As a warning to speculators, several money changers working on the streets of central Tehran have been arrested by undercover police officers pretending to desperately seek foreign currency.
In addition, the chief of Iran’s judiciary, Ayatollah Sadegh Amoli Larijani, threatened Wednesday to seek the death penalty for major speculators. Speaking about the unrest in the foreign-exchange markets, he warned that “depending on the importance of their crimes, some of the economic corrupted can face execution,” the semiofficial Mehr News Agency quoted him as saying in a meeting with judicial officials on the currency crisis.
The government has also announced that special branches of state banks will be set up at Iran’s international airports, where travelers leaving the country will be able to purchase up to $1,000 in foreign currency — after passing through passport and customs controls — and take it with them abroad.
The rial was already losing ground to the dollar and the euro during months of increasing threats of war and further sanctions against the country, analysts said. But after President Obama signed off on new measures against Iran’s central bank on Dec. 31, the currency fell to unprecedented lows. Since then, it has lost nearly half its value on the black market.
The market rate for the dollar now stands at about 18,800 rials, compared with an official exchange rate of about 11,500 rials to the dollar. In December, the market rate was about 12,500 rials to the dollar. Even at the official rate, the rial’s value has fallen sharply since Dec. 1, when it theoretically took only about 7,400 rials to buy a dollar.
A European Union ban on Iranian oil — announced on Jan. 23 and due to take effect in six months — has further worried Iranian consumers and importers.
Products such as imported steel, iPhones and wheat have doubled in price, with traders changing price tags by the hour to keep up with the rial’s plunging value. The drop has prompted housewives, businessmen and pensioners to buy up even more foreign currency and gold, as few expect the situation to normalize anytime soon.
“I have spent the whole day trying to buy dollars,” one steel trader said this week. For the first time in his life, he said, he had to go out on the streets and whisper to illegal currency dealers, asking if they had “it.”
“How do we travel, order new shipments? I have no idea,” the trader said, asking to remain anonymous because he sold steel to government-related companies.
“I need dollars, euros, anything,” said a man who identified himself only as a “carpet dealer.” Like many others on Tuesday, he was looking to sell rials around Ferdowsi Street in Tehran, traditionally a center for exchanging currency. “This plunge will continue,” he said. “I don’t want all my savings to become worthless.”
To prop up the rial, the Central Bank of Iran has taken seemingly tough measures.
The bank’s main goals have been to weed out those it blames for the crisis, described as “speculators acting in line with the nation’s enemies,” and to herd investors large and small back to the national currency.
To promote saving, the bank has raised interest rates from 12 percent to 20 percent. On orders of President Mahmoud Ahmadinejad, the rate of interest — officially “unclean” in Islam but never abolished here — had been set for years well below Iran’s official inflation rate of 20 percent, as part of a plan to promote investments in Iran’s production sector.
But the central bank’s main measure last week was announcing a new, extremely low exchange rate for the dollar and promising that the currency would become readily available on the market.
While the rate was set more than 50 percent lower than the street rate, no dollars were delivered to banks. Official money changers, who were forced to advertise the new rate but now are not selling, said they would sustain losses.
“Just announcing a new currency rate is not enough,” Mohammad Nahavandian, president of the Iran Chamber of Commerce, told the semiofficial Fars News Agency on Wednesday. “Steps must be taken in order to solve the situation.”
In an attempt to quell the worries of angry businessmen, Tehran’s Chamber of Commerce on Tuesday organized a seminar to discuss the hike in the prices of foreign currency and gold. Central bank representatives were invited to give explanations but did not attend.
Stressing that a solution to the currency crisis is needed urgently, the Tehran chamber’s chairman, Yahya Ale-Eshagh, warned that “people are ready to fight and die for their vital interests.” He did not elaborate on who they are ready to fight.
Restoring order to the currency markets is especially important for Iran’s private sector, which makes its money in rials. The sector accounts for about 20 percent of the country’s economy and has been hit hard by Western sanctions. By contrast, the government, which receives oil revenue mostly in dollars and euros, is profiting from the rial’s decline, analysts said.
“Their income is in dollars, so a strong dollar helps them to buy more rials to pay their bills,” said one prominent economist, who asked not to be identified, for fear of reprisals.
Politicians have charged that Ahmadinejad is incapable of handling the crisis.
In an open letter published Sunday, Ahmad Tavakoli, a leading parliamentarian, asked, “Why is the government stalling its decisions?” He also wondered why Ahmadinejad took a long trip to Latin America last month and decided to participate in a ceremony for religious theaters. “The government’s procrastination is an important reason for the problems,” Tavakoli wrote.
The government denies that it has no answers to the currency crisis, or that it is profiting from the rial’s plunge. “We have plans,” a government spokesman told parliament last week. “But we are keeping them secret to prevent the enemy from misusing them.”
Special correspondent Ramtin Rastin contributed to this report.