The devaluation of Iran’s national currency continues to accelerate in what could be a sign of the early effectiveness of the return of American sanctions that had previously been suspended under the 2015 Iran nuclear deal. After President Donald Trump withdrew from that agreement, it was announced that the sanctions would come back into effect in two groups, following two consecutive 90-day waiting periods. The first such period ended in August, bringing sanctions on various Iranian import and export markets. The second group of sanctions are set to return in early November, targeting the Iranian oil industry and banking sector, as well as third parties that do business with the Islamic Republic.
In late July, the imminent return of the first round of sanctions led to the national currency, the rial, trading at more than 120,000 to the dollar. This was reportedly the lowest rial value on record, and it helped to spur protests focused on the economic situation, which began on July 31 in Isfahan and continued for several days across approximately a dozen cities. This and other instances of unrest also prompted the Iranian parliament to take the nearly unprecedented action of summoning President Hassan Rouhani so he could be grilled on his administration’s record with regard to economics and other domestic matters.
Despite such signs of government attention to the economic crisis, the currency devaluation has continued, setting a new record low of approximately 150,000 rials to the dollar on Wednesday, according to the Associated Press. This represents a loss of a quarter of the currency’s value over just three days. And despite the prior publicity associated with Rouhani’s appearance before parliament, there was no immediate acknowledgement of the latest developments by the government.
Meanwhile, Almanitor is reporting upon some of the regime’s internal responses to the worsening crisis, which include efforts to consolidate the economic power of hardline institutions like the Iranian Revolutionary Guard Corps. The relevant report notes that “corrupt schemes” such as the provision of low-interest loans and better-than-normal exchange rates to politically influential individuals, “flourish in a society that is under economic duress.”
The report also indicates that numerous banks have defrauded ordinary Iranians, as by accepting massive deposits to facilitate the purchase of overvalued properties “while knowing that there was no financial backbone to ever repay the principal.” Now, some of the banks involved in such schemes are examining the prospect of merging, specifically those that are owned by and represent the interests of the IRGC and other military entities in the Islamic Republic.
Al Monitor explains: “The outcome of the merger would potentially become the second-largest bank in Iran after the government-owned Bank Melli Iran and would overshadow a number of other networks.” It would also further isolate Iran from Western economies by making at least one major bank susceptible to existing sanctions that target the IRGC and the country’s support for international terrorism. The report goes on to say that if the planned merger or something like it is successful, it will likely set the stage for further consolidation, which would be justified largely as a response to the economic crisis but would do nothing to address the chronic mismanagement that many Iranian officials have acknowledged as being at the root of the problem.
At least for the time being, the government’s response to the crisis appears to be focused on airing grievances between the competing factions of Iranian politics while expressing a mutual commitment to defiance of Western demands and Western interests. In one example of the latter trend, President Rouhani appeared on Iranian state television on Tuesday in order to declare that the country will continue to both produce and export crude oil at the highest possible level, regardless of the US sanctions that are set to take effect in November.
The Associated Press quoted him as saying, “We will continue by all means to both produce and export. Oil is in the front line of confrontation and resistance.” Additionally, Oil Price gave some indication of what the Iranian president’s reference to “all means” might signify. The report suggests that the Iranians may use deceptive and outright illegal practices such as avoiding the international reserve currency through barter, as well as the delivery of oil and gas via tankers on which tracking has been disabled.
This conclusion was based in part on the fact that such methods had been utilized during earlier periods of sanctions, resulting in disparities between Iran’s reported and actual sales and thus alleviating some of the pain of economic sanctions. But those sanctions proved effective nonetheless, and it is widely expected that the existing and forthcoming American measures will have a similar effect. Indeed, the Oil Price report indicates that Iran’s oil exports already fell by approximately 600,000 barrels per day between July and August, as mutual trading partners of Iran and the US took early steps to comply with the emerging sanctions.
What’s more, a report by Hellenic Shipping News indicates that this compliance is being observed even among certain nations, such as India, that had previously vowed to resist the unilateral implementation of pressure by the United States. Meanwhile, the US has retreated somewhat from its original commitment to reduce Iranian oil exports to zero, offering instead to consider sanctions waivers for some importers, provided that they demonstrated a good faith commitment to reducing their intake of Iranian oil. But the above-mentioned report notes that even a diminished goal for American sanctions could be sufficient to create a global deficit in the oil market, which other exporters such as Iran’s fellow OPEC members would work to fill.
The report underscores the dubious nature of Iran’s declarations of resistance, as by pointing out that the forthcoming sanctions will affect every link in the supply chain, from distributors to shippers to insurers, thereby presenting Iranian exporters with numerous obstacles to overcome in order to get their products to foreign markets. Nevertheless, past experience demonstrates that this is entirely possible, even if on a limited scale. But the limitations are perhaps less pronounced if there is not international support for the American-led measures.
So far, the other signatories to the Joint Comprehensive Plan of Action have been standing by the nuclear deal and attempting to provide Iran with incentives to stay within it as well. But those same countries, particularly the E3 – Germany, the United Kingdom, and France – are under serious pressure from a White House that has been working to step up pressure on the Islamic Republic virtually since day one.
This pressure may also be proving effective, while perhaps being helped along by Iran’s persistent belligerence in the broader Middle East and the world at large. This belligerence was on display this week when Iranian Foreign Minister Javad Zarif advocated for an overwhelming attack on the Syrian province of Idlib, aimed at stamping out some of the last pockets of resistance to the Iran-backed dictatorship of Bashar al-Assad. Al Jazeera quoted Zarif as saying Idlib must be “cleaned out” while on a trip to Syria, which followed close on the heels of a mutual cooperation agreement between the Iranian and Syrian Defense Ministers. The same report notes that the United Nations has warned of a potential “civilian bloodbath” if the planned attack goes forward.
International wariness about such plans, and about the associated danger of Iran’s further development of regional terrorist networks, may help to motivate other countries, especially European countries, to sever financial ties with the Islamic Republic out of fears regarding how the money might be spent. This is certainly something that the US has emphasized in dialogue with its allies as it seeks to secure broader global participation in a campaign of sanctions and other forms of pressure.
“Iran is the world’s leading state sponsor of terrorism. We must be vigilant,” said Richard Grenell, the US ambassador to Germany after it was announced that Iran was abandoning plans to transfer 300 million euros that were being held in German banks. As the Algemeiner reported on Wednesday, those plans were interrupted only after Grenell and other Americans contacted German authorities to express their strong opposition. The apparent effectiveness of that communication may bode well for the prospect of farther-ranging US pressure producing more comprehensive pressure on an Iranian economy that is already suffering greatly under the strain of runaway inflation, government mismanagement, and official denial.
Source » ncr-iran