The internal politics of the Iranian rial crisis

Published October 15th, 2012 - 06:00 GMT
What does the currency crisis mean for ordinary Iranians?
What does the currency crisis mean for ordinary Iranians?

The rapid devaluation of the Iranian currency in the past few days does constitute the “most immediate” problem for the Iranian regime. Yet, it is not the only economic problem that needs to be tackled in order to distinguish the fire that is burning under the ashes in Iran, analysts and experts in Iranian affairs said.

“I think any protest in the current situation in Iran is serious,” commented Anoush Ehteshami, a Professor of International Relations and Head of the School of Government and International Affairs at Durham University.

Economic hardships, coupled with few years old political protests make “a cocktail” that has pushed people to the streets in downtown Iran on Wednesday to protest the rapid dropping of the national currency, the Riyal, Ehteshami pointed out to Gulf News.

Yet, “I don’t think this will develop into a mass uprising of the sort we saw in 2009,” he said in reference to the protests that swept Iran to protest the victory of Iranian president Mahmoud Ahmadinejad in the presidential elections and the loss of the “moderate” candidates.

Several attempts to call experts in Tehran were unsuccessful.

Yesterday morning, most of the foreign currency shops and outlets in Tehran’s Grand Bazaar were shut down, as hundreds of Iranian riot police patrolled in the downtown area.

A press report from Tehran noted that minority of exchange houses that did open failed to display prices or carry out transactions. The rial fell to a record low of 35,000 to the dollar on October 1, an 18 per cent drop, on the unofficial market. The currency has plummeted since November when it traded at 13,200 to the greenback.

“The Iranian economy is [currently] in a real frail situation,” said Mahjoub Zweiri, assistant professor and experts in Iranian affairs at Qatar University.

Apart from the control of the military institution on the economic installations, the international sanctions on Iran and Tehran’s oil exports coupled with imposing restrictions on the movements of the Iranian capital were behind the weak status of the oil-rich country, Zweiri explained to Gulf News.

And when the state tried to tackle the issue of inflation, it increased further the economic burdens on people.

“The state decided that it will end subsidising the basic commodities and will focus more on the poor. But this doubled the problems, because other bureaucratic issues came out, such as who should benefit and how to distribute the subsided items,” Zweiri said.

The devaluation of the Iranian national currency by nearly one-third in the past week came to “dramatically complete the scene” for the Iranian people.

Iran has been subjected to a series of international economic sanctions after it was accused of not cooperating with the international community over its controversial nuclear programme. While Iran says it is of a civilian nature, there are international concerns that Iran is seeking to develop nuclear weapons.

Beginning last July, Iranian oil exports to major importers in Asia, including Japan and China, were decreased after the recent sanctions came into effect.

“The most painful strike to the oil sector came from the insurance sector. Practically, all the [international] insurance companies working in Iran have left… the Iranian insurance companies started to offer insurance for Iran’s foreign trade. But there is a problem of trust for importers from other countries,” Zweiri, author and co-author of several books on Iran, explained.

According to analysts’ figures, Iranian oil exports dropped by nearly 65 per cent due to the international sanctions.

The Iranian regime has a “myriad” of problems to solve, and “the currency is the most immediate but not the only problem,” said Ehteshami.

Peoples’ frustration with the deteriorated economic situation, he added, could manifest itself in different ways, while the regime’s tolerance with protests proved to be “very low”.

It could be in the form of strikes in factories or student marches or any other form of protest.

— With additional input from Bloomberg.


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