Iranian Currency takes the plunge, near collapse

[Caelius]

Source

The Iranian currency fell to a record low on Tuesday as the Islamic republic struggles under the impact of Western economic sanctions and nervous citizens rushed to change their savings into hard currency.

The Iranian government blamed speculators for the rial's collapse and ordered the security services to take action against them.

President Mahmoud Ahmadinejad rejected criticism of his policies and insisted the country could ride out the sanctions, imposed because of Iran's nuclear programme, after the rial lost about a third of its value in a week.

"Enemies have managed to reduce our oil sales but hopefully we will compensate for this," a combative Ahmadinejad told a news conference. He suggested domestic criticism of him was part of a "psychological war" against Iran.

"According to a report from one of the security services, 22 individuals are ringleaders of the recent turmoil in the currency market, and since these individuals are known, security institutions must act," Ahmadinejad said.

The rial tumbled to a record low of around 37,500 to the U.S. dollar in the free market on Tuesday, from about 34,200 at the close of business on Monday, foreign exchange traders in Tehran said. On Monday last week, it traded at around 24,600.

Late on Tuesday, some Iranian media reported that the currency had recovered to around 32,000, but traders contacted by Reuters could not confirm this, saying they had stopped dealing because of the extreme volatility.

The rial's slide suggested the Western sanctions were doing serious damage to the country's economy.

On Sunday, Israeli Finance Minister Yuval Steinitz said Iran's economy was "on the verge of collapse".

By freezing Iran out of the global banking system, sanctions have made it hard for Tehran to obtain payment for its oil exports. Iranians have responded by rushing to change their savings into hard currency, fuelling the rial's slide.

"This is going to cause a shutdown in transactions in Iran. All the main distributors of electronics and household items will be concerned about trading - they'll want to know where the bottom is and how long it will continue," said Mehrdad Emadi, an Iranian-born economic adviser to the European Union who is based in Britain.

With Iran's official inflation rate running at around 25 percent, the rial's weakness threatens to increase the costs of industrial companies, worsening a recent spate of job losses in addition to reducing living standards.

SANCTIONS IMPACT

But Ahmadinejad insisted on Tuesday that the impact of the sanctions had been manageable. Iran's imports totaled $26 billion in the first half of this year, down only moderately from $29 billion in the same period last year, he said.

"The central bank has provided all the currency for these imports," he said.

Many businessmen and ordinary citizens in Iran say the government is at least partly to blame for the currency crisis, and Ahmadinejad has been criticized for it by political enemies in parliament.

The rial has been depreciating for over a year and has lost about two-thirds of its value since June 2011. Its losses accelerated in the past week after the government launched an "exchange centre" to supply dollars to importers of basic goods; businessmen say the centre failed to meet demand for dollars.

"Eighty percent of our economic issues and problems are related to the system of management," parliamentary speaker Ali Larijani said on Tuesday, quoted by the Fars news agency.

Parliamentary news agency ICANA quoting Mohammad Bayatian, a member of parliament's industry and mines committee, as saying enough signatures had been collected to call Ahmadinejad to parliament for questioning over the rial's fall.

Iranian university students protested in front of parliament on Monday over a lack of government-subsidized dollars for their studies abroad, the Iranian Labor News Agency reported.

However, there is no clear sign that the criticism has reached a level that would force any change in the government.

The Iranian government has not released data showing the impact of the sanctions on living standards, but it can be glimpsed 150 kilometers (100 miles) across the Gulf in Dubai, traditionally a major centre of trade with Iran.

At the Dubai Creek, a crowded waterway from which motorized dhows ship goods to Iran, merchants said Iranian business had fallen off dramatically in the last two weeks.

"Everyone is losing; traders from Iran are losing because of the depreciating rial, and we're losing here because Iranians can't afford to buy our products any more," said Ahmed Mohammed Amin, 53, an Iranian trader who has lived in Dubai for 40 years.

"These are our worst days."

The Rial has been falling like a rock for the last two weeks, though this is merely the climax of what has been going on for at least the last 9 months. In the first months of 2012 one USD traded for around 10,000 Rials, this slowly crawled up to 18,000 around the beginning of summer, and a month or so ago reached about 22,000 Rials per dollar. The fall to ~35,000 Rial per dollar the currency has taken in the last 10-14 days is just downright catastrophic.

[Armenum]

It's becoming similar to Iraq under the heavy sanctions. I wonder what this will mean for the upcoming presidential elections in Iran and if this may embolden Israel and/or the US to strike.

[Axeman]

It's becoming similar to Iraq under the heavy sanctions. I wonder what this will mean for the upcoming presidential elections in Iran and if this may embolden Israel and/or the US to strike.

