A member of the Iranian parliament’s economic committee said on Wednesday that the administration has raised the official exchange rate of foreign currencies to generate revenue at the public's expense,warning of a looming inflationary wave.
"The government's goal in raising the official exchange rate from 550,000 to approximately 640,000 rials per dollar was to sell the $5 billion it had taken from the National Development Fund at the highest price and, which means earning about 1 quadrillion rials from people's pockets," Hossein Samsami was quoted by Tasnim news agency as saying.
However, the Islamic Republic faces real economic pitfalls that have devastated the currency in the past 45 years. From a high of 70 rials for each US dollar in 1978, the currency was trading close to 800,000 per one dollar on Wednesday in Tehran's free market. In addition to its usual weaknesses, the economy has been hit hard with US sanctions since 2018.
In Iran's heavily state-controlled economy, the government has historically dominated foreign currency supply and import controls. Since 2012, when international sanctions triggered a sharp devaluation of the Iranian rial, the government has struggled to keep essential imports affordable.
To manage this, it implemented a multiple exchange rate system, which has become a breeding ground for corruption. Insiders with government-granted privileges, such as import-export licenses, have profited from the difference between the lower official exchange rate and the higher free market rate.
For example, the exchange rate of the dollar in the free market was nearly 800,000 rials per US dollar on Wednesday but the government-sanctioned rate was about 650,000 rials.
A portion of Iran's imports, such as medicine, is currently done using the government-subsidized rate of around 285,000 rials per US dollar, while other imports, like food, are conducted at different rates such as the "NIMA" system, which was about 500,000 rials per dollar until President Masoud Pezeshkian’s government raised it earlier this month. The move was justified as one step towards a unified rate to curb corruption.
Samsami’s accusation suggests the government is prioritizing short-term revenue generation over long-term economic stability and public welfare. He argued that simply unifying the exchange rate—the stated policy goal—will be ineffective without addressing deeper systemic issues.
"The policy of unifying the exchange rate," he emphasized, "will not be successful without implementing its requirements, such as implementing the law on combating smuggling of goods and currency, combating money laundering, and capital flight."
Samsami also challenged the claim that the exchange rates, designed to subsidize essential goods, are not reaching their intended beneficiaries.
However, he acknowledged the complexities of the system, noting that domestically produced goods, such as chicken, are still vulnerable to price increases.
"Domestically produced chicken, one-third of whose costs are covered by the 285,000-rial exchange rate and two-thirds by the NIMA and free market exchange rates, will see its production costs increase if the Nima and free market exchange rates rise,” Samsami explained.
He concluded with a stark warning about the inflationary consequences of the government's currency policy.
"With the government's jump in the official exchange rate, we will witness a wave of inflation in the next two to three months," he predicted. This prediction aligns with economic principles that link currency devaluation to rising import costs and broader price increases.
Hossein Shamkhani, son of ex-security chief Ali Shamkhani, oversees a network of companies central to facilitating weapons shipments across the Caspian Sea to Moscow amid its ongoing war in Ukraine, the report said.
Through his Dubai-based company Crios Shipping LLC, the younger Shamkhani began moving missiles, drone components, and dual-use goods last year, relying on at least two ships.
The Bloomberg report cited information provided by more than a dozen unnamed US, UK, and European officials, along with others familiar with the transactions.
These shipments, according to sources cited by Bloomberg, are part of a barter arrangement in which Moscow pays Tehran with oil cargoes in order to bypass sanctions restricting both nations’ access to international financial systems.
“My understanding is the Shamkhani network ties into the drone contracts for use in Ukraine,” said John Bolton, former US National Security Advisor, now a senior fellow at the Foundation for American Security and Freedom.
Shamkhani’s trading prowess highlights Iran's broader use of a vast network of companies spanning commodities trading and hedge funds.
A family legacy of influence and controversy
Hossein Shamkhani’s ascent in global commerce and politics is intertwined with his father Ali Shamkhani’s legacy. As a long-serving Iranian defense minister and national security advisor, Ali Shamkhani has remained close to Supreme Leader Ali Khamenei, leveraging his influence even after stepping down from the Supreme National Security Council in 2023.
The Shamkhani family has faced repeated allegations of corruption and abuse of power. Iran International’s investigative journalist Mojtaba Pourmohsen has reported extensively on family members’ involvement in high-profile scandals, including accusations of illicit business dealings, ownership of extravagant properties and bank accounts abroad.
One particularly contentious episode involved their role in the collapse of a building in Khuzestan province in 2022, a tragedy that left dozens dead. The building’s owner, a businessman linked to the family, was found to have violated multiple construction regulations.
Hossein Shamkhani has denied any wrongdoing and rejected claims of involvement in illegal arms shipments or sanction-busting oil trades.
A lawyer representing him told Bloomberg that the allegations are baseless and lack supporting evidence. Similarly, Mohamed Al Hashmi, managing director of Dubai-based Milavous Group Ltd—another firm tied to Shamkhani—dismissed allegations of involvement in Iranian or Russian oil trading.
Complexities of sanctions and enforcement
The cross-Caspian shipments highlight challenges in enforcing Western sanctions. Ships linked to Shamkhani’s network, including the Sea Castle and Sea Anchor, have completed multiple trips between Iranian ports and Russia’s Astrakhan in the past year.
These vessels, though modest in size by global shipping standards, are believed to have been sufficient for transporting weaponry on the short Caspian routes.
Bloomberg’s analysis of ship tracking data suggests these voyages accelerated in 2023, coinciding with Russia’s increased reliance on Iranian arms for its operations in Ukraine.
Shamkhani’s maritime network extends beyond these two vessels. Bloomberg cited sources describing an extensive fleet of tankers and cargo ships controlled through entities such as Oceanlink Maritime DMCC and Koban Shipping LLC.
While the US Treasury has sanctioned several of these ships and their associated companies, enforcement has been complicated by frequent changes in ownership and the lack of direct links to Shamkhani in official records.
“Sanctions enforcement against these barter networks is a lot harder, particularly when you consider Russia’s historic dominance in the region,” said Behnam Ben Taleblu, a senior fellow at the Foundation for Defense of Democracies.
He emphasized the importance of transparency and international cooperation to expose these networks and curb their activities.
Expanding business empire and diplomatic implications
Beyond shipping, Shamkhani’s network includes a hedge fund operating in financial hubs such as London, Geneva, and Singapore, and a Dubai-based commodities trading firm dealing with Western oil companies.
Despite these connections, he has not been personally sanctioned by the US or European governments. This lack of direct penalties has fueled concerns about loopholes in current sanctions regimes, particularly as entities within Shamkhani’s network continue to conduct significant business with Chinese buyers using yuan transactions, avoiding the US financial system.
Both Iran and Russia have acknowledged their growing military cooperation without detailing specific arms deals.
While their collaboration appears not to inherently violate international law, it exposes participants to potential sanctions.
A State Department spokesperson warned of the broader security implications, saying, “This partnership threatens European security and illustrates how Iran’s destabilizing influence reaches beyond the Middle East and around the world.”
The allegations against Hossein Shamkhani, if substantiated, underscore the resilience of global sanctions evasion networks and the complexities of monitoring illicit trade.
With limited transparency and persistent geopolitical rivalries, success in curtailing Iran's sanctioned trade has eluded the West and its allies.