Iran's Government Scrambles To Contain Financial Chaos
Mardo Soghom
Iran International
Chaos reigned in financial and currency markets in Iran on Tuesday as the government scrambled to contain the damage from an unprecedented fall of the currency.
Iran International
Chaos reigned in financial and currency markets in Iran on Tuesday as the government scrambled to contain the damage from an unprecedented fall of the currency.
The rial, which fell to a low of 500,000 against the US dollar on Monday stayed around the same level as a string of measures were announced by the government on Tuesday, giving the Central Bank of Iran (CBI) “unprecedented powers” to contain the damage.
Officials announced that citizens will not be allowed to buy their annual share of foreign currency from official exchange bureaus, which previously was $2,000. They also said that the government will stop providing dollars to banks and official dealers for that purpose.
Meat and other prices shot up, as a general mood of panic emerged over rising inflation in the coming days.
Some underground activist groups that have organized popular protests since September issued a call for demonstrations on Wednesday at bazaars around the country.
The economic chaos can reinvigorate antigovernment protests, after large-scale government repression reduced street demonstrations in January. Iranian analysts in recent weeks were speaking of the “grey strata” in society, unwilling to come out and support younger protesters, but the economic chaos can be the catalyst for more Iranians to join the movement.
Confidential government documents obtained by Iran International Tuesday showed that the Secretary of the Supreme National Security Council, Ali Shamkhani, was warning President Ebrahim Raisi of shortages in animal feed due to lack of imports. Iran is dependent on importing millions of tons of grains and animal feed to maintain food production and supply. Any serious shortages can lead to chaos for consumers.
Mohammad Machine-Chian, a senior research scholar at the Center for Governance and Markets at the University of Pittsburgh told Iran International Tuesday that the “Supply chain of essential goods in Iran is in an extremely vulnerable and dangerous situation.” He added that the government’s foreign currency reserves are running out and it is not able to secure sufficient imports.
The government claimed that it established a new “currency exchange center” to provide dollars and other hard currencies “for legitimate needs,” leaving a trail of unanswered questions in the wake of the announcement.
Ordinary people and businesses more likely will see the move as yet another dubious government scheme, typical of the state-controlled economy.
According to official figures, well over $10 billion have been taken out of the country in the past few months. The real figure might be much higher as confidence in the economy and the government’s foreign policy seems to be at an all-time low.
The Biden administration, which was negotiating last year with Iran to resolve the dispute over Tehran’s nuclear program, not only has kept the Trump administration’s economic sanctions in place but has made attempts to strengthen their enforcement. The talks reached an impasse in September and since then Washington has repeatedly said that its focus has shifted to supporting the rights of Iranian protesters.
The mood among European powers has also shifted against the Iranian regime after it became obvious that it was supplying hundreds of kamikaze drones to Russia that are being used in Ukraine.
Ali Majedi, Iran’s former ambassador in Germany wrote in an article in Etemad newspaper in Tehran that "The fact that neither Iran, nor Russia were invited to the conference clearly shows where the pressure on Iran is coming from and what impact Iran's support of Russia in the Ukraine war has left on Tehran's foreign relations.
Russia has been using Iranian supplied Kamikaze drones to attack Ukraine since October, and the West is concerned about further Iranian involvement, including supplying missiles to augment Russia’s declining stocks.
The former ambassador said that supporting Russia in the Ukraine war was perhaps Iran's biggest mistake during the past year. He added that Iran's behavior has united Europe and the United States against Iran. Tehran has also missed the chance of reviving the nuclear agreement with world powers because of this.
Western countries are now focused on delegitimizing the Iranian government and Iran is now only counting on countries such as China, Majedi said and asked if Tehran could count on Beijing when in past the Chinese supported international sanctions against the Islamic Republic.
Majedi said Germany has always been Iran's biggest trade partner in Europe and Berlin's stances has always been more favorable toward Iran in the nuclear negotiations. The Iranian foreign ministry should now answer why Germany has adopted a tough position against Iran and has become more radical than France and the United Kingdom.
Meanwhile, international relations expert Mehdi Motaharnia told Khabar Online website that the Munich Security Conference's decision had an obvious message for Tehran which should not be ignored.
