Iran president warns of 'war situation' as sanctions resume

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An Iranian checks various currency rates at an exchange shop window in downtown Tehran, Iran, Monday, Nov. 5, 2018. Iran greeted the re-imposition of U.S. sanctions on Monday with air defense drills and a statement from President Hassan Rouhani that the nation faces a "war situation," raising Mideast tensions as America's maximalist approach to the Islamic Republic takes hold. (AP Photo/Ebrahim Noroozi)

The U.S. re-imposed all sanctions Monday on Iran that once were lifted under its 2015 nuclear deal with world powers, grinding further down on the Islamic Republic's already-ailing economy in what President Hassan Rouhani described as a "war situation" now facing Tehran.

Iran ran televised air defense drills showing soldiers cheering the downing of a drone, but otherwise held back from any military response over U.S. efforts to curtail what Washington calls its "malign activities" across the Middle East. While previously warning it could ramp up its nuclear program, Iran still honors the atomic accord now limiting its enrichment of uranium, according to the United Nations.

As Iranian officials struck a martial tone, the strain could be felt on the streets of Tehran. It lurked in shops emptied by the country's rapidly depreciating currency. It could be felt in the lines at currency exchange shops. And it could be heard in the stress of the voices of people struggling to buy medicine.

"When the dollar rate went up, prices for medicine went up by 80 percent," said a man who identified himself only as Amidi, who suffers from mental illness and has a son with cancer. "I can't buy my own medicine anymore. I haven't taken my medicine for two months, because I can't afford it."

The U.S. Treasury Department imposed penalties on more than 700 Iranian and Iranian-linked individuals, entities, aircraft and vessels in the new sanctions. Among those are 50 Iranian banks and subsidiaries, more than 200 people and ships, Iran's state-run airline Iran Air and more than 65 of its planes.

The new sanctions particularly hurt Iran's vital oil industry, which provides a crucial source of hard currency. U.S. Secretary of State Mike Pompeo told journalists in Washington the sanctions already had cost Iran the sale of over 1 million barrels of crude oil a day.

"Our objective is to starve the Iranian regime of the revenue it uses to fund violent and destabilizing activities throughout the Middle East and, indeed, around the world," Pompeo said. "The Iranian regime has a choice: It can either do a 180-degree turn from its outlawed course of action and act like a normal country, or it can see its economy crumble."

The administration of President Donald Trump, who campaigned on a promise of tearing up the nuclear deal, insists it does not seek "regime change" in Iran through the sanctions. It says It wants Iran to radically change its policies, including its support for regional militant groups and its development of long-range ballistic missiles.

However, Trump's personal lawyer Rudy Giuliani and his national security adviser John Bolton both have given speeches advocating overthrowing Iran's theocratic government.

Analysts feared in the run-up to the sanctions that global oil prices could spike on tight supply and increasing demand. However, the Trump administration allowed some of its allies — Greece, India, Italy, Japan, South Korea, Taiwan and Turkey — as well as rival China to continue to purchase Iranian oil as long as they work to reduce imports to zero. That caused prices of benchmark Brent crude to dip down from over $80 a barrel in recent days. It traded up over $73 a barrel Monday after the sanctions took effect.

"We have the toughest sanctions ever imposed but on oil we want to go a little bit slower because I don't want to drive the oil prices in the world," Trump said on Thursday. "I could get the Iran oil down to zero immediately, but it would cause a shock to the market."

Rouhani, whose signature achievement was the nuclear deal, promised that Iran would still be able to sell its oil on the international market. Its national oil company has started selling crude oil to private companies who then can sell to anonymous buyers abroad as a means to get around the sanctions.

"We are in an economic war situation. We are standing up to a bullying enemy," Rouhani told government officials in televised remarks, invoking Iran's ruinous 1980s war with Iraqi dictator Saddam Hussein. "Yesterday, Saddam was in front us; today Trump is front of us. There is no difference. We must resist and win."

Iranian state television broadcast video of air defense systems and anti-aircraft batteries in two-day military maneuvers underway across a vast stretch of the country's north. It included surface-to-air missiles shooting down a drone.

Iran is already in the grip of an economic crisis. Its national currency, the rial, now trades at 150,000 to one U.S. dollar; a year ago, it was about 40,500 to $1. The economic chaos sparked mass anti-government protests at the end of last year, resulting in nearly 5,000 reported arrests and at least 25 people being killed. Sporadic demonstrations still continue.

Gholamali Khoshroo, Iran's U.N. ambassador, accused the U.S. of "brazenly and boldly" violating a U.N. Security Council resolution that unanimously endorsed the nuclear deal by re-imposing sanctions, and he called for "a collective response by the international community."

Chinese Foreign Ministry spokeswoman Hua Chunying said China regretted the U.S. decision, adding the accord "should be comprehensively and effectively implemented" despite the fact that the United States pulled out of it in May.

European nations still a part of the nuclear deal have sought to offer protection for its firms to continue trading with Iran. However, many international firms already have backed out of the country, fearful of facing American sanctions.

That fear also has kept shoppers out of the stores in Tehran.

"Check the shops here one by one. There are no customers," said Hossein Ahmadi, who sells purses. "People have kept their money for rainy days out of fear of sanctions."

Meanwhile, there are fears of other threats. Iran's Telecommunication Minister Mohammad Javad Azeri Jahromi and his deputy, Hamid Fatahi, both tweeted about a cyberattack targeting the country's communications infrastructure, without elaborating. They blamed Israel for the attack and both referenced Stuxnet, which destroyed thousands of centrifuges involved in Iran's contested nuclear program in 2011. Stuxnet is widely believed to be an American and Israeli creation, though neither country has acknowledged being behind the attack.

Israel's Foreign Ministry declined to comment on the Iranian claim. Last week, Gen. Gholam Reza Jalali, the head of country's military unit in charge of combating sabotage, said Rouhani's cellphone was tapped recently.

Israeli Prime Minister Benjamin Netanyahu, a longtime foe of Iran, lauded the sanctions as "historic," saying they will "strangle" what he described as Iranian state-sponsored terrorism. Defense Minister Avigdor Lieberman tweeted that the U.S. decision to restore sanctions "is the sea change the Middle East has been waiting for."

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Gambrell reported from Dubai, United Arab Emirates. Associated Press writers Matthew Lee in Washington, Tia Goldenberg in Jerusalem, Edith M. Lederer at the United Nations, and Amir Vahdat and television producer Mehdi Fattahi in Tehran, Iran, contributed.