By INU Staff
INU - The Iranian rial’s value dropped to record lows last week, and politicians, meanwhile, are searching for a way out of the economic crisis facing the Islamic Republic with the imposition of US sanctions.
Following US President Trump’s announcement that the United States would exit the 2015 international agreement designed to keep Tehran from building nuclear weapons, the first set of US sanctions suspended under the nuclear accord go into force on August 6th.
This first set will restrict the gold trade with Iran and the country’s automotive sector. The second wave of sanctions will target Iran’s oil exports. They are set to go into effect in November.
Iranians, worried over the new sanctions, converted their savings from rials to protect their money, which resulted in the Iranian currency losing 20% against the US dollar in two days. Since April, the rial has lost more than half of its value.
Senior fellow at the Foreign Policy Research Institute in Philadelphia, Brandon Friedman, listed “economic mismanagement, corruption and the psychological effect of uncertainty during this period of heightened tension” with the United States as underlying reasons for the collapse of the Iranian currency. In response to questions, he said, “I am not sure it is entirely in the government’s power to stop the crisis in the short term.” Friedman added, “There are things they can do to reduce panic and build confidence, they might reduce but not ‘fix’ the problem.”
Protests have continued to rock Iran since the huge uprising in December / January. They are fueled by the worsening economy, as well as e foreign policy projects in Syria and elsewhere in the region. In Tehran, in June, shops in the Grand Bazaar were closed, as shopkeepers and citizens staged the largest protest the bazaar has seen in in six years, according to reports.
In cities across Iran, including Isfahan, Karaj, Shiraz and Ahvaz, rallies to protest inflation caused in part by the weak rial, have flared. Additionally, the people are angry over the scarcity of drinking water in southern Iran — a growing concern, due to a drought that analysts say has been worsened by mismanagement.
Iran’s judiciary announced in July that 60 people had been arrested for fraud and attempting to undermine the banking system. According to Gholam Hossein Mohseni-Ejei, deputy judiciary chief and spokesman of the Iranian judiciary, several of those detained had direct ties to the government.
However, observers say the real need is for structural reforms. “No one is talking about bank reform and investment and job creation,” journalist Maziar Motamedi of Tehran’s Financial Tribune told Agence France-Presse.
Iranian President Hassan Rouhani has been summoned by Parliament to explain why the sanctions that were lifted after the 2015 nuclear deal was implemented did not improve Iran’s economy.
In a move that suggests that Rouhani is conceding a need for reshuffling his economic team, he appointed a new central bank governor on August 1st.
US President Trump said he would sit down with Rouhani to discuss a new nuclear deal. Senior Iranian officials and military leaders rejected the offer. “The Iranians respond to pressure but there must be a face-saving way to respond,” Friedman wrote. “It is not clear if Trump’s offer to meet unconditionally is enough of a face-saver.”
Many in Washington say that Trump’s goal is to topple the Tehran government.
The National Council of Resistance of Iran that has received support from people close to Trump says only regime change in Tehran can improve the economy. “Iran’s crumbling economy cannot be saved unless by toppling the regime,” Maryam Rajavi, leader of the People’s Mojahedin of Iran (MEK), wrote on Twitter. “The clerical regime has ravaged Iran’s economy by its missile and nuclear projects, warmongering and terrorism.”