Not Cashing In: Virus Hits Iraq's Iran-US Money Trade

By Shwan Nawzad

In Iraq's Kurdistan region and at the country's Muslim Shiite holy sites, trading US dollars for rials from Iran was once big business.

But the money exchange trade has been hard hit by lockdown restrictions to stop the spread of COVID-19, and by deep economic woes in both countries.

Traders in Sulaimaniyah, the second city of Iraqi Kurdistan and close to the border with Iran, have seen dramatic changes.

In March, before restrictions to stem the pandemic which has killed more than 5,000 Iraqis and infected more than 130,000 others, one dollar traded for 150,000 Iranian rials.

Today, one dollar fetches 250,000 rials, money changer Amanaj Saleh told AFP.

Tehran and Washington may be at loggerheads—coming close to open war in Iraq at the beginning of the year -- but Iraqis have no problem keeping a mix of the rival banknotes in their wallets.

Betting on a rebound in the Iranian currency—and hoping the coronavirus crisis would pass quickly -- many Iraqis rushed to snap up rials on the cheap.

The dollar-rial trade seemed like a welcome alternative income during the financial turmoil, which has destroyed countless livelihoods.

A survey by the International Rescue Committee (IRC) aid organization has found 87 percent of people questioned said they could no longer work because of the disease.

Big Losses

Iraq is going through its worst economic crisis in its recent history, hit by a slump in oil prices that account for almost all public revenues.

Government austerity cuts are expected to be severe.

"Since the appearance of coronavirus and the economic crisis it has caused, people who can no longer work are investing in Iranian currency to make their capital work," said Saleh.

But the trader, a man with a small grey moustache sitting under a huge framed reproduction $100 bill, warned that not all had found profit in the gamble.

"Those who had bought Iranian rials at the exchange rate of 200,000 rials for one dollar, now resell them at the lower rate: 250,000 rials for a dollar," he said.

Many Iraqis use American dollars and their own dinars interchangeably, with the rates stable between the two currencies.

It is the big swings between dollars and Iran's rial that attract those hopeful of winning on the difference.

American sanctions have long stifled the Iranian economy, and the closure of official border crossings between Iran and Iraq has added to the woes.

Hazar Rahim, a laborer in Sulaimaniyah, found this out the hard way.

"A few days ago, I bought five billion Iranian rials," he told AFP. "I was betting on the market but I was taken by surprise. In a few hours, the rial dropped, and I'd lost 13,000 dollars."

Religious Tourism Frozen

Two of the most holy sites for Shiites, Karbala and Najaf, are both in southern Iraq. Millions of Shiite pilgrims, the majority from Iran, visit every year.

They bring Iranian rials to spend and trade. In past years, the visitors brought in up to five billion dollars -- crucial in a country where almost all tourism is to religious sites.

It also provided hundreds of thousands of jobs and accounted for around 2.5 percent of GDP, according to official figures.

But with travel restrictions in place because of the virus, the shops and restaurants once busy with visitors are closed.

Iranian arrivals had already slowed amid deep economic woes at home since the United States in 2018 withdrew from the Iranian nuclear agreement and reinstated punishing sanctions.

Coronavirus in Iran -- the worst in the region with more than 17,000 deaths and 310,000 infections -- has only worsened the situation of the country.

The crisis has reduced Iran's exports, causing devaluation and inflation.

According to the International Monetary Fund, Iran's GDP is expected to shrink six percent in 2020, after contracting 7.6 percent last year.

In Iraq, meanwhile, tougher times loom as well. The economy is expected to contract almost 10 percent this year.

But with few apparent alternatives, dozens of Iraqis keep coming to the money traders in the hope that times will change, the rial will rise, and they can cash in.

Photo: IRNA

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 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 Court Tries 13 in $7 Billion Petrochemical Fraud Case

The trial has started in an Iranian court for 13 petrochemical industry executives charged with embezzling EUR 6.6 billion USD 7.4 billion) in one of the nation’s biggest corruption cases, the state-run Islamic Republic News Agency reported. 

The defendants, most either chief executives or board members of Iranian petrochemical producers and exporters, are accused of “causing a great economic disturbance” by establishing shell companies overseas to circumvent sanctions imposed while Mahmoud Ahmadinejad was president, judge Assadollah Masoudi Magham said, according to IRNA.

Reading from a 700-page indictment, another judicial official added that billions of euros worth of sales from petrochemical exports were funneled to the companies as purchases, the Mehr news agency reported on Thursday.

The case, described by IRNA as “record-breaking” for its monetary value, is the latest in a series of trials and investigations started after the government of President Hassan Rouhani and the hardline judiciary vowed to root-out corruption in response to rising public anger over levels of cronyism and economic nepotism within industry and government.

