People gathered outside a bank foreign exchange office in Tehran. Undated
Iran’s president has blamed saboteurs after the rial fell to 300,000 to the dollar Saturday with European and US officials airing pessimism over nuclear talks.
At a meeting of a government economic taskforce Tuesday evening President Ebrahaim Raisi (Raeesi) ordered authorities to identify "manipulators and destabilizers in the forex market" while exercising their powers to manage the exchange rate.
"Some of these people in the country and others abroad are trying to push up the forex rates," he said, presumably referring to media briefings by US and European officials suggesting talks in Vienna to revive Iran’s 2015 nuclear deal had been stymied by proposals Tehran presented last week.
"We have concrete information that a group of people are trying day and night to raise the foreign exchange rate…in order to tie the [Vienna nuclear] talks to the economy and impose their own demands on the nation," Raisi had said hours before, in a speech to university students.
Blaming speculators and resorting to arrests and even executions is not new for the government. In 2018, Iran executed two men − including Vahid Mazloumin, the ‘Sultan of Coins’ arrested allegedly with two tons of gold coins − for illegal currency transactions.
The administration of President Donald Trump argued that the considerable damage inflicted, by ‘maximum pressure’ − including recession and a continuing currency depreciation − would lead Tehran into a range of concessions. President Joe Biden, who took office in January, expressed a commitment to revive the JCPOA but has continued ‘maximum pressure’ as leverage.
The rial-dollar exchange rate passed the important threshold of 300,000 Saturday, a day after European and American negotiators returned to their capital from Vienna downplaying prospects for an agreement. The dollar traded close to 310,000 Wednesday despite assurances from Raisi and the Central Bank governor that the currency would stabilize.
Local media on Wednesday criticized and even ridiculed Raisi’s attempt to blame the rial’s fall on speculators, rather than admit that US sanctions should be lifted and oil revenues to increase before Iran’s economic crisis somewhat subsides.
The conservative Jomhouri Eslami newspaper wrote Wednesday that Raisi's remarks recalled the case of forex dealer Jamshid Besmellah, arrested in 2012 after a public denunciation by vice-President Mohammad-Reza Rahimi for large-scale profiteering. Besmellah, who served two years in jail, insisted he had done nothing wrong and was a scapegoat.
"He was arrested … but the rise of the dollar and other currencies continued,” Jomhouri Eslami noted. “The market went its own way and neither orders nor arrests made any difference. We hope Mr Raisi proves in action that [his recent allegations] are not only a projection [of blame]."
While currency depreciation is not solely tied to sanctions, the squeezing of Iran’s foreign currency reserves by US third-party sanctions has led to daily liquidity growth of over 50 trillion rials a day based on Central Bank figures, and consumer price inflation that has reached 45 percent according to Iranian government figures.
Raisi identified tacking the fiscal deficit as a priority in his television interview Sunday, when he argued that his government had managed to pay civil servants' salaries without borrowing from the Central Bank.
In a commentary Tuesday, entitled "The Mystery of Printing Money", Etemad newspaper said that Raisi's government has not directly borrowed from the Central Bank but has borrowed from other banks, which are all state or quasi-state banks. Etemad argued, that this is tantamount to borrowing from the Central bank, because the other lenders in turn have to borrow from the Central Bank, which has to print money. Liquidity fueling inflation has grown fourfold since 2018 when the United States imposed sanctions.