The West’s stiffened sanctions against Iran are apparently starting to bite.
Since July, when the European Union voted to end purchases of Iranian oil, Iran’s main source of income, exports have fallen by 30 percent or more. And sanctions against Iran’s banks have blocked access to as much as $110 billion in foreign currency reserves.
The sanctions are intended to halt Iran’s uranium-enrichment program, the first step toward developing a nuclear weapon. Iran has blustered and stalled in international talks aimed at reaching some kind of agreement to restrain the program.
Now the country is seeing its currency collapse.
On Sept. 30, the unofficial exchange rate was 29,500 rials to the U.S. dollar; by Tuesday, it was 35,500. Two years ago, according to the Associated Press, the rate was 10,000 rials to the dollar.
President Mahmoud Ahmadinejad blames the collapse on Western sanctions and psychological pressures. But the decline of the rial has become an issue in Iran’s corrosive internal politics, with his rivals, including politicians who hope to succeed him in the presidential elections next June, blaming it on economic mismanagement.
As if to prove that point, an ill-timed decision by the Central Bank to give preferential foreign exchange rates to importers of essential goods such as food and medicine aggravated a run on savings accounts as Iranians rushed to withdraw their rials and change them into hard currency on the black market.
Indeed, the currency problem may be even worse than the government lets on. The New York Times reports that the government decided several weeks ago to stop publishing an official inflation rate. At the time, it was officially 23.5 percent, and while high, that number was probably understated.
Iran’s ruling clerics are clearly worried that economic discontent may translate into political discontent, and although there has been nothing like the massive protests that followed the last election, it was a worrisome sign that 10,000 workers signed an open petition to the government protesting their loss of purchasing power.
Iran’s monetary problems give credence to President Obama’s refusal to let Israeli Prime Minister Benjamin Netanyahu browbeat him into drawing red lines for military strikes in favor of giving the sanctions more time to work.