Frustration remains the master of the situation concerning the Iranian economy and all indications point to a very negative shape of things to come. There is no doubt that the risks are growing as well as feelings of anxiety in that country. Warnings and appeals made by economists have fallen on deaf ears, and the intellectual stagnation the country is suffering from politically and economically, especially after what the files of corruption have recently revealed; another crisis and a fading hope of solving it.
Poor outcomes have been created by a mess of an economic policy on the economic situation in Iran, and its offal formed an incubator for economic pests due to the lack of proper management of the economic crisis. This has led to a sharp rise in inflation and the decline of the Iranian Rial to a historic new low against the dollar, warning of a period of economic recession in a new, more intense, and dangerous form.
The Iranian currency’s decline has accelerated after the election of the US president, Donald Trump, who has threatened to cancel the nuclear deal reached between Iran and the superpowers whereby many international sanctions have been lifted. The decline has also been exacerbated because of the failure of the “resistant economy” policy advocated by Iranian Leader Ali Khamenei, not to mention the plots of the Revolutionary Guards and the hard-liners designed to pre-empt any reform project that aims ultimately to make steps to combat corruption, which has become a mainstay of the Iranian regime.
What is new is that on Sunday, the Iranian Rial fell to a record new low against the dollar, a continuation of the ongoing decline that started six months ago in which it lost about 19% of its value despite sanctions on Tehran being lifted, proving once again that the economic sanctions against Iran were not the cause of the deterioration of the economic situation, the increase of inflation, and falling currency, but it is rather mismanagement and corruption that lays behind the economic recession. Sanctions were only an excuse for the Revolutionary Guard and Khamenei to blame their failure on in running the country, and a cover to hide the extent of corruption, which has become organized and underpins the mullahs’ rule in Tehran. This has been proven by some Iranian officials, headed by Ahmad Tavakoli, who admitted to the widespread corruption present in all corners of the institutions of the country and warned that corruption would lead to the overthrow of the Iranian regime, saying that corruption is more dangerous than a military attack or a velvet revolution.
In the latest shock to the Iranian economy, the Iranian currency stood at 41300 against the dollar, down from 34,600 to the dollar, which widens the gap between the official rate, which is still at 32,300 Rials to the dollar, where Iran implements two systems for the exchange rate, the first is the free-market one, which exceeded as we mentioned 40 thousand Rials to the dollar, and the other one is the official which is used in some formal financial transactions and determined by the central bank at about 32,300 Rials. Therefore, this is the largest decline in the Iranian currency against the dollar in 14 years and according to experts, the Iranian currency’s decline against the dollar will continue, especially with the beginning of the new year and the activation of Trump’s policies toward Iran, which seeks to put an end to the Iranian terrorism, where the international community considers that any improvement in the economic situation of Iran would mean a support for terrorism and instability. The Iranian economy, thanks to the destructive Iranian regime’s policies, has been closely linked to supporting terrorism as the Iranian regime, through its Revolutionary Guards, has allocated a substantial part of the economy to export the revolution, the expansion of the Safavid project and foreign interventions by supporting terrorist groups in the Middle East, while internal development projects remain on hold and in the marginalization box.
According to a currency brokers in Tehran, the