Iranian Rial Hits New Low Against Dollar

By Amir Havasi

The Iranian rial plunged to a new low against the US dollar on Monday in what economists said was a slump partly induced by the Middle East's deadliest coronavirus outbreak.

At Tehran's foreign exchange hub on Ferdowsi Street, the currency was being traded at around 192,800 to the dollar at midday, according to AFP journalists.

The rial has hit rock bottom in the past month, collapsing even below the 190,000 rate it fell to in the wake of the US decision in 2018 to withdraw from the Iran nuclear deal and reimpose sanctions.

Reza looked dispirited as he went from exchange to exchange hunting down better rates for dollars needed to pay for a family member's overseas university fees.

The value of the rial against the dollar is "beyond awful now", said the 35-year-old, who has a job in Tehran's Grand Bazaar.

"We're seeing a different rate every day," he told AFP.

The street was busier around government-owned exchanges, as people formed long queues to take advantage of a central bank scheme offering discount rates.

One of those standing in line was a 30-year-old physiotherapist planning to emigrate to Australia.

"The more I work, the less dollars I can buy," she said, only giving her name as Niki.

"This has affected my welfare, made me more stressed. It's a bad situation," she said as she eyed a digital board displaying the latest rates in red.

Iran's already fragile and sanction-hit economy started deteriorating after it reported its first coronavirus cases on February 19, and it has since struggled to contain the outbreak.

US sanctions reimposed in 2018 mainly targeted Iran's oil sales lifeline, prompting the Islamic republic to focus on its manufacturing sector with exports mostly aimed at its neighbors.

Iran earned just $8.9 billion from the sale of oil and related products in the year to March, down from a peak of $119 billion less than a decade ago, according to Mohammad Bagher Nobakht, the head of planning and budget organization.

Coupled with the lower revenues, the coronavirus pandemic led to a temporary shutdown of the economy, border closures and a halt in non-oil shipments.

"The main cause of the current crisis is the coronavirus," said economist Saeed Laylaz, who has acted as an adviser to Iranian presidents.

"Our non-oil exports have virtually stopped, particularly to neighboring countries" due to the COVID-19 outbreak, he noted in a phone interview.

Iran's health ministry on Monday announced 119 new coronavirus deaths and another 2,573 cases of infection.

That takes the overall toll to over 9,742 dead out of more than 207,500 cases in the outbreak, with official figures showing an upward trajectory in new cases of infection since early May.

Iran's government closed non-essential businesses in March in a bid to stem the spread of the virus, but it refrained from imposing a mandatory lockdown on the population.

Restrictions have been eased gradually since April with officials arguing the economy cannot remain shut down.

But the rial's sharp decline was "not unpredictable", said Laylaz, given the considerable growth of liquidity which leads to rising inflation.

The economist said the forex market turmoil had led to "increasing social and political pressure on the government".

According to Yaser Shariat, a market analyst heading a stock brokerage, the rial's troubles may "continue until the epidemic is brought under control" and borders are reopened.

Most of Iran's border crossings with its neighbors remain closed, save for few at Iraq's Kurdistan region, according to Iranian authorities.

Photo: IRNA

Iran Starts New Domestic Bond to Support Manufacturers

By Yasna Haghdoost

Iran has launched a new domestic bond to support manufacturers and non-oil sectors, Central Bank Governor Abdolnaser Hemmati said.

Hemmati said he expects the local bonds, dubbed “Gam,” or “step” in Farsi, will raise 50,000 trillion rials from the first round of issue, the state-run Islamic Republic News Agency reported on Tuesday. That’s equivalent to $11.9 billion, according to the Central Bank of Iran’s official fixed exchange rate, or $3.6 billion on the open, unregulated market.

Four national banks – Melli, Mellat, Tejarat, and Saderat – will use the bonds to finance manufacturing.

“I am confident that the measures taken by the banking system will see growth in the country’s production and economy,” Hemmati said at the launch.

Iran has sought to boost its non-oil sectors after U.S. sanctions drastically reduced crude oil exports.

The loss of revenue from oil exports, Iran’s main source of hard currency, dealt a blow to the currency, fueling inflation and shortages of some imports.'

Photo: IRNA

Trump Announces Sanctions on Iran Central Bank for Saudi Attack

By Saleha Mohsin and Josh Wingrove

The U.S. slapped terror-related sanctions on Iran’s central bank and sovereign wealth fund on Friday in retaliation for last weekend’s attack on Saudi Arabia, moves aimed at squelching any remaining trade the country conducts with Europe and Asia.

“These are the highest sanctions ever imposed,” President Donald Trump told reporters during a meeting with Australian Prime Minister Scott Morrison at the White House. “We’ve never done it at this level.”

Friday’s action sanctions the central bank under a George W. Bush-era executive order designed to disrupt terrorist groups’ financial networks, over what the administration says is the bank’s support for the Islamic Revolutionary Guard Corps. It’s a controversial step, as sanctioning the central bank may also limit the ability to import humanitarian goods into the country.

Proponents such as Mark Dubowitz of the Foundation for Defense of Democracies argue that by linking the central bank to terrorism, the move will scare away remaining market participants and subject companies to potentially devastating secondary sanctions. It may also create a chilling effect even if a Democrat beats Trump in 2020 and seeks to re-enter the Iran nuclear deal that Trump walked away from in 2018.