Referring to the recent meeting of Iranian opposition figures at Georgetown University in Washington, Motaharnia said that inviting them rather than Iranian government officials makes the decision even more meaningful.
Motaharnia said although the Munich Security Conference is a non-governmental international forum, it is the world's most important security conference, and its impact goes beyond governments and political activists. Entrepreneurs such as Mark Zuckerberg and Elon Musk also take part in it next to kings and presidents. Previously Foreign Ministers Javad Zarif and Hossein Amir-Abdollahian represented Iran at the conference.
"When Iran makes claims about destroying the world order, the other side will also mobilize its forces against the Islamic Republic," he added.
He said, "The rhetoric taking shape against Iran is creating a meaningful atmosphere for designating the Revolutionary Guard (IRGC) as a terrorist group in Europe which is in a way an expansion of the IRGC's designation by the US government."
At the same time, Iran's former ambassador to London Jalal Sadatian predicted in an article in Etemad that "Diplomatic pressures on Iran will increase." He wrote: "Within the current frameworks, the Western side is increasing its pressures on the Islamic Republic and channeling it toward internal developments to drag the situation to regime change."
Other pundits in Tehran have been arguing that Iran’s international isolation directly impacts its already fragile economy and also emboldens the opposition. It also creates a widespread impression within the country that the government’s foreign policy is disastrous for the country.
Sadatian added that the United States is the world's leader and when Iran rejects the United States' supremacy, this is unacceptable for the United States.
When Iran chooses to resort to a language other than dialogue and tells the world that it has drones and missiles as tools for diplomacy, pressures will naturally mount and Tehran will be cornered, Sadatian said.
While Iran has been overwhelmed by street protests for more than five months, Ahmad Khorram, a cabinet minister in the late 1990s and early 2000's reformist government said in an interview with moderate news website Rouydad24 that Iranian officials are reluctant to listen to the people as they have lost their sensitivity to their expectations.
Pointing out that the use of violence is the government's first and often only response to people's demands and protests, Khorram said that violent approaches have not worked elsewhere in the world, and they will not work in Iran either.
He observed that what is happening today is extremely different from what was meant to happen after the 1979 revolution. He said the government responds with insult and violence to anyone asking why this has happened. This approach, Khorram said, has eroded people's trust in the government.
The turnout in the latest elections in Tehran was around 26 percent, Khorram observed, adding that the government's own opinion polls show that its popularity has plummeted to less than 20 percent in recent months.
Critics say that amid sanctions and economic hardship, the regime decided that loyal hardliners should take over the parliament in 2020, and then using its veto power over candidates, arranged for an ill-prepared hardliner become president in 2021.
He said that inquiries by reformists during a meeting with the country's top officials has revealed that they are aware of the crisis, but they are reluctant to address it properly and that they have no plans to tackle the existing dissent.
Earlier, former diplomat Jalal Sadatian had said that the government routinely resorts to violence instead of relying on its social capital. As a result, the unity and coherence of the Iranian society has been lost, he said.
Sadatian suggested that the "sources of emulation," or Iran's highest ranking Shiite clerics should try to hold meetings with Supreme Leader Ali Khamenei and communicate people's demands to him. The suggestion by Sadatian, a pragmatist politician, indicates that Khamenei has lost touch with realities on the ground and as it was evident in his latest meeting with officials on February 18, he is under the illusion that the regime enjoys tremendous support.
Meanwhile, Sadatian charged that the government has failed to understand why recent protests have taken place. He argued that economic and social demands have been the main driving forces behind the protests. However, inefficient management, wrong decisions, and insisting on non-democratic political processes have also played major parts in the situation that led to Iran's biggest nationwide protests in 44 years.
Sadatian added that embezzlement, corruption and ignoring people's dire financial situation were among other factors that led Iranians to take to the streets in protest. He added that giving key posts to incompetent officials has been one of the main reasons why this situation has occurred.
In such a situation holding a dialogue between the government and academics and experts can be helpful but the current all-conservative government in Iran ignores experts' views and therefore, cannot find a way out of the crisis.
Sadatian said that the situation is so critical that some embassies in Tehran have called on foreign nationals to leave the country because the diplomats are concerned about their safety and well-being, "but it is doubtful if I can tell you about the real reasons for that or if you can publish it if I talk about them!"