Iranian currency slides under latest U.S. sanctions
By Thomas Erdbrink,
TEHRAN — Iran’s ailing currency took a steep slide Monday, losing 12 percent against foreign currencies after President Obama on Saturday signed a bill that places the Islamic republic’s central bank under unilateral sanctions.
The currency, which economists say was held artificially high for years against the dollar and the euro, has lost about 35 percent of its value since September. Its exchange rate hovered at 16,800 rials to the dollar, marking a record low. The currency was trading at about 10,500 rials to the U.S. dollar in late December 2010.
The slide Monday came as Iran tested a domestically produced cruise missile during continuing naval drills near the strategic Strait of Hormuz, sending a message to the West that the country would not tolerate increased sanctions against its profitable oil industry.
But in Tehran, people said they were bleeding money. Currency traders stopped writing exchange rates on the whiteboards propped against their shop windows as residents were trying to buy foreign currency.
“I am selling my motorcycle in order to invest it in dollars,” said Mehrdad Allahyari, a computer engineer. “My dream is once to buy a BMW car, but now our leaders are even destroying that.”
Although some say that the government, which says it holds a lot of oil dollars, is gaining from the crisis, the slide of the rial is a huge blow to Iran’s leaders, who have been claiming that the sanctions aren’t hurting the country. The currency drop feeds increasing worries that the government is running out of funds.
The Central Bank of Iran had said Sunday that the United States had become the laughingstock of the world after Obama signed the latest round of sanctions aimed at the institution, Iran’s key axis for oil transactions. But Monday afternoon, the bank held an emergency meeting over the sliding rial, the semiofficial Mehr News Agency reported.
The rial had already suffered a blow Dec. 20, amid confusion after Iranian statements that, preempting new sanctions, it had suspended all trade with the United Arab Emirates, a major re-exporting partner. Although the decision was revoked, the rial lost 10 percent of its value based on the report.
A year earlier, there was a similar reaction when the UAE implemented sanctions.
“It is clear that there is lack of cohesion within the government on how to fix this,” said a prominent Iranian economist, who asked not to be named because of the sensitivity of the issue. “The market has lost all confidence in a solution.”
Housing prices have risen 20 percent in the past few weeks, Mehr reported. Private companies and importers say they are in deep trouble.
“Prices are changing by the hour, the banks are refusing to pay letters of credit at the official dollar rate. It’s a zoo out there,” one steel trader said.
Those with large amounts of rials are scrambling to buy products that will hold their value, sometimes pre-ordering commodities and paying in advance. Other currencies, such as Britain’s pound and the UAE’s dirham, also have greatly appreciated against the rial.
Meanwhile, state television’s English-language satellite channel, Press TV, also reported Monday on the launch of another missile, called “Nour,” which it said was an anti-radar missile.
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