That would be a great way for them to say "we were right all along told you", to the Iranian people. Nothing makes people forget how horrible their economy is like a foreign military occupying your country, or attacking it.

[hellheaven1987]

Who knows what would happen next; perhaps that just solidify Iran's will to have nuclear weapons since West is doing exactly what Iranian government has propagandized about.

[brandbll]

Well hopefully they've learned a valuable lesson here: happens when you party naked.

[Condottiere 40K]

Less painful than an invasion.

[sabaku_no_gaara]

"According to a report from one of the security services, 22 individuals are ringleaders of the recent turmoil in the currency market, and since these individuals are known, security institutions must act," Ahmadinejad said.

What do they mean with that? Is he blaming 22 traders and is he going to assasinate them or something?

[John ''True Grit'' Wayne]

Ordinary people will starve and suffer and still the country will go after nuke tech either for a bomb or for energy.
Why cant we just bribe them to stop?Works in Total War sometimes ha ha

[Grouchio]

Ordinary people will starve and suffer and still the country will go after nuke tech either for a bomb or for energy.
Why cant we just bribe them to stop?Works in Total War sometimes ha ha

When we could spend that bribing money on fixing our deficit?

[ivan_the_terrible]

Exactly. The rhetoric is all about bringing the Iranian regime into line, but the regime doesn't suffer -- regular people do.

I'm not sure what the point of sanctions is. Is it to make life for regular people miserable enough so that enough of them feel like they have nothing to lose, and attempt to bring down the regime? Not only is that morally irresponsible, but it's also pragmatically irresponsible, especially when one of the major arguments against nuclear weapons is that they can end up in the wrong hands. Using sanctions to undermine stability only increases the risk of this happening if the regime does acquire the weapons before it falls (if it falls at all).

[Thorn777]

But its clean. The market did it. Thats spirutaly justified. The market punishes bad people and bad beahvior. Like a good god.

[Aanker]

But its clean. The market did it. Thats spirutaly justified. The market punishes bad people and bad beahvior. Like a good god.

You are starting to sound like the "religious right-wings" you so often criticize or satirize in your posts...

I'm torn on the issue, really. Flooding Iran with western technology, social networks (the Great Indisputable Catalyst of Freedom) etc. could have had a greater effect on the public and have been bought at a smaller human price tag. On the other hand, the task of our governments is not to see to the needs of the Iranian people but to ensure our own security and make certain that the nuclear program is halted.

[Treize]

Oh I am quite sure the Iranians will not nuke the USA.

[Aanker]

No, but they have missiles that could reach any country in the Middle-East and even some countries in Europe. An Iranian nuclear weapon would spur an arms race and make our positions insecure.

[Thorn777]

No, but they have missiles that could reach any country in the Middle-East and even some countries in Europe. An Iranian nuclear weapon would spur an arms race and make our positions insecure.

Imma just going to let this speak for itself. And if you didnt know, you sound like a certain famous nue labour former head of govt being steadily ridiculed for the same line.

[hellheaven1987]

No, but they have missiles that could reach any country in the Middle-East and even some countries in Europe. An Iranian nuclear weapon would spur an arms race and make our positions insecure.

And let Zionists have nukes make the world more secure?

[Aanker]

And let Zionists have nukes make the world more secure?

Clearly, if there is an epidemic, it is better to let everyone be infected with the ability to spread the disease further than to stop it before it gets out of hand. This is using your view.

Or we could just look at the consequences of Israeli (are there any consequences in this case?), Pakistani and North Korean nuclear weapons and conclude that a state such as Iran is definitely better off without them. This is about protecting our home turf, either from oil price spikes or retaliation should the day come.

[Thorn777]

Clearly, if there is an epidemic, it is better to let everyone be infected with the ability to spread the disease further than to stop it before it gets out of hand. This is using your view.

Or we could just look at the consequences of Israeli (are there any consequences in this case?), Pakistani and North Korean nuclear weapons and conclude that a state such as Iran is definitely better off without them. This is about protecting our home turf, either from oil price spikes or retaliation should the day come.

So international law?

What kind of a conservative are you?

[Aanker]

So international law?

What kind of a conservative are you?

I am working from the assumption that nations do not want the further spread of nuclear weapons (as was agreed upon in treaties). This clearly conforms to international law.

[hellheaven1987]

Clearly, if there is an epidemic, it is better to let everyone be infected with the ability to spread the disease further than to stop it before it gets out of hand. This is using your view.

Or we could just look at the consequences of Israeli (are there any consequences in this case?), Pakistani and North Korean nuclear weapons and conclude that a state such as Iran is definitely better off without them. This is about protecting our home turf, either from oil price spikes or retaliation should the day come.

That still does not change the fact that Zionists may use nukes against Iranians - so what protect Iranians from Zionists? United States?