“It creates a wall of market deterrence,” Dubowitz said in an interview. “When you set aside the technical gobbledygook, what’s left is that if you do business with Iran, you are supporting terrorism.”

The Treasury Department issued a statement saying Iran’s sovereign wealth fund, the National Development Fund of Iran, was also a major source of foreign currency and funding for the IRGC. The move is aimed partly at tying up any NDF money kept in overseas bank accounts.

Trump said he’ll meet Friday with his national security advisers to discuss further responses to the attack on the Saudi oil facilities, which the U.S. has blamed on Iran. He’s under pressure from hawks among congressional Republicans to order a military attack on the Islamic Republic but has resisted, and has drawn comparisons to the Iraq War that he says he opposed.

Trump said a U.S. attack would be the “easiest thing,” adding, “and maybe it’s even a natural instinct.” But he said that he was showing U.S. strength by not immediately ordering a strike. He could take out 15 different targets in Iran if he wanted to, Trump said.

“I could do it right here, in front of you, and that would be it,” he said. “It shows far more strength to do it the way we’re doing it. I think restraint is a good thing.”

More than 80% of Iran’s economy is under U.S. sanctions already, the Trump administration has said, and the U.S. is looking to target sectors that continue to function, such as trade in manufactured goods and transportation equipment. The U.S. is already sanctioning significant sectors including oil, banks and steel, leaving smaller targets including certain exports and government officials.

The U.S. has previously targeted the country’s central bank, sanctioning one of its governors and another senior official in May 2018 for allegedly providing support for terrorist activity. Tensions have steadily risen between the U.S. and Iran since 2018, when Trump abandoned the 2015 accord negotiated by President Barack Obama to curb Tehran’s nuclear weapons program and began re-imposing sanctions relaxed under the deal.

Friday’s action may also complicate plans by European nations to launch a mechanism known as Instex that would serve as a financial go-between for humanitarian trade with Iran. Iran’s counterpart to Instex, the Special Trade and Finance Institute, is closely linked to the Iranian central bank.

The Trump administration argues that there are already carve-outs for humanitarian trade with Iran and Instex isn’t needed. Critics say the new rules will only make that trade more difficult, and regular Iranians will suffer.

“The end result of this shift in policy—whether out of criminal negligence or willful vindictiveness—is likely to be pain for the Iranian people in the form of more medicine shortages for drugs produced in the West and sharply rising prices for food,” Ryan Costello, the policy director at the National Iranian American Council, said in a statement.

Photo: IRNA

Iran Says Efforts to Curb the Rial's Slide Are Starting to Work

By Golnar Motevalli

Iran’s battered currency is starting to recover in the unregulated market as government policies to defend it against U.S. sanctions take effect.

The rial has stabilized, Abdolnaser Hemmati, the head of Iran’s central bank, was cited as saying by the semi-official Iranian Students’ News Agency. It strengthened about 8% in the open market over the past month to 125,450 per dollar, according to prices compiled by Bloomberg from foreign-exchange websites and traders in Tehran.

The advance is a relief for Iranians who watched the currency plummet more than 50% after U.S. President Donald Trump scrapped the 2015 nuclear accord and reimposed sanctions on the nation. The central bank sought ways to protect the currency with measures that include setting up a government-run foreign-exchange platform known as NIMA to quell the black market and controlling interest rates offered by lenders.

The rial on the open market is now close to the NIMA rate, Hemmati said.

“The central bank’s policies of controlling currency markets and bank interest rates appear to be helping,” said Massoud Gholampour, an analyst at Novin Investment Bank in Tehran. “Demand for foreign currency has dropped compared to last year,” he said, adding that bans on a raft of luxury imports helped as much as $2 billion from being spent on imports.

Photo: Wikicommons

Iran Replaces Central Bank Chief as Economy Faces Crisis

Iran replaced its central bank chief on Wednesday, local media reported, amid fallout over banking scandals and the crisis facing the country's economy.

Valiollah Seif, who had served as the bank's governor since President Hassan Rouhani took power in August 2013, was replaced by Abdolnasser Hemmati following a cabinet meeting, according to the official IRNA news agency. 

Hemmati, 61, previously served as head of Central Insurance of Iran, as well as both Sina Bank and Bank Melli. He had been slated to become ambassador to China until he was recalled at the last minute.

Seif has been criticized particularly over his handling of a currency crisis that has seen the rial lose more than half its value against the dollar in the past year. 

An attempt in April to enforce a fixed rate for the rial sparked a boom in black market exchanges, forcing the central bank to backtrack as the currency's street value crashed to record lows in June.

The crisis coincided with Washington's announcement in May that it was pulling out of the 2015 nuclear deal and reimposing full sanctions on Tehran, exacerbating the run on the rial. 

The US also slapped individual sanctions on Seif in May, accusing him of helping Iran's Revolutionary Guard Corps transfer millions of dollars to Lebanon's Hezbollah.

Rouhani thanked Seif for his "strong and serious service", and said the cabinet had "full confidence" in Hemmati. 

He said a key priority was tackling "illegal credit institutions."

Bankruptcies at several unlicensed lenders—which had offered high interest rates and cheap loans with little capital to back them up—wiped out the savings of millions of depositors and has been a key driver of recent protests.

Rouhani vowed to crackdown on unlicensed banks when he came to power. 

His government has been pressured to repay lost deposits, further straining government resources. 

Photo Credit: IRNA