The return in August of U.S. sanctions, the most punitive ever imposed on the Islamic Republic by Washington, has brought fresh urgency to the efforts as people are being forced to cope with steep increases in prices and a collapse in the rial, which have cut the value of their paychecks and spending power.

Photo Credit: IRNA

Iran Arrests 11 Who Stole $400m Earmarked for Imports

Iran's intelligence ministry said Monday it had arrested 11 "economic disruptors" who misappropriated some USD 400 million earmarked for essential goods and smuggled the money out of the country.

Authorities have been cracking down on those seeking to exploit the collapsing rial, which has lost around half its value against the dollar this year, in part due to the return of US sanctions.

"During these sensitive economic times, this network received IRR 47 trillion rials (USD 416 million at Monday's open market rate) of subsidized foreign exchange to import essential goods but instead invested them in some other countries," the intelligence ministry said in a statement published on its website.

The group, based in the western Kurdistan province, used "bogus companies, forged documents and bribery" to receive subsidized dollars from state banks, it said.

The Islamic republic has multiple exchange rates, with the government offering a subsidized rate of IRR 42,000 per dollar to importers of vital goods. Most Iranians must buy dollars on the open market, where the rate stood at IRR 110,000 on Monday, according to currency tracking site Bonbast.

At one point in September, the rial had fallen to IRR 190,000 per dollar, but the central bank has been pumping cash into the market in recent weeks to stabilize the currency.

Dozens of other "economic disruptors" have been arrested in recent months, and in November, a trader dubbed the "Sultan of Coins" and his accomplice were executed for exploiting the surge in demand for dollars and gold.

Many panicked Iranians rushed to secure their savings by buying foreign currency and precious metals in response to US President Donald Trump's decision in May to withdraw from the 2015 nuclear deal and to reimpose sanctions.

Photo Credit: IRNA

Iran Supreme Leader Warns Against Spread of Pessimism

Iran's supreme leader on Thursday warned against the spread of pessimism in the country, as people face mounting economic woes after the imposition of US sanctions.

Addressing the Assembly of Experts, an elected body of high-ranking clerics tasked with choosing the supreme leader, Ayatollah Ali Khamenei called for people's problems not to be overstated.

"This exaggeration intensifies the anxiety of public opinion and causes the pessimism virus to spread," Khamenei said in comments published on his official website.

"It is not correct to speak in a way that the audience is terrified and thinks that all is lost," he added, calling for both the good and bad aspects of state institutions to be highlighted.

Khamenei was speaking as Iranians adjust to sanctions imposed by the United States last month, after Washington pulled out of the landmark nuclear deal with Tehran.

The move by US President Donald Trump has exacerbated economic woes in Iran, with the Iranian rial losing 70 percent of its value in the past year. 

The currency crisis has led to huge price rises in the country and put pressure on President Hassan Rouhani, who has so far been defended by Khamenei.

"No government can go on without the support and trust of the people, we must not act in a way that will deprive the government of the people's trust," the supreme leader said Thursday.

Photo Credit: leader.ir

Iran Currency Hits All-Time Low Against Dollar

The Iranian rial hit another all-time low against the US dollar on Monday in spite of central bank efforts to stem the decline.

The rial has lost around 15 percent of its value on the open market in the past three days, bottoming at 128,500 to the dollar by Monday evening, according to Bonbast.com, which monitors Iran's rates.

The drop followed a speech by central bank governor Abdolnaser Hemmati on Saturday, in which he announced tighter restrictions on allocating foreign exchange reserves, said financial journalist Maziar Motamedi.

"Hemmati said that he wishes to be much more careful in allocating foreign currencies at government rates, signalling a potential forthcoming shortage of hard currency," he told AFP.

The rial has lost 70 percent of its value in the past year, primarily due to increased hostility from the United States and its withdrawal from the 2015 nuclear deal in May.

Official statements have done little to calm the markets.

Hemmati, who took over in August after his predecessor was sacked, "seems to have had a point when he said in (his inaugural speech) that he will try to minimise public remarks, as every comment coming from high-ranking officials aiming to calm the market has spurred negative reactions," said Motamedi.

The central bank puts tight controls on how much foreign currency is pumped into the system, and hands out a special government rate of 42,000 to certain importers, such as those buying essential goods like medicines.

Another factor may be demand from pilgrims heading to Iraq for the upcoming Arbaeen religious festival, attended by some two million Iranians last year.

The central bank has tried to calm the market, first by trying to end open-market trading in April, fixing the rate at 42,000 and shutting down exchange shops.

But that only sparked huge speculation and corruption on the black market, leading the government to sack the central bank chief and reverse the April measures.

Photo Credit: IRNA

Iraq Religious Tourism Squeezed by Iran Sanctions

With hotels facing mass cancellations, Iraqis in the holy city of Najaf are being hit hard by US sanctions on neighboring Iran, which have forced cash-strapped pilgrims to stay home.

At the city's edge, surrounded by mosaic-covered walls and topped by a golden dome, sits the shrine of Imam Ali, son-in-law of the Prophet Mohammed and a revered figure among Shiite Muslims.

The shrine draws a million and a half Shiite pilgrims to Najaf each year, in addition to those who travel to the holy city for the huge annual Arbaeen commemoration.

The vast majority hail from neighboring Iran, whose population is overwhelmingly Shiite.

"More than 85 percent are Iranians," said Saeb Abu Ghoneim, president of the hoteliers' union in the city.

Signs throughout the city, 150 kilometres (95 miles) south of Baghdad, are translated into Farsi.

Iran's national language can be heard across Najaf, spoken by women in full-length black veils and by male pilgrims, walking in the shade to avoid the searing sunlight.

But just days after Washington this month re-imposed sanctions on Iran, following President Donald Trump's decision to pull the US out of a landmark 2015 nuclear accord with Tehran, the impact is already being felt in Najaf.

Currency Crisis

The Iranian rial has been severely hit by internal economic woes and the US measures, losing around half of its value against the dollar since April.

Farzad Reza Ali, an Iranian who did manage to fund his trip to Najaf, said the drop in pilgrim numbers was a direct result of the currency crisis.

"(It's) because the rial is worth nothing," he said, a travel company badge tied to a ribbon around his neck in the colors of the Iranian flag.

The first round of sanctions against Iran covers financial transactions and imports of raw materials. 

Further measures due to hit in November will affect Iran's central bank and the vital hydrocarbon industry.

At the start of the year the dollar exchange rate was 42,900 rials. It has since hit nearly 120,000 rials on the black market.

To get the USD 40 needed for a visa to Iraq, Mokdabandeh Mehrban said he had to go to the black market.

"Now the market fluctuates and it's not supported by the government, so there are fewer Iranian pilgrims," he said, wearing large sunglasses and a striped shirt.

Market in 'Free Fall'

Cancellations by Iranian pilgrims could have dramatic consequences for Iraq's tourism sector, which last year directly or indirectly employed some 544,500 people.

It also contributed three percent of GDP, nearly $5 billion dollars, according to the World Travel and Tourism Council.

Tourism is almost exclusively religious in Iraq and is concentrated in Najaf and nearly Karbala, the country's other holy Shiite city.

As Najaf prepares to welcome pilgrims for numerous religious festivals this month, there is a notable lack of Iranian arrivals.

Transport links have been slashed -- Najaf airport, which used to offer 35 flights a day between the two countries, now operates just 12.

Officials say most of the passengers on the flights leaving Najaf for Iran are Iraqi pilgrims heading for Iranian holy sites.

"A lot of hotel reservations have been cancelled and the number of pilgrims to Najaf is very fragile," said Abu Ghoneim, although he was unable to provide precise figures from the city's 285 hotels.

To counter the trend, hoteliers have been forced to offer rooms at bargain basement prices.

"Prices have been slashed, to less than 50 percent sometimes," said Youssef Abu Al-Tabouk, owner of Najaf's Al Balad Al Amine hotel.

But discounted stays and other special offers are not enough to make up for the impact of sanctions, the 85-year-old said, his head covered with a traditional black and white keffiyeh scarf. Without Iranian pilgrims, he said, "the market is in free fall."

Photo Credit: IRNA

Iran Gives Most Explicit Rejection Yet of US Talks

Iran gave its most explicit rejection yet of talks with the United States on Saturday, and accused Washington of an "addiction to sanctions" over its latest spat with Turkey. 

The US reimposed harsh sanctions on Iran on Tuesday following its May withdrawal from a landmark 2015 nuclear agreement, dealing a heavy blow to the already troubled economy.

US President Donald Trump has offered talks on a "more comprehensive deal" but Iran has baulked at negotiating under the pressure of sanctions and has instead leant on its increasingly close ties with fellow US sanctions targets Turkey and Russia.

Foreign Minister Mohammad Javad Zarif was asked by the conservative Tasnim
news agency whether there was any plan to meet with US Secretary of State Mike
Pompeo.  

"No, there will be no meeting," was the blunt response from Zarif. 

He said there were also no plans for a meeting with US officials on the sidelines of the UN General Assembly in New York next month, which both Iranian President Hassan Rouhani and Trump are due to attend. 

"On Trump's recent proposal (of talks), our official stance was announced by the president and by us. Americans are not honest and their addiction to sanctions does not allow any negotiation to take place," Zarif told Tasnim. 

It was Iran's most explicit rejection of talks to date, after much speculation that economic pressure would force its leaders back to the table with Washington or at least to engage in backroom discussions in New York.

Stop 'Bullying' Turkey

Earlier on Saturday, Zarif waded into the mounting row between Turkey and the United States. 

"Trump's jubilation in inflicting economic hardship on its NATO ally Turkey is shameful," he wrote on Twitter. 

"The US has to rehabilitate its addiction to sanctions (and) bullying or entire world will unite—beyond verbal condemnations—to force it to," he warned.  

"We've stood with neighbors before, and will again now."

Trump said Friday he was doubling steel and aluminum tariffs on Turkey as part of an ongoing row over the detention of American pastor Andrew Brunson and other issues.

The tensions have fueled a run on the Turkish lira, which dropped 16 percent to a record low on Friday, with Trump tweeting that the currency was sliding "rapidly downward against our very strong Dollar!"

Rial Pain

Iran too has suffered a major decline in its currency this year—in part due to US abandonment of the nuclear deal—with the rial losing more than half its value against the dollar since April.

Ironically, the rial strengthened in the two days leading up to the reimposition of US sanctions on Tuesday, after the government announced new foreign exchange measures giving greater freedom to trade dollars at market rates. 

But there has since been a fresh decline of almost 13 percent, with the rial at 106,200 per dollar on Saturday, according to currency tracking website Bonbast—approaching the record low of 119,000 that it reached on July 31.

Analysts say this is due to uncertainty in the market, with currency traders still unsure of the new rules and struggling to access dollars from the central bank.

Zarif met repeatedly with then US secretary of state John Kerry during the negotiation and implementation of the 2015 agreement—but those relatively warm ties were abruptly ended when the Trump administration came to power.

Rouhani said last week that Iran "always welcomed negotiations" but that Washington would first have to demonstrate it can be trusted.

"If you're an enemy and you stab the other person with a knife and then you say you want negotiations, then the first thing you have to do is remove the knife," he said in an interview on state television.

Photo Credit: IRNA

Afghans Return Home in Record Numbers as Iran Currency Plunges

Migrant workers squeezed into battered taxis pull into the Four Seasons of Freedom hotel in western Afghanistan, part of a wave of Afghans forced to leave Iran after a currency implosion wiped out their earnings.

A record 442,344 Afghans have voluntarily returned or been deported from Iran this year as looming US sanctions—which began to be reimposed this week—fueled a run on the rial and spurred inflation.

Iran's currency has lost around half of its value against the dollar since US President Donald Trump abandoned a landmark 2015 nuclear deal in May, triggering a reimposition of tough penalties on the Islamic republic.

That has devastated not only the savings of Iranian households, but also the remittances of undocumented Afghans.  

Desperate and jobless Afghans have crossed the porous border with Iran for years in search of work to support their struggling families back home.

Many of those families are farmers now suffering through Afghanistan's worst drought in living memory, compounding the misery caused by 17 years of conflict and underscoring their reliance on the remittances.

Abdul Mussawir, who went to Iran three years ago, used to earn the equivalent of 18,000 afghanis per month (about USD 260) working in an auto factory in the central city of Isfahan. 

Mussawir, 22, sent money to his parents and nine younger siblings in Parwan province, supplementing the meagre income of his taxi driver father. 

But as the run on the rial gathered pace, his monthly earnings shriveled to the equivalent of 6,000 afghanis. 

"I was sending almost all the money I was earning to support my family... (but) it wasn't enough," said Mussawir, wearing a shirt emblazoned with "Keep Karma + Carry On".

After taking a taxi from the border to the Four Seasons of Freedom hotel in Herat city, a distance of roughly 140 kilometres (90 miles), Mussawir hoped to find better paid work in his conflict-torn country. 

"It doesn't make sense to come back here but I have to," he said, a look of resignation etched on his face.

No Job, No Future

The 442,344 Afghans who returned from Iran in the first seven months of 2018 was more than double the number for the same period of 2017, according to the International Organization for Migration (IOM). 

"The number of Afghan returnees from Iran in 2018 has been unprecedented," IOM spokeswoman Eva Schwoerer told AFP in Herat.

The figure included 191,056 "spontaneous", or voluntary, returns. The remaining 251,288 were deported as Iran toughens its border controls. 

Among those kicked out was 17-year-old Aleem Mohmini, who spent three months working on a tomato farm near the southern city of Shiraz before Iranian police caught him.

As he sat with other minors in the IOM's transit centre for returnees in Herat, Mohmini pondered his future in a country where unemployment is rampant.   

"I don't know what I should do. There's no one in my family to earn money," said Mohmini, who was the breadwinner for his household in the northern province of Baghlan.

The IOM expects the flood of returnees to Afghanistan to continue as US sanctions targeting Iran's access to US banknotes, key industries and oil sales exacerbate the country's economic woes.

The influx is having "direct and immediate effects" on the Afghan economy, the IOM said in its latest report.

It is pushing down wages for casual laborers in cities and fueling the displacement of drought-stricken Afghan farmers, many of whom have long relied on income from relatives working in Iran.

More than 70,000 people have been forced to move to cities due to the lack of water and food, according to the United Nations, with many of them living in makeshift tents and competing with returnees for limited jobs. 

Iran's currency freefall is also hurting Afghan businesses in Herat that rely heavily on returning Afghans for sales of mobile phones, backpacks and shoes. 

"Business was much better in the past... (people) were rich, they could buy everything," said Zia Fahmi, whose sales have plunged more than 80 percent in recent months.

As newly arrived returnees loitered outside his store, Fahmi said he may be forced to close the shop and join the migrant trail to look for work in "other countries".  

Abdullah Wasi Zahariyan, who spent a year working on a cucumber farm in Isfahan, also told AFP he plans to go to "another country"—most likely Turkey, and then Germany—if he cannot find a job in Afghanistan.

Zahariyan, 22, decided to return home after his earnings plunged 60 percent due to the devaluation of the rial.

"If there is no job in Afghanistan, there is no future," he told AFP. 

Photo Credit: Wikicommons

Iran Volatile on Eve of US Sanctions

Iranians are hunkering down for the return of US sanctions on Monday with a run on gold and hard currency as they scramble to protect their savings, and sporadic protests over the already troubled economy.

State news agencies reported "scattered protests" of a few hundred people on Thursday in the cities of Shiraz, Ahvaz, Mashhad and Karaj, which police had brought under control.

Videos posted on social media—whose authenticity could not be verified—have shown days of demonstrations in Iran's third city Isfahan and minor protests in the capital on Thursday night. 

So far, they have not been on the scale of the violent unrest that gripped dozens of towns and cities in December and January.

But anxiety is everywhere, especially over the collapse of the rial, which has lost nearly two-thirds of its value in six months. 

"We are seeing protests and they will continue," said Adnan Tabatabai, head of the CARPO think tank in Germany. 

"The establishment knows they are legitimate but my biggest concern is they will be hijacked by groups inside and outside the country and turn violent."

A decision to fix the exchange rate in April and arrest unlicensed currency dealers backfired spectacularly and triggered a boom in the black market. The consequences have sometimes felt absurd. One expat described having to meet a trader under a bridge in central Tehran to change USD 2,000.

"He told me to wear a red scarf and came up to me whispering: 'Show me the money' like we were in a spy film," she said.

Many wealthy Iranians are leaving the country, while others have been gripped by a bunker mentality, stocking up on provisions, dollars and gold in order to ride out the storm. 

Customers were cheek-to-jowl in the narrow alleys of Tehran's Grand Bazaar this week. 

"People are worried that if they don't buy things today, they won't be available tomorrow," said Ali, who runs a kitchen store in the bazaar, adding that wholesalers were hoarding new stock while they waited to see how the crisis unfolded.

The US walked out of the 2015 nuclear deal in May and is bringing back "maximum pressure" sanctions for most sectors on August 6, and the energy sector on November 4. 

Multinational firms that rushed to cash in three years ago—such as France's energy giant Total and carmakers Peugeot and Renault—are already packing up. 

Loopholes

But many smaller firms are hunting loopholes and counting on protection from European governments who are determined to keep the nuclear deal alive. 

"No one really knows how the sanctions will be. The Trump administration is doing that on purpose to keep everyone feeling threatened," said a Western businessman in Tehran working in the oil and gas sector. 

He said US threats are making some Europeans more furious than afraid. 

"I've heard of four German pharmaceutical firms who are looking to come to Iran specifically to piss off the US."

The return of sanctions will make things only slightly harder for them, as major international banks were already too scared of US penalties to work with Iran even before Trump tore up the agreement. 

"The nuclear deal was good for the oil sector but didn't help the financial and banking sectors," said Farid Dehdilani, international affairs adviser for the Iranian Privatization Organisation. 

 "We did everything we could to attract foreign investment but without the banks it was limited. The US election in 2016 was always a cloud over the agreement, and in the end it produced the worst possible result."

Hitting Oil Sales

A major blow for Iran will be the loss of oil sales, which Facts Global Energy analysis firm says could drop from 2.4 million barrels per day to as low as 700,000 by the end of the year.

Some countries like India, China and Turkey say they are too dependent on Iranian crude to obey US orders, but many refiners, particularly in Europe, are already cutting back.  

Ironically, Iran's government may regret cracking down on black market operators that facilitated oil sales during the last sanctions regime, such as billionaire Babak Zanjani who was sentenced to death for corruption in 2016.

"Because (President Hassan) Rouhani went after his opponents and targeted people using the black market... now the US Treasury knows exactly how they bypassed the system," said Mohammad Reza Behzadian, former head of the Tehran chamber of commerce. 

There have been positive signs, with a new central bank governor pledging fresh currency policies in the coming days, and an unprecedented transparency push that has seen dozens of arrests of profiteers with political connections. 

But many say it is all too late, with the government never putting a convincing economic plan together when it had the chance. 

"It failed to take advantage when conditions were good," said Behzadian. "It's much more difficult to act in a crisis."

Photo Credit: EPA/Shutterstock

Iran's Currency Crisis Triggers Corruption Crackdown

With its currency plummeting ahead of the reimposition of US sanctions, Iran has responded with dozens of arrests and claims of an enemy conspiracy, but also signs of a push to confront corruption.

The Iranian rial has lost almost two-thirds of its value since the start of the year, and 20 percent in just two days since the weekend, hitting a record-low of 119,000 to the dollar. 

Many lay the blame on the imminent reimposition of US sanctions on August 6 following US President Donald Trump's decision to pull out of the historic nuclear accord, with Iranians rushing to store their savings in dollars. 

The central bank issued a statement on Monday that trod a familiar line, blaming "the enemies' conspiracies" for the rial's sudden decline.

This may not be purely paranoid fantasy. The US and its Gulf Arab allies are engaged in a "maximum pressure campaign" against the Iranian government, and there have been rumours that the United Arab Emirates has been curbing the physical supply of dollars to Iran, helping drive up prices.

But others say outside pressure is only effective because Iran's economy is so corrupt and poorly managed. 

Belatedly, the authorities appear to be waking up to the crisis. This weekend, the judiciary announced 60 people had been arrested for fraud and trying to undermine the banking system, with more to come.  

Spokesman Gholam Hossein Mohseni-Ejeie said several had direct ties to the government, allowing them, for example, to illegally import luxury cars, and could face the death penalty on Iran's infamous charge of "corruption on Earth". 

New Transparency

The arrests follow mounting anger against profiteers who use political connections to access dollars at artificially low rates, and then use them to import goods on the cheap, or simply sell them on the black market for a huge profit.

In a radical departure from usual government practice, in June the young telecoms minister Mohammad Javad Azari Jahromi exposed a group of mobile phone importers who were gaming the system. 

They had been granted USD 250 million at the cheap rate to import phones, he said, "but less than one third was used for the purpose," implying the rest was stashed away or sold.

The 36-year-old minister's move proved wildly popular on social media, but saw a backlash from some of his cabinet colleagues such as Industry Minister Mohammad Shariatmadari, who said doing something similar in his ministry would amount to "a war against the private sector."

Still, the episode showed a new willingness among Iranian officials to "be transparent and introduce accountability into the system," said Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, a business network.

"Hopefully, more officials will understand that this is what the public is looking for."

'Full-Fledged Crisis'

The other priority is fixing the chaotic policies that have facilitated profiteering in the first place, particularly the disastrous decision in April to set a single, fixed rate for the dollar at IRR 42,000. 

To enforce the decision, the authorities shut down currency trading shops and made it illegal to sell dollars above the official rate, which only fueled a boom in the black market.

The government was forced to climb down in June, saying only importers of essential items such as medicines would use the cheap rate, while others would negotiate a higher price. 

President Hassan Rouhani sacked the central bank chief last week, and his replacement, Abdolnassar Hemati, has promised new currency policies "in the coming days". 

But trapped in fire-fighting mode and under fire from both conservatives and reformists over the deteriorating economic situation, Rouhani has done little to address deeper problems. 

"We're in a full-fledged crisis and that's taking all the attention. No one is talking about bank reform and investment and job creation," said economic journalist Maziar Motamedi of Tehran's Financial Tribune. 

Fearing a public panic, the government continues to insist that everything is under control, but has so far offered only vague promises that it will allocate more money to job creation and funnel more infrastructure projects to the private sector. 

"Just saying positive stuff is not helping. People have a hard time believing them," Motamedi said. 

"Everyone knows the structural problems are there but the government is tackling crises as they happen rather than preventing them."

Photo Credit: Wikicommons

Iran's Rial Hits Record-Low 100,000 to the Dollar

Iran's currency hit a record low on Sunday of 100,000 rials to the dollar amid a deepening economic crisis and the imminent return of full US sanctions. 

The unofficial rate stood at 102,000 rials by midday, according to Bonbast, one of the most reliable sites for tracking the Iranian currency. 

The rate was confirmed by a trader who spoke on condition of anonymity to AFP. 

The rial has lost half its value against the dollar in just four months, having broken through the 50,000-mark for the first time in March. 

The government attempted to fix the rate at 42,000 in April, and threatened to crackdown on black market traders. 

But the trade continued with Iranians worried about a prolonged economic downturn turning to dollars as a safe way to store their savings, or as an investment in the hope the rial will continue to drop. 

With banks often refusing to sell their dollars at the artificially low rate, the government was forced to soften its line in June, allowing more flexibility for certain groups of importers. 

The handling of the crisis was one of the reasons behind last week's decision by President Hassan Rouhani to replace central bank chief, Valiollah Seif. 

The currency collapse was encouraged by the US announcement in May that it was pulling out of the 2015 nuclear deal, that lifted certain sanctions in exchange for curbs to Iran's atomic program.

The US is set to reimpose its full range of sanctions in two stages on August 6 and November 4, forcing many foreign firms to cut off business with Iran. 

Photo Credit: Mehr

Iran's Rouhani Says US 'Isolated' on Sanctions

The United States is increasingly isolated in its move to reimpose sanctions on Tehran after quitting the international nuclear deal, President Hassan Rouhani said Saturday, vowing to resist  American "plots."

"The path chosen by the Islamic Republic of Iran is perseverance, resistance", Rouhani said in televised remarks. "Each time that we were able to thwart the plots, the people and the government were side by side."

Over the objections of allies, Trump in May pulled the United States from the nuclear deal signed between Tehran and world powers in 2015.

He re-imposed US sanctions that had been suspended in return for controls on Tehran's nuclear program, effectively barring many multinational firms from doing business in Iran.

"The United States is more and more isolated on the subject of sanctions," said Rouhani. "The illegal logic of the United States is not supported by any of the international organizations." 

Iran has faced mounting economic woes since Trump's announcement, which added to pressure on its currency. The rial has lost around half its value against the dollar in nine months.

Many importers and exporters have complained they do not have enough currency to enable trade with foreign countries.

But Rouhani said Iran would ensure exporters and importers have "the necessary currency."

Photo Credit: IRNA

Iran's Rouhani Calls for Unity in Face of Economic Woes

Iranian President Hassan Rouhani called on Tuesday for national unity to preserve "confidence" and "hope" in the face of unrest over the Islamic republic's mounting economic woes.

Rouhani's remarks came as vendors in Tehran's Grand Bazaar, a traditional area of support for Iran's leadership, continued a rare strike that began Monday over the collapse of the rial on foreign exchange markets.

"The media, the scholars, the preachers, the (Shiite) seminaries, all those with a public voice, the parliament, the judicial system... we must all join hands," Rouhani said in a long televised address during an annual conference organised by the judiciary.

"I assure you that if we can safeguard these two assets—hope and trust (of the people)—we can overcome all problems," Rouhani said.

"Why should people worry? Today, this anxiety is created by the media of the enemies. They are doing their job... but we expect more (support) from our friends," the president said. 

A moderate conservative elected in 2013 and re-elected in 2017 with backing from reformers, Rouhani has been under attack in recent weeks from Iran's ultra-conservative camp—be it editorials in the press or sermons from imams in cities across the country. 

Critics accuse the government of neglecting the most vulnerable segments of the population from inflation and price hikes, and instead focusing on reforms they deem non-essential like the admission of women into football stadiums.

Iran's currency has plunged almost 50 percent in value in the past six months, with the US dollar now buying around 85,000 rials on the black market.

Tehran has faced mounting economic woes since the United States in May pulled out of a 2015 nuclear accord between Tehran and world powers that lifted international sanctions in exchange for a scaling back of the Islamic republic's atomic program.

Apart from the rial's collapse, the Iranian private sector has long been starved of investment, its banking system is crippled by bad loans and record levels of unemployment mean a third of under 30-year-olds are out of work.

Photo Credit: Wikicommons

Tehran's Grand Bazaar Strikes in Protest at Rial Collapse

Traders in the Iranian capital's Grand Bazaar held a rare protest strike Monday against the collapse of the rial on the foreign exchange market as demonstrators also took to the streets.

At a crossroads in central Tehran, police fired tear gas at dozens of youths shouting slogans and throwing stones, an AFP photographer said.

"The demands of bazaar traders are legitimate. They want the situation on the foreign exchange market to be clarified once and for all," Abdollah Esfiandari, head of the historical covered market's administrative board, told ISNA news agency.

He said the protest was against "the high exchange rate, foreign currency fluctuations... goods being blocked at customs, and the lack of clear criteria for duties".

Shops had their metal shutters down throughout the market, said 45-year-old carpet trader who grew up in the area. "It's the first time in my life that I have seen this."

Iran's currency has plunged almost 50 percent in value in the past six months, with the US dollar now buying around 85,000 rials on the open market.

"Anti-riot police intervened" to disperse a protest in the Grand Bazaar, making two arrests, according to another carpet merchant.

Iran has faced mounting economic woes since the United States in May pulled out of a 2015 nuclear accord between Tehran and world powers that lifted international sanctions in exchange for a scaling back of the Islamic  republic's atomic program.

Photo Credit: Omid Vahabzadeh, Fars News

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

Iran's Rial Hits New Record-Low on Trump Fears

Iran's currency fell more than six percent against the dollar on Sunday, hitting another record-low, as fears of a US withdrawal from the nuclear deal continued to drive speculation.

The rial reached 55,200 to the dollar at the close on the open market—a drop of nearly a third in the past six months—according to the Financial Informing Network, considered the most reliable for fluctuations in the free rate.

"There is a clearly an increase of people buying dollars because they think the United States will pull out of the nuclear deal," said the head of an exchange office in Tehran, on condition of anonymity.

The gap with the government's official rate, which stood at 37,814 on Sunday, has continued to widen, threatening a return of high inflation which the government has battled to bring under control.

"The government can't do anything when there is this much panic. If the US exits the agreement, the Iranian currency could collapse even further and reach 70,000 to the dollar," said the exchange dealer.

The head of the central bank, Valiollah Seif, and Economy Minister Masoud Karbasian were summoned to parliament to discuss the issue last Monday.

Long queues have been seen outside exchange offices for weeks as uncertainty mounts over the nuclear deal which Iran reached with world powers in 2015.

President Donald Trump has threatened to walk away from the deal and reimpose sanctions by May 12—the next deadline for confirming US involvement—unless new restrictions are placed on Iran's nuclear and missile programs.

The rial stood at around 40,000 to the dollar in October, when Trump said he would no longer certify Iran's compliance with the nuclear deal, and has been falling steadily since.

Iran's government took drastic measures in February to stem the decline, arresting unlicenced exchange dealers and freezing speculators' accounts, but they have had little impact.

President Hassan Rouhani, who has staked his legacy on trying to revive the economy by rebuilding ties with the West, sought to play down the decline earlier this year, saying Iran was bringing in plenty of dollars through oil sales.

Photo Credit: AFP

Iran Currency Hits Record Low, Crashing Through 50,000 Mark

The Iranian rial fell to a record-low on Monday, breaking through the 50,000-to-the-dollar mark for the first time, with analysts blaming uncertainty stemming from Washington.

The rial has lost around a quarter of its value in the past six months to reach 50,860 against the US dollar according to the Financial Information Market, a trusted website for fluctuations on the open market.

The gap with the official rate, which stood at 37,686 on Monday, has continued to widen. Iran's government took drastic measures last month to stem the decline in the free market rate, arresting foreign exchange dealers, freezing speculators' accounts and raising interest rates, as well as buying up millions of dollars in a bid to lower the price.

But on the streets of Tehran, long queues continued to gather outside foreign exchanges in the build-up to the Nowruz New Year holiday, which is running for another week.

"The issue is psychological rather than economic. There's no reason to buy dollars except in the hope that you can sell them later at a higher rate," said Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, a business network.

He said Iranians were reacting to worrying headlines from the United States, where President Donald Trump recently appointed two hardline anti-Iran figures to his administration: Mike Pompeo as secretary of state and John Bolton as national security advisor.

Many analysts believe Trump will pull out of the 2015 nuclear deal with Iran when it next comes up for renewal in May, bringing back crippling sanctions.

"I see many people looking to invest in neighbouring countries because this fear is spreading about the future of the JCPOA (nuclear deal)," said Navid Kalhor, a Tehran-based financial analyst.

Local officials have complained that Iranians are hoarding billions of dollars, while local banks run short of cash "I have friends who go to banks and ask for 15 or 20 million tomans (150 million or 200 million rials, $3,000 or $4,000) and they're told to come back in a week because they're out of cash," said Kalhor.

"Very Concerning"

The devaluation poses a major problem for President Hassan Rouhani's government, which had hoped to attract massive foreign investment in the wake of the nuclear deal.

Already facing huge obstacles from remaining, non-nuclear US sanctions, the collapsing currency will serve as another deterrent to potential investors, Batmanghelidj said.

"Even in an instance where an investor is willing to operate in Iran, the devaluation is very concerning. If you invest now and the currency falls even 15 percent, you have to discount that from your returns, and that's very difficult to hedge against," he said.

"This will be difficult for the government. There is very little they can do about the mentality of individuals."

The government has resisted unifying the official and free-market rates of the rial because it would mean more expensive imports and therefore higher inflation.

But analysts say the gap has distorted trade and fueled corruption. Perhaps the biggest challenge is that hoarding dollars has become a preferred way to store money amid economic uncertainty, especially after a housing boom stagnated after years of over-construction.

Iranian banks have tried to counter this by offering interest rates as high as 20 percent.

But speculation on the dollar has become an endemic problem. The Iran newspaper reported last month that 775 people's accounts had been frozen on suspicion of distorting the foreign exchange market with capital movements totaling 200 trillion rials (over $4 billion).

This has only fueled wider problems in the economy by discouraging investors from putting their money into businesses. "The situation in the economy right now is far from beautiful," said Kalhor.

Photo Credit: Wikicommons