Insider news & Analysis in Iran

On Tuesday, Reuters reported upon some of the latest efforts by the Trump administration to support a European push for more sanctions on Iran, as the clock ticks closer to the US president’s deadline for “fixing the flaws” in the 2015 Iran nuclear agreement. The European signatories to that deal, namely the United Kingdom, France, and Germany, have reportedly strengthened their positions on Iran’s regional activities in recent months, and have lately been trying to secure support from other European Union member states for measures that would be aimed at halting Iran’s ballistic missile development and impeding the country’s support of international terrorism.

So far, the three European members of the P5+1 have faced pushback from their European partners. This fact creates a dim outlook for the prospect of collective action, since economic sanctions by the EU would require unanimous approval. This in turn puts the future of the nuclear deal, or Joint Comprehensive Plan of Action, in danger because the United States is expected to pull out and re-impose its own sanctions if the agreement is not strengthened to the president’s satisfaction by May 12, the deadline for the renewal of waivers for those nuclear-related sanctions.

Tehran has variously threatened to retaliate against American withdrawal and to pull out of the deal on its own end. On Monday, Iranian President Hassan Rouhani spoke at a ceremony for National Atomic Energy Day and boasted that the country’s nuclear technology had advanced to the point at which uranium enrichment could take place at a much faster pace. But such comments are presumably intended to pressure the US to remain in the deal, or to pressure the Europeans to convince it to do so. And this is perhaps more imperative than ever for the Iranian regime in light of the escalating economic crisis that it has been facing in recent days.

Another Reuters report declared that the threat of reinstated US sanctions was a major contributing factor, alongside government mismanagement, to the collapse in the value of Iran’s national currency, the rial. The news agency previously reported that one US dollar had been worth 54,700 rials on Sunday and was worth 60,000 rials on Monday. This compares to an exchange rate of one-to-36,000 as recently as September. The situation promptly led to Iranian authorities merging the market exchange rate with the official exchange rate, which typically allows government officials and their associates to secure better deals.

In addition, Iranian security forces were said to be monitoring currency exchanges and enforcing limits on the amount of foreign currency that individuals could hold outside of banks. But Reuters suggested that these measures were indicative of the regime’s struggle to support the rial, and that this struggle would likely be exacerbated by the government’s previous failures to sustain a system in which there is only one rate of exchange.

Such shortcomings in the government response undermine the claims advanced by figures like Valiollah Seif, the president of the Central Bank of Iran. As Reuters noted, Seif responded to criticism of his failure to manage the crisis by saying, “The recent volatility in the foreign exchange market is a plot by enemies and we should not worry about it.”

Seif specifically blamed the United States, along with Saudi Arabia and the United Arab Emirates. But at the same time that Reuters acknowledges the role of US sanctions threats in the crisis, this and other outlets have also emphasized that broader problems with the Iranian economy make recovery a difficult proposition regardless of external circumstances. Indeed, this point was seemingly illustrated at the end of last year and the beginning of this year, when economic concerns among large sections of the Iranian population sparked anti-government protests that spanned every major city and town in the country.

Iran Human Rights Monitor highlighted the persistence and the legitimacy of those concerns on Tuesday, quoting one recent study as saying that fully one-third of the Iranian population lives below the line of “absolute poverty” while six percent of the population does not have enough income to adequately feed themselves. The falling value of the rial naturally worsens this problem, and it was this inflation alongside increases in the price of bread and other commodities that led to the first of December’s anti-government protests, in the city of Mashhad.

The subsequent nationwide uprising was notable not only for the participation of the rural poor but also for the overall diversity of participation, which allowed for them to voice the concerns of Iran’s shrinking middle class, as well. The collapse of the rial is naturally linked to these concerns, but a report by IW suggests that it is indicative of larger and much more long-lived problems affecting major Iranian banks.

That report notes that banks have lost an estimated 4.5 billion dollars, as part of a trend that has been ongoing throughout recent years, even in the wake of the sanctions relief associated with the JCPOA’s implementation in January 2016. What’s more, the losses are projected to accelerate throughout the year ahead. And according to IW, this is “only one indicator of an overall crisis that reaches across every economic sector in the country— a crisis the government has been largely unsuccessful in controlling.”

This raises questions about Tehran’s ability to deflect economic anxieties by blaming problems on foreign actors. It also highlights the possibility that even if the Trump administration backs down from its threats or the European negotiators succeed in securing a new agreement, the retention of sanctions relief may not substantially help ordinary Iranians or the average shareholder in Iranian institutions.

Of course, there is little chance of the Trump administration backing down, especially in light of the recent appointment to noted Iran hawks Mike Pompeo and John Bolton to the positions of Secretary of State and National Security Advisor, respectively. And at the same time that these figures are expected to bolster the president’s hardline attitudes toward Iran, the anxieties of regional allies of the US are also continuing to exert pressure on the administration to act upon those attitudes.

This latter trend was highlighted by Monday’s Israeli airstrike on Iranian military targets in Syria. The New York Times has reported that Iran’s Fars News Agency retracted its previous statement that three members of the Iranian Revolutionary Guard Corps were killed in that strike. The latest reports instead indicate that seven of the 14 people killed were Iranians, though they were supposedly affiliated with the military rather than with the paramilitary IRGC.

Whatever the details of the strike, it clearly showcased the Israeli government’s seriousness about preventing Iran from deepening its foothold in Syria – a project with which it would undoubtedly like American help. But on the other hand, the Times report also indicates that the strike and the same day’s American statement decrying a Syrian chemical weapons attack facilitated a visit to Tehran by Russian special envoy Aleksandr Lavrentiev, so as to specifically discuss countering American interests in the region.

It seems doubtful, however, that forthcoming support from Russian allies will be sufficient to counteract the established pressures and potential pressures that may be exerted on Iran simultaneously by the US Treasury, the European Union, regional adversaries such as Israel and Saudi Arabia, and the Islamic Republic’s own heavily impoverished population.

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