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

US Hits Iran Central Bank Governor with Sanctions

The United States slapped sanctions Tuesday on Valiollah Seif, the governor of the Central Bank of Iran, accusing him of helping the country's Revolutionary Guard Corps transfer millions of dollars to Lebanon's Hezbollah. 

In the second move in a week taking aim at the money networks of the Revolutionary Guards, or IRGC, the US Treasury also blacklisted a second central bank official, Iraq's Al-Bilad Islamic Bank and its top two executives, and a liaison between IRGC and Hezbollah, which Washington has designated an international terrorist group.

The Treasury said Seif covertly moved "hundreds of millions of dollars" to Hezbollah from IRGC via Al-Bilad Islamic Bank.

Tuesday's action seeks to cut off what the US called a "critical" banking network for Iran, and deny those blacklisted access to the global financial system. 

"The United States will not permit Iran's increasingly brazen abuse of the international financial system," said US Treasury Secretary Steven Mnuchin.

"The global community must remain vigilant against Iran's deceptive efforts to provide financial support to its terrorist proxies."

On Thursday, the Treasury announced sanctions against a "large scale" currency exchange network serving the Revolutionary Guards, hitting six individuals and three companies at the center of the network.

At the time, the US singled out the Central Bank of Iran as "complicit" in the operation, foreshadowing Tuesday's action.

The move against Seif came one week after President Donald Trump withdrew from the Iran nuclear accord and signalled plans to ratchet up pressure on the Iranian economy, and especially on the economic power of the Revolutionary Guards.

Photo Credit: Mehr

Iranians Flock to Empty Exchangers After Currency Fix

Confused and frustrated Iranians flocked to exchange offices on Tuesday after the government fixed a new rate for the dollar, only to find there were none to buy.

On Ferdowsi Street in central Tehran, home to dozens of banks and currency exchanges, many had hoped to find much cheaper dollars than the day before.

Overnight, the government had announced it was fixing the rate at 42,000 rials per dollar in a bid to arrest a slide in the currency, which has lost more than a third of its value against the greenback in six months.

But all along Ferdowsi Street, exchangers were turning hundreds of people away or had signs up saying: "We have no dollars to sell", while rate boards showed blank spaces for US and European currencies.

"Last night on TV I heard it's 42,000 so I came here to buy some for my son who is overseas. I've checked every exchanger but I couldn't find any dollars," said Tahmoores Faravahar, a 71-year-old retired oil sector worker.

A day earlier, some reported dollars selling at a record-high rate of 60,000 rials—pushed up by fears over tensions with the United States and a difficult political and economic situation at home.

"The truth is that the people can't trust the word of the government that their money will be safe," said a trader who sold currency on the street and asked to remain anonymous.

"People don't have hope in the political and economic situation in this country. People are confused and just want to keep their money safe by turning it into dollars."

One exchange office said it was never clear when the central bank would deliver dollars for them to sell.

"I don't know why they haven't come yet today," he said in the early afternoon. "But the new rate is good. The price was not normal these last few days."

'Everything is down'

Another street trader said the recent currency speculation was driven by the fact that people had few other options to make cash.

"If you look at the market, everything is down except the dollar. Real estate is down, the retail sector is down. People need income so it's a good idea to buy and sell dollars and make some money," he said.

"Last night, the government lowered the price and some people had a heart attack, but it won't stay like this."

He said exchangers would find ways to fiddle the system to get round the new fixed rate, even though Vice President Eshagh Jahangiri warned this would be considered smuggling.

"Just like the smuggling of drugs, no one has the right to buy or sell it... If any other exchange rate is formed in the market, the judiciary and security forces will deal with it," Jahangiri warned on state television.

Some said this had only created fear and confusion. "I want to sell some dollars but no one wants to buy them because the market is not safe," said a man in his forties, who did not give his name.

"The exchanges are worried about the situation because the government says it is smuggling if they sell above the new rate, so no one wants to sell," he said.

Meanwhile, for the many journalists covering the scene at Ferdowsi Street on Tuesday, there was another, unexplained phenomenon. "There are so many police here, but no one has asked us anything," said one local reporter.

Other media, including AFP reporters, said it was the first time they had been left to work without even being asked for their papers or being told to move on.

Journalists have felt less pressure since President Hassan Rouhani came to power in 2013, but police routinely hassle reporters and stop them filming in public. "It's like a dream," said one journalist as police walked past his video camera without batting an eye.

Photo Credit: Shutterstock