U.S. Sanctions Take a Toll on Iran’s Currency

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There aren’t many places for Iranians to shelter their money these days. Inflation has surpassed interest rates. There’s a construction boom in Tehran, and gold and gems are popular, but hard currency is the safest commodity. And Iranians are fleeing the Rial for the dollar. As one U.S. official described it, they are voting with their currency against their government.

The Iranian Rial on Monday reached 36,000 to the dollar, nearly a 30% devaluation just since last week. The currency has lost half its value since the day I left Iran last month, when the Rial was trading at 22,500 to the dollar on the black market. (The official rate was, as it is today, roughly 12,000 Rial to the dollar). The upshot: U.S. sanctions are clearly having an impact.

Last month I traveled to Iran for the Non-Aligned Movement conference. While there, I took the opportunity to check out the local economy. As a testament to how stringent U.S. sanctions have become, I had to get a special license from the Treasury Department to spend money in Iran. (Subscribers can read my story on how the sanctions are impacting Tehran here.)

I heard several people complain that the government wasn’t doing more to shore up the Rial. For example, Tehran bought dozens of brand new black armored Mercedes to ferry dignitaries around – hard cash that could’ve been used to buy Rial. At the airport waiting for my flight to Dubai, I saw a dozen of the vehicles being loaded onto trucks near the tarmac and I wondered: Can one return barely used armored cars?

At a press conference in New York last week, Iranian President Mahmoud Ahmadinejad scoffed at the idea that Iran’s economy might be suffering under sanctions. “Certainly our economic situation is better than Europe or America,” he said. “The last 33 years we’ve had no trade ties with the U.S.”

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What does the potential collapse of the Rial mean? Aside from economic pain for the Iranian people, not much. The Iranian economy is largely isolated from the rest of the world. And the Green Movement, which conducted anti-government protests in the wake of the 2009 election, seems to be too scattered to step into the void even if Iran’s regime were to weaken.

Where Iran’s economic distress could have an impact is in regional politics. Israeli Prime Minister Benjamin Netanyahu has threatened to bomb Iran over its nuclear program, but last week, in a speech before the U.N., Netanyahu conceded that sanctions are, for the first time, taking a toll on Iran’s economy. (He also said they have “not had an effect on Iran’s nuclear program,” citing an International Atomic Energy Agency report that Iran has doubled refinement in the past year.)

And over the weekend, Netanyahu’s finance minister argued that given the drastic scope and nature of the sanctions, more time was needed to allow diplomatic measures to work. “The sanctions on Iran in the past year jumped a level,” Yuval Steinitz told Israel Radio. “It is not collapsing, but it is on the verge of collapse. The loss of income from oil there is approaching $45-50 billion by the year’s end.”

27 comments
AbdeljalilGhaith
AbdeljalilGhaith

Now, After Obama gave Order to Authorities concerned to start lifting sanctions against Iran, Iranian Rial Currency has 90 


days before its value will improve knowing that Iranian Rial was 1750 IRR per One USD and it is now 29800 per One USD. 


Iranian Rial is becoming the currency of the year. It is a good investment for all currency dealers and investors. The 


Focus is on the 100K and 50K denominations whether used or Uncirculated.


www.BuyIranianRialCurrency.com

AbdeljalilGhaith
AbdeljalilGhaith

Iranian Rials will soon become the hottest best-selling currency of year 2015 and likely to be for many years to come. Iranian Rial exchange rate was 1750 IRR to one USD in year 2001. It is now about 2980 Iranian Rials to one USD. USA Sanctions / Embargo against Iran will be lifted soon. Many countries have abolished the embargo which gives you a hint of the volume of Iran economy. So much expectations that Iranian Rial value will raise due to the lift of sanctions and the great potentiality of the Iranian economy.


http://www.iranian-rials.com

AbdeljalilGhaith
AbdeljalilGhaith

Iranian rials after expected lift of sanction on the 18th of October is going to raise in value. currenct currency value is 29900 to the us dollar.. Remember Iranian Rial was 1750 to the dollar in year 2001. After lift of sanctions revaluation of Iranian Rials could result in dramatic raise in its value against the dollar.. Best investment of Iranian Toman Irani Rials is the denomination of 100K and 50K. Try to avoid the bigger cheque denominations of 500K and One Million.


http://www.buynewdinar.com/iran-rial

ahandout
ahandout

They don't care about their currency.  Heck, the US doesn't care about our currency. 

SRSwain
SRSwain

What about the horrible hangover we already have from the time wasted in all these stupid flummeries (er, the 18-month ongoing "campaign" do baffle them with BS)?  Neither side has a clue how to get to the bottom of what ails our economy.  "It's the economy Stupid!" still applies, writ large.  The fact is that we were collectively robbed, raped, and thrown under the train (except for the people who pulled off the crime).  Now these two clowns are arguing over who owes the liability insurance premium.  This is very, very dire.  And who is going to call them on it?  

Maybe in the debates... (Har•Har•Hardy•Har•Har•Har!)  We need to wake up.  The slippery slope has already turned into a 60 degree angle.

HudsonValleyTim
HudsonValleyTim

Any bets on how Romney is going to spin this in the debates? My guess is that he's going to mirror his economic argument and go with "Sure, sanctions are working...but not nearly as well or as quickly as they would under a Republican administration". Come to think of it, he would have a point there...the Republicans have been way more effective at imposing economic hardship on the working class than Democrats.

DonQuixotic
DonQuixotic

The sad thing is the regime doesn't care how much its own people suffer because of this (and neither does Netanyahoo).

Paul Dirks
Paul Dirks

It's a sad fact that the less democratic a government is, the less effective sanctions are at changing the behavior of the leadership. Which isn't to say that they shouldn't be tried before resorting to violence.

sacredh
sacredh

JNS, you've been writing some interesting articles on foreign policy. Are you going to do some in-depth analysis of the foreign policy debate between Obama and Romney?

Curious_Quiche
Curious_Quiche

It really is a shame that a society like Iran has been kept in this state simply because it allowed the highest echelons of power to be maintained by hardline religious fanatics that don't represent even a very large percentage of the population. A LESS CIRCUMSPECT MAN MIGHT USE THIS STATE OF AFFAIRS AS AN OBJECT LESSON OR AN AESOP OR SOMETHING, I DON'T KNOW. *ahem*

Seriously though, Iran isn't a third world sty, they wouldn't have to put up with this if they could just get that that last clingy bit of 5th century off of their shoes.

nflfoghorn
nflfoghorn

Nahoohoo, a graduate of the Glenn Bleck School of Props.

sacredh
sacredh

This sounds like a few questions for the presidential debate on foreign policy. I wonder if Mitt will deny that sanctions are working?

Razor Man
Razor Man

Sanctions work albeit insidiously and slowly, allowing sufferers to claim their effects are caused by other forces. If you really want to see the devastating effects of sanctions, look at the magnitude of the highest note when the Zimbabwean dollar collapsed. And factor in the fact that the government had already lobbed of no less that nine zeroes earlier. An egg was in the regions of a quadrillion Zim dollars. And that was one note.

SmilingSmartBlonde
SmilingSmartBlonde

Netanyahu conceded that sanctions are, for the first time, taking a toll on Iran’s economy.Read more: http://swampland.time.com/2012...

This is very good news.

Now the question is whether Netanyahu will stop "using"  Romney. Romney is Netanyahu's puppet, so it seems.

charlieromeobravo
charlieromeobravo

"

The Iranian Rial on Monday reached 36,000 to the dollar, nearly a 30% devaluation just since last week. The currency has lost half its value since the day I left Iran last month, when the Rial was trading at 22,500 to the dollar on the black market."

This is the sort of thing that brings down a government.  I wonder how long this can go on before there's serious trouble, unrest over there.  And, if the people do revolt, what would take the current government's place?  We seem to have a special talent for not backing replacements that are both acceptable to the general populace AND that are friendly to us...