Months away from the looming US presidential elections, the possibility of a return of a Donald Trump administration and the anti-JCPOA lobby in Iran's next parliament is already causing negative shockwaves to Iran's national currency.
Economist Morteza Afghah told ILNA that every report about the possibility of Trump's victory or polls in favor of the Republican Party leads to the rial’s devaluation as a return to Republican rule in the US signals a choking of the Iranian economy with Trump seen as a US president with the most negative impacts on the regime.
In 2018, Trump pulled out of the 2015 nuclear deal – known as the Joint Comprehensive Plan of Actions or JCPOA – and imposed ‘maximum pressure’ sanctions on Tehran, practically reducing Iran’s oil exports to less than 500,000 barrels per day and blocking the revenues in foreign banks.
Afghah noted that a myriad of factors play a role in the devaluation of the rial such as the country's foreign policy and the regional tensions over the war in Gaza. Iran backs several regional militia groups in Lebanon, Iraq and Syria as well as Yemen that have escalated attacks on US and Israeli targets in allegiance with Hamas.
The Iran-backed Islamist group invaded Israel on October 7, killed about 1,200 mostly civilians and took about 240 hostages, igniting the worst Middle East conflict in years. Meanwhile, Iran's Yemeni militia, the Houthis, are now imposing a blockade on trade routes around the Red Sea in support of Hamas in Gaza, causing huge economic implications to global trade.
According to Afghah, another factor that has been fueling the rise of foreign currency rates against the rial is the high demand for dollars and euros in the last weeks of the Iranian year, which ends on March 20 and ushers the Noruz (Nowruz) in Iran. During the two-week holidays, many Iranians take trips abroad, making the demand for foreign currency far higher than the Iranian authorities can supply.
Afghah made the remarks after the rial hit a low of about 600,000 against the dollar on Sunday. The Central Bank of Iran (CBI) has been injecting foreign currency into the market to curb the devaluation of the rial but after a historic low turnout in Iran’s elections on March 1 and the prospects of Trump winning the office in the US, the CBI’s efforts seem inconsequential.
The analyst says the fall of rial will continue until at least the end of March and the CBI does not have enough foreign currency supply to control the market as the administration has been draining all its strategic reserves, including the National Development Fund, in the past two years to balance its budget deficit.
Former US president Trump swept a trio of states Saturday, inching his way closer to a formal Republican party nomination for president. But the weekend also featured a bright spot for Nikki Haley, who won her first state in the nominating cycle with a victory in Sunday's Washington, DC, primaries. However, even Haley is a tough critic of the Iranian regime and strongly defended Trump’s decision to withdraw from the JCPOA.
For critics outside Iran, the JCPOA symbolizes a policy of appeasement with Tehran’s destabilizing acts across the region and human rights violations at home. Dissidents and critics of the regime in Tehran view the nuclear deal as the West tolerating Iran’s military adventurism and crackdown on dissent as a measure to keep the path of diplomacy open. The majority of the Iranian population and a large number of foreign officials believe that years of punitive measures against Tehran have proved that sanctions and condemnations will not lead to a change in the regime's behavior, only becoming further emboldened in its policy of hostage-taking and accelerating its nuclear program in the face of sanctions.
Ruling hardliners in Iran are growing increasingly apprehensive about the possibility of a Republican victory in US presidential elections, leading to a tougher stance towards Tehran. Trump's withdrawal from the JCPOA shattered the hopes of both Iranian hardliners and moderates, who had envisioned reaping benefits from the nuclear deal with the West in exchange for curbing their nuclear ambitions, while expanding their conventional capabilities and regional influence.
Although the Biden Administration has been too lenient on Iran and often turned a blind eye in the face of mischiefs by the regime, politicians in Tehran still believe that Biden could have done more than giving billions of dollars to Iran in return for releasing US hostages and releasing Iran's frozen assets in South Korea, Iraq and elsewhere.
Making matters worse, the results of Iran’s March 1 elections show that some of Iran's lawmakers known to be staunch critics of the JCPOA have been reelected for the parliament. Morteza Ezzati, an economic analyst, told Rouydad24, “The representatives who will apparently be in the next parliament are known to be anti-JCPOA, which could seriously threaten the public interest and also provoke a reaction from the global community.”
He noted that the history of hardliners at the helm shows that whenever they are the decision makers, they have dragged the economy to the brink of bankruptcy.