US Renewed Iran Sanctions Waiver For Iraq As Nuclear Talk Resumed

Iranian authorities in recent days devised ways to show that the national currency was actually rising against major currencies as its diplomats met representatives of major powers to discuss a possible revival of the 2015 nuclear deal, the JCPOA. However, talks adjourned on Friday with no results except pessimism among European negotiators and disappointment on the part of the United States.

"Iran right now does not seem to be serious about doing what's necessary to return to compliance, which is why we ended this round of talks in Vienna," US Secretary of State Antony Blinken told the Reuters Next Conference on Friday.

The Iranian currency has fallen more than ninefold since early 2018, when it became apparent that then-president Donald Trump was inclined to leave the JCPOA and impose sanctions on Iran. He did so in May of that year and the rial has kept falling ever since.

US sanctions on oil exports and international banking has deprived Tehran of its main foreign currency revenues that financed half its government budget. The solution for officials was to print money, short of negotiations and a new agreement with Washington. Liquidity more than quadrupled in the past three years, pushing inflation rate to 50 percent and the rial down to Saturday’s level against the dollar and other major currencies.

A week ago, Iran tried to protect its currency by limiting legal purchases by small buyers. According to the law, every Iranian citizen can get $2,000 a year with a slightly favorable dollar rate for travel abroad and other needs such as medical care or wire transfers for students abroad.

Some people sold this right to others who needed more dollars, by using their national ID card to buy the currency. The government clamed down on the practice by tightening the requirements, demanding firm evidence of impending travel, such as the original copy of an air ticket. Buyers flocked to street dealers, instead of official bank exchange offices and the dollar rose to more than 300,000 rials.

Only once before the rial has lost so much value and that was before US presidential election last year, when people were nervous that Trump would be reelected and would increase pressure on the Islamic Republic. Once Joe Biden got elected, the pressure on rial declined somewhat, as he has already announced his intention to revive the JCPOA.

State-controlled media has begun blaming conspirators for the fall of the rial, as they have done on previous occasions, but the reason for having a battered currency and an economic crisis is obvious to most Iranians.

Noor News, a website close to the national security council said Friday that the fall of the rial “is a fully planned” conspiracy and blamed neighboring countries, in a clear reference to the United Arab Emirates and Saudi Arabia, who see Iran’s nuclear program and regional expansion as a serious threat to their security.

The government’s official IRNA news website blamed “greedy traders” and enemies who spread “fake news” about the lack of prospects for the success of nuclear talks.

The Revolutionary Guard, which usually tries to justify the high cost of involvement in the Syrian war, has been arguing that trade and investment in Syria will pay off and compensate billions of dollars Tehran has spent to support Bashar al-Assad.

Tasnim news affiliated with IRGC quoted Syria's economy and trade minister on Friday as saying that Syria's new investment law is very favorable to Iranian investors.

What Mohammad Samer al-Khalil said was that the law would offer benefits, tax exemption, and guarantees to all investors, including Iranian companies. Al-Khalil expressed hope for greater bilateral economic cooperation and trade.

The extent of Iranian military expenditures and financial aid to Syria to keep President Bashar al-Assad in power is not known. In May 2020 a member of the Iranian parliament's National Security and Foreign Policy Committee, Heshmatollah Falahatpisheh, made an unprecedented declaration that Iran has spent $30 billion in Syria and must recoup the loss.

Iran has also spent blood on top of treasure to defend Assad's government. No one knows how many servicemen have been killed in Syria, but Iran at one point was deploying 20-30 thousand fighters, mostly Afghan and other mercenaries and allies, but also some of its own troops.

A program on Iranian national television Thursday highlighted obstacles to increasing trade. Keyvan Kashefi, chairman of the Iran-Syria chamber of commerce, highlighted the difficulties caused to both countries by US sanctions as well as the absence of safe land and maritime trade routes.

The director of the Trade Promotion Organization of Iran, Alireza Peymanpak, told the program that Iran's Trade Development Fund had allocated $50 million to supportIranian companies' exports to Syria.

The deputy chairman of Iran's Chamber of Commerce, Mohammad Amirzadeh, in November blamed the government for what he said was a low level of Iran’s exports to Syria, which make up 3 percent of Syria’s imports compared to 30 percent from Turkey. Some Iranian trade officials recently said Syria had completely stopped importing Iranian vehicles, which had been a major export item.

The odd thing is that Turkey has been supporting Assad’s Sunni opponents in Syria for years and is the protector of Idlib province where all the Sunni factions, defeated in the war, have found a relatively safe haven.

In early November, reports said that Syria had expelled top IRGC commander, General Seyyed Javad Ghaffar, a move that was seen as Assad’s attempt to improve ties with rich Sunni Arab states.

While Tehran has been portraying the development as an ordinary event, The Times of Israel on November 11 quoted Saudi sources as saying that Ghaffari was expelled from Syria as he was "accused of ‘major breach of Syrian sovereignty’ after attacking US forces, and deploying Iranian weapons to unapproved places."

However, Tasnim acknowledged in an earlier report that according to "foreign news sources," Ghaffari was forced by the Syrian government to leave Syria after a visit to Damascus by the Foreign Minister of the United Arab Emirates, Sheikh Abdullah bin Zayed Al Nahyan's on November 9.

Iranian state media have occasionally reflected dissatisfaction in recent years that Iran’s share of the Syrian economy is small and Russia, which intervened in the war decisively to save Assad, has more influence and more chance of benefitting from Syria’s reconstruction than Iran.

In the aftermath of a war where reconstruction costs are put at $250-$400 billion, Syria badly needs to boost economic relations with regional countries. While Arab League countries are gradually resuming diplomatic relations, Syria faces United States and European Union sanctions.

Iran, itself under US sanctions and coping with a serious economic crisis does not have the financial resources to help Syria’s reconstruction.

Iranian media had reported earlier that budget planners believe Iran can achieve the unprecedented rate of 8 percent economic growth, despite United States sanctions, which have crippled the economy since 2018.

Massoud Mirkazemi, the head of the Planning and Budget Organization, in tweets on Friday confirmed the news, while some economists told media in Iran they have serious doubt about achieving any growth under US sanctions.

Iran’s economic growth has been zero for the past 15 years, as international and US sanctions interrupted its oil exports and global banking relations. Although there were years when there was a positive rate of growth, overall the economy has stalled.

Mirkazemi claimed that non-oil exports increased by 40 percent since the beginning of the Iranian year in March.

Iran’s steel production fell by 15 percent in October, following smaller declines earlier in the year resulting from lack of electricity.

Iran’s method for generating revenues has been a relentless increase in liquidity, which has led to a 50-percent inflation rate and a ninefold drop in the value of the currency.

According to postings on social media, police and security forces including Basij militia deployed around the city's landmark Khajoo Bridge, the center of last Friday's protests, and in nearby areas.

Security forces also set up checkpoints in the city. Two videos acquired by Iran International show a roadblock, and dozens of riot police and other security forces maneuvering on motorcycles.

The large-scale police operation on Friday amounted to an undeclared martial law in the city.

The few people managing to tweet from Esfahan Friday said mobile internet was disrupted and that wi-fi connections were too slow for their photos and videos. Some also reported disruption to mobile phone connections.

Mohammad-Reza Mohammadi, chief of Esfahan traffic police, announced Thursday that roads along the river and leading to the bridge would be closed to cars, motorcycles and pedestrians from 5am Friday, and parked vehicles would be clamped and removed.

An anonymous call was widely circulated on social media in recent days called for people to gather for Friday prayers in the dry bed of Zayandeh Roud. Germany-based journalist Mehdi Mahdavi-Azad told Iran International this was a “very clever move” to draw people away from the usual Friday prayers led by “state-appointed imams.”

While security forces prevented people from reaching the river bed, Mojtaba Mirdamadi, the Friday prayer imam of Esfahan, said previous administrations had ignored the plight of farmers facing water shortages and that the issue lay now “in God's hands." Mirdamadi in previous times criticized the government of former president Hassan Rouhani for alleged mismanagement of water resources.

"We hope rain sent by God will solve all the problems," Mirdamadi told his congregation and advised them to hold special prayers for rainfall.

In Mashhad in north-eastern Iran, Friday prayer leader Ahmad Alamolhoda told those congregated that that among last week's protesters had been "mercenaries of the enemy" who had used Molotov cocktails. He said the people of Esfahan would not “oppose the Revolution for the sake of food and water.”

Authorities and state media in the past few days called the call for Friday’s rally politically motivated and suggested "rioters" were trying to take advantage of water protests.

Esfahan’s governor, Mohammad-Ali Ahmadi, said in a radio program Thursday that no one had applied for a permit to protest. He argued that that the authorities had heard farmers' voices and that farmers had realized "anti-revolutionary groups" were looking to manipulate any protests. "Security forces will prosecute those who spread rumors and fake news on social media," he warned.

The Islamic Republic routinely ignores applications requesting permit for political gatherings and only issues permission for rallies organized by the government. When a group congregates for a protest, they are usually dispersed or arrested.

Esfahan farmers' union in a statement Wednesday said it was not planning further protests Friday. Many on social media have alleged they had been coerced by security forces.

The justice department of Esfahan province said that in a statement Thursday that farmers no longer intended to protest, so that protests on Friday would be unjustified, illegal, and aimed at "abetting and aiding the enemies of the Islamic Republic.”

The highest price increase was related to sugar, which jumped by 76 percent compared to October 2020 as the government stopped allocating cheap dollars for its import. The data was released this week by the Ministry of Industry, Mines and Trade.

Since April 2018, Iran has been providing US dollars to importers of essential goods at the preferential rate of 42,000 rials, while the dollar has steadily climbed against Iran’s rial, reaching 290,000 in November.

This was in fact a food subsidy first provided when looming US economic sanctions in early 2018 were already creating high inflation in the country.

The cash-strapped government has been winding down the preferential dollar rate, which could push the current 50-percent inflation rate even higher. This indirect subsidy has cost the government at least $8 billion a year, roughly equal to its oil income in the same period.

Sugar is a vivid example as an essential food staple, with the price expected to rise even higher as stockpiles of subsidized imports decline and importers have to buy dollars at much higher rates.

Rice, which is a central staple of Iranian diet rose by more than 60 percent compared to last year. Imported rice had a smaller price increase, because of the indirect government subsidy, which could run out in the near future.

The reason for the steep price increase of domestic rice could be partly attributed to worsening drought this year, but production cost including fertilizer, and overall inflation also play a role.

Price of chicken meat increased by 42 percent, reaching $1.30 per kilogram. This is a good price compared with other countries, but the falling incomes of Iranians should be considered. A blue-collar worker earns around $100 a month and an office worker $150. If the worker has to feed a family of three, buying poultry becomes difficult and buying red meat at $4-5 becomes a luxury.

Reports say that meet consumption has fallen by around 40% this year as the price rose an average of 60 percent.

An even more alarming inflation news pertains to price increases in just one month, from September to October. Food prices rose between 1.9 to 8.4 percent on month-to-month basis, a sign of more trouble down the road.

Iran has experienced rounds of protests since December 2017, all triggered by high inflation. But every protest quickly turned into anti-government and anti-regime unrest. Economic hardship leads to demonstrations, but protesters have other deep grievances, such as religious restrictions on lifestyle, government corruption, nepotism and pessimism about the future that quickly manifest themselves.