Ira­ni­ans feel the pain as cur­rency dips

The Washington Times Daily - - WORLD - BY AMIR VAH­DAT AND JON GAM­BRELL

TEHRAN, IRAN | At money-chang­ing sta­tions across Tehran, shout­ing voices ac­com­pany each change of the sign­boards out front show­ing the value of the Ira­nian rial, which slips ever lower against the U.S. dol­lar.

This week saw Iran’s cur­rency fall to 41,600 ri­als to $1, its low­est point ever.

While mak­ing Ira­nian ex­ports more at­trac­tive to the global mar­ket in the wake of the land­mark nu­clear deal with the U.S. and other world pow­ers, it also means peo­ple’s sav­ings con­tinue to lose value in the Is­lamic Republic. Mean­while, con­cerns gather about what Pres­i­dent-elect Don­ald Trump might mean for the nu­clear ac­cord go­ing for­ward, even as most Ira­ni­ans have yet to feel any change from the agree­ment.

“Surely, this neg­a­tively impacts peo­ple’s lives. Lots of for­eign goods are im­ported into our coun­try, and many of the things peo­ple need come from abroad,” said a Tehran res­i­dent who only gave his name as Babaei. “It also has a very neg­a­tive psy­cho­log­i­cal ef­fect on the peo­ple.”

The cur­rency col­lapse could prove a po­lit­i­cal headache for Pres­i­dent Has­san Rouhani and other rel­a­tive “mod­er­ates” on the Ira­nian po­lit­i­cal spec­trum. The pres­i­dent strongly pushed the nu­clear ac­cord in the face of fierce re­sis­tance from hard-lin­ers, and needs to show the eco­nomic pay­off from the con­ces­sions the gov­ern­ment made ahead of next May’s pres­i­den­tial elec­tion.

Con­ser­va­tive news­pa­pers in­side Iran are al­ready slam­ming the Rouhani gov­ern­ment’s han­dling of the cur­rency fall, the Ira­nian FARS news agency re­ported this week.

In that last 10 years, Iran has seen the rial go from around 9,200 to $1 to 41,600 to $1, a de­pre­ci­a­tion of some 450 per­cent. Much of that col­lapse came in 2012 over the coun­try’s con­tested nu­clear pro­gram, when the U.S. banned the world’s banks from tak­ing part in Iran’s oil econ­omy and the Euro­pean Union im­posed an oil em­bargo.

Un­der the 2015 nu­clear deal be­tween Iran and world pow­ers, in­ter­na­tional sanc­tions against the coun­try were lifted in ex­change for Tehran agree­ing to limit its en­rich­ment of ura­nium. In the time since, Iran has rushed to in­crease oil pro­duc­tion to re­gain its lost mar­ket share while si­mul­ta­ne­ously sign­ing deals worth tens of bil­lions of dol­lars with for­eign com­pa­nies, in­clud­ing the ma­jor air­plane man­u­fac­tur­ers Air­bus and Boe­ing Co.

But the rial, ini­tially buoyed by the ac­cord, has now fallen on hard times. While those who could long-ago off­loaded their ri­als for other in­vest­ments, av­er­age Ira­ni­ans have faced harder times.

“This is tragic to me,” said Ah­mad Hei­dari, a 64-year-old re­tiree. “I have lost 20 per­cent of my pur­chas­ing power with this ex­change rate be­cause all prices are go­ing up harshly.”

There are a host of rea­sons con­tribut­ing to the rial’s des­cent. Since Mr. Trump’s elec­tion and a re­cent Fed­eral Re­serve hike in in­ter­est rates, the U.S. dol­lar has been strength­en­ing. Mean­while, Mr. Trump’s still-un­clear cam­paign prom­ise to rene­go­ti­ate the Iran deal has sparked un­cer­tainty.

Iran’s gov­ern­ment in the past has ma­nip­u­lated its cur­rency mar­ket to cover gov­ern­ment bud­get deficits. It does that through us­ing the dif­fer­ence be­tween the lower gov­ern­ment ex­change rate and the higher mar­ket ex­change rate to gain ri­als from oil sales, a move known in the fi­nan­cial world as ar­bi­trage.

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