For Fatemeh, the pill she takes twice a day in her home in Iran means the difference between life and death. Earlier this summer when she contacted her friend Mohammad in the US to say she was running out of the medicine due to a shortage, the obvious thing for her fellow Iranian to do was to order it from the chemist next door and have it shipped directly to Iran. To the dismay of Fatemeh and Mohammad, the order was rejected because of US sanctions on trade with Iran.

This week, Standard Chartered bank was accused by US regulators of scheming with Iran to hide transactions, an accusation it denies. While the sanctions focus may currently be on big institutions, in the eyes of ordinary Iranians, it is they who bear the brunt.

"My friend suffers from Brugada syndrome [a heart condition] and has abnormal electrocardiogram and is at risk of sudden death," said Mohammad, who lives in Moorhead, Minnesota. "There is one drug that is very effective in regulating the electrocardiogram, and hence preventing cardiac arrest. It is called quinidine sulfate and is manufactured in the US."

Mohammad ultimately circumvented the problem by having the medicine ordered to his home address and sent to Iran through friends. "By the time she got the pills, her own supply was finishing within four days, what if we couldn't send them in time? Who would be responsible if anything had happened to her?" he asked.

With the latest embargo placed on the importing of Iranian oil, sanctions are now tighter than ever. Western officials argue that sanctions are aimed at punishing the Iranian regime in the hope of forcing it to comply with international rules over its disputed nuclear programme, but many Iranians see things differently.

"Sanctions are affecting the entire country, but it is the people that bear the brunt and have the least ability to protect themselves from this pressure," said Trita Parsi, president of the National Iranian American Council and the author of the book A Single Roll of the Dice: Obama's Diplomacy with Iran. "What is most concerning is that it is now increasingly clear that the people are the target," he said.

According to Parsi, those advocating the punitive measures hope that pressure on the people will translate into pressure on the government. "That works in theory – in democracies. But in a non-democracy, such as Iran, the ability for people to pressure their government is limited," he said. "Many in Washington acknowledge that we are conducting economic warfare. That means the entire Iranian economy is the battlefield – and ordinary Iranians are [seen as] enemy combatants."

As sanctions have started to take their toll, prices of fruit and sugar, among other staples, have soared – in some cases showing three- and four-fold increases. The latest controversy surrounds long queues for discounted poultry, an essential ingredient of Persian food, which has seen its price double since last year, causing what has been dubbed a "chicken crisis" and prompting demonstrations.

Iran's Haemophilia Society recently blamed the sanctions for risking thousands of children's lives due to a lack of proper drugs, the opposition website Rahesabz reported.

Sanctions, too, are compounding the country's economic woes, sending the national currency falling to a record low and making dollars hard to come by.

The west says sanctions are the only option left, other than war. But Parsi said: "That is patently false. It is the pro-war elements that are propagating the idea that the choice is between war and sanctions. The type of patient and persistent diplomacy that has resolved issues like this in the past is yet to be fully explored."

Measures imposed on Iran's central bank, cutting it off from the world, have caused grave problems for ordinary Iranians as well as opposition activists because it is the only official channel for them to transfer money abroad.

"Those who carry on despite hardships inside the country are also feeling more and more isolated. Activists, like regular Iranians, cannot use banks to transfer funds for conference participation, hotel reservations and to attend training workshops abroad," said Sussan Tahmasebi, a prominent Iranian women's rights activist who worked on a recent report called Killing Them Softly: The Stark Impact of Sanctions on the Lives of Ordinary Iranians.

"As a result of these [western] policies, ordinary Iranians are finding themselves caught up in the sanctions mess," she said. "In effect, the banking sanctions are forcing Iranians to rely on a cash-based economy, making them dependent on black marketeers for the transfer of funds to cover legitimate expenses, such as educational and health costs."

Activists say that, unlike ordinary people, the regime can find a way out of banking difficulties with help from its proxies.

Sanctions are also affecting Iranians outside the country. One Iranian who is a resident of the US said her bank account was closed recently because of a "new policy forbidding the banks to work with countries that expose them to money laundering".

Speaking on condition of anonymity, she said: "I am living in this country [US], working and paying tax like others. I believe this is a kind of discrimination."

• Some names have been changed to protect people's identities