Iran's Currency Falls With Fading Hopes Of A Nuclear Deal
Iran’s currency hit a new low against the US dollar in over two months, as nuclear talks remained deadlocked, with sanctions keeping pressure on the economy.
Iran’s currency hit a new low against the US dollar in over two months, as nuclear talks remained deadlocked, with sanctions keeping pressure on the economy.
The US dollar rose to 280,000 rials on Monday from 260,000 on March 12, when signs emerged that negotiations in Vienna over reviving the 2015 nuclear agreement known as JCPOA were coming to a halt without an agreement.
Last December, the rial hit a low of more than 300,000 against the dollar but it gradually strengthened as hopes emerged of a nuclear deal that would lift US economic sanctions.
The Iranian government news website Monday morning claimed that a “high-level” regional official would visit Tehran on Tuesday to finalize the release of $7 billion frozen by South Korean banks. However, the foreign ministry spokesman immediately denied any knowledge of such a visit.
Any solid sign of blocked funds being released would boost the rial, which has fallen ninefold since late 2017, as former US president Donald Trump signaled his intention to withdraw from the JCPOA and impose sanctions on Iran.
Tehran has been claiming a 40-percent increase in oil exports in recent weeks, which have been partly confirmed by industry observers, but there are no positive signs of a financial windfall in Iran.
The falling currency has kept inflation at around 40 percent for more than a year, with food prices rising much faster, pushing wage earners into poverty. Even government-controlled media have been full of reports lately about food items rising in price to unaffordable levels.
Four state-owned banks including Bank-e Melli, Iran's largest bank, published the list of their major debtors on Saturday, six months after the ministry of economy ordered them to publish quarterly lists of major debtors.
The ministry of economy defines a 'major debtor' as persons or entities that hold loans worth at least 10% of the bank's total resources but have not paid instalments for loans estimated to total around $10 billion in today’s exchange rate, but much more in US dollars when the loans were received.
"At first glance this can be interpreted as an important and positive step in battling corruption and recovering the money owed to state banks," Eghtesad Online (Economy Online) wrote Sunday, but it added that the lists are extremely vague and do not offer any details.
The lists show no information other than names of individuals and companies. It is very hard to trace the background of these individuals or the ownership of the companies, that appear to be subsidiaries or front companies set up by unknown firms, some connected with state enterprises with well-connected managers.
"None of the lists include information on the time the loans were granted to persons and entities that have a long record of getting loans and not paying back. It's also not clear if the banks decided on their own to grant the loans or were ordered [by other entities]. The information also does not reveal what the collateral for the loans were," Eghtesad Online wrote.
The publication also said it is equally important to know who endorsed the loans and bring them to account. It also said the purpose of publishing the lists is meant to enable the government to convince people that President Ebrahim Raisi is delivering on his election promises of fighting corruption and establishing transparency.
Officials say the move is proof that Raisi is delivering on his election promise of fighting corruption in the banking system. "One more of the President's promises was implemented. Melli Bank, the largest bank in the country, published the names of its major creditors," Government Spokesman Ali Bahadori-Jahromi said in a tweet Saturday.
Others such as Malek Shariati, a Tehran lawmaker in the parliament, say the publication of names of major creditors is proof that the administration and parliament are steadfast in establishing transparency and battling corruption.
Based on the budget bill, the government was mandated with publishing all information on major creditors on the central bank’s.
In 2017, outspoken reformist lawmaker Mahmoud Sadeghi published a list of major debtors of Sarmayeh Bank who has defaulted. In some cases, he said, the collaterals for the loans had been evaluated at a much higher price than their real worth.
Sadeghi called the phenomenon widespread in Iran 'crony capitalism', meaning those who have connections with centers of power could easily get loans that others find extremely difficult to secure. Many of the debtors had received low-interest, subsidized loans from banks.
Major debtors to banks with bad credit have allegedly used the money to speculate in the housing, foreign currency and gold markets rather than invest in production and have thus contributed to higher inflation.
One report suggested that the United States has refrained so far from sending a counterproposal to Iran regarding its demand that the Revolutionary Guard be removed from the US Foreign Terrorist Organization list as a pre-condition to reviving the 2015 nuclear deal, the JCPOA.
Talks in Vienna that have lasted one year were close to completion at the end of February as the Russian invasion of Ukraine began. But then Iran that was insisting all along for the removal of all US sanctions imposed since 2018, demanded the delisting of the IRGC. The US position in the talks is that it will remove major sanctions related to Iran’s nuclear program, but not other sanctions that are related to terrorism or human rights violations.
Once the issue became public, opposition in the United States grew. Most Republicans and many Democrats openly put pressure on the White House not to delist the Guards, that are known to have caused mayhem in the Middle East by supporting a large network of militant groups, all the way to the Mediterranean shores and beyond.
The opposition made it less likely for the Biden team to agree to Iran’s demand, specially as Democrats face an uphill battle in the November elections.
But a nuance in White House statements leads to the possibility that President Biden might be thinking to delist the IRGC but not its extraterritorial Qods (Quds) Force, which is Iran’s direct arm for building up anti-US, anti-Israeli, and anti-Saudi forces in the region.
An opinion piece by David Ignatius in the Washington Post on Friday mentioned that sanctioning the IRGC in 2019 was somewhat of a controversial issue, as some in the government and outside experts believed the multi-faceted entity was not only Iran’s main military force but also a major player in Iran’s economy and the public sector in general.
But opponents of giving a reprieve to the IRGC argue that separating it from the Qods force would be a wholly artificial distinction, just as trying to distinguish between the political and military wings of Hamas or Hezbollah. The US has traditionally rejected such a distinction.
Frequent Iranian threats directed at the United States and Israel are officially pronounced by the Revolutionary Guard, not just by the Qods Force, which speaks occasionally. Practically, the IRGC might even officially disband the Qods and create another outfit overnight that would carry out the same mission in the region.
The issue is Iran’s anti-West ideology kept alive by Supreme Leader Ali Khamenei who reinforces it in every public speech. Every Iranian government entity is supposed to fight against the archenemy, America, and Israel, according to the official dictum of the Islamic Republic.
Even at the height of improved ties in the wake of the JCPOA, Khamenei declared in 2016 that the Islamic Republic had no intention of cooperating on regional disagreements with main enemy the United States and “evil” Britain. He repeated the same message in November 2017, before former president Donald Trump had pulled out of the JCPOA and imposed sanctions.
The Biden administration, however, believes that the revival of the JCPOA is important to delay Iran’s nuclear breakout timeline, while opponents believe in continuing ‘maximum pressure’ sanctions until the regime is crippled or collapses.
