Iran facing economic crisis because of sanctions, says Israel

Sanctions against the Iranian regime are pushing the Islamic Republic's economy into crisis, according to key Israeli officials in comments seen as a further indication unilateral military action may have been put on hold.

The Iranian rial fell 5 per cent to a record low against the US dollar on Saturday, according to financial websites. The rial's value has fallen by almost 57 per cent since June last year, leading to big price increases for imports.

Israeli Finance Minister Yuval Steinitz said Iran's economy "is not collapsing, but it is on the verge of collapse". The loss of oil revenue would be up to US$50 billion by the end of the year, he told Israel Radio. "The Iranians are in great economic difficulties as a result of the sanctions."

His comments followed the leak last week of an internal foreign ministry report, which said international sanctions were having a profound effect on Iran's economy and could be destabilising the government. But the measures had yet to persuade the regime to abandon its nuclear programme and, therefore, additional sanctions were needed.

According to an Israeli official quoted in the Haaretz newspaper, Israel wants the European Union to impose more sanctions. The move suggests a distancing by Israel from a military option.

Foreign Minister Avigdor Lieberman said: "The situation in Iran and the feelings of the man on the street is one of economic catastrophe. There's a shortage of basic goods, a rise in crime, and people are trying to flee the country, sending money abroad."