Iran currency plummets as sanctions bite
Date October 3, 2012
IRANIANS are suffering their worst financial crisis since the Iran-Iraq war in the 1980s, with the national currency hitting an all-time low and the prices of staple goods soaring.
With the Iranian economy crumbling under escalating Western sanctions, the rial was sent into a tailspin on Monday, dropping by more than 15 per cent to its lowest level against the US dollar.
At midday, 34,500 rials bought $US1 on the open market, compared with 29,600 rials on Sunday's close, according to Iranian currency monitoring websites.
Iran's president, Mahmoud Ahmadinejad, had previously rejected predictions that the rial would drop as low as 30,000 rials against the dollar, saying that such suggestions amounted to little more than ''psychological war''.
The latest news will come as a further blow to a president already widely seen as a lame duck. Mr Ahmadinejad will stand down in June 2013, and cannot run for a third term under Iranian law.
''What an embarrassment for Ahmadinejad,'' said Farshad, a student at Tehran University. ''The economy is in crisis and he is either blind to it or simply doesn't want to see it.''
Western sanctions are compounding the country's economic woes, sending the national currency into a nosedive and making dollars hard to come by.
The situation has worsened significantly in recent months; the latest US and EU sanctions on Tehran came into effect in July. As a result, the prices of chicken, milk, cheese, bread, sugar and yoghurt, among other staples, are now rising almost every day.
For Zohreh, a middle-aged housewife living in east Tehran, the crisis evokes the bad old days of the Iran-Iraq war.
''It's like the war years, the price today is different from the price yesterday,'' she said. ''For certain items you have to queue up and some are not available any more.''
Zohreh, like millions of other Iranians, receives a monthly government payment to families to compensate for a cut in subsidies. But she said the money, known as Yaraneh, no longer meets her needs.
''Just nine months ago I used to go to the market with 120,000 rials in my pocket and come back home with a basket of vegetables, fruits and staples, but now for [the] same items I have to pay 300,000 rials.''
The rial has lost 57 per cent of its value in the past three months and 75 per cent in comparison with the end of last year. The dollar is now three times stronger than early last year.
Iran, one of the world's largest oil producers, relies on crude sales for 80 per cent of its export revenue and to bring in most of the foreign currency. In the wake of the currency crisis, many Iranians who have lost faith in the rial are now contributing to its instability by rushing to convert their assets and properties to foreign currency and gold.
Among those bearing the brunt of the crisis are patients and hospitals reliant on currency for imported medicines and foreign-based services.
Iran's Haemophilia Society, for example, has blamed the sanctions for risking thousands of children's lives due to a lack of proper drugs.
The government has repeatedly attempted to bring the currency under control with no success. Last week it launched an exchange centre aimed at stabilising the rates, but the rial's fall has since increased.
Iran's economic weaknesses - perpetually high unemployment and government mismanagement - have been masked in recent years by the high price of oil, but its dependency on oil means the embargo has had a significant impact.
