are sparse.
The International Monetary Fund estimated foreign reserves were down to $80 billion in March from $96 billion a year earlier. The $80 billion is still a healthy level, but it's not clear how much of the money is accessible and how much is frozen in accounts overseas by sanctions.
Economic Research firm Roubini Global Economics and Dubowitz's Foundation for Defense of Democracies assessed in a new draft report that $30 billion to $50 billion of reserves is accessible. But the figures cannot be independently verified.
Still, analysts say Iran's economy has proved so far to be resilient and flexible enough to offset some sanctions damage. And the rial's devaluation has one advantage — it has made exports cheaper and thus more appealing. That has helped the country diversify its exports and become less reliant on sanctioned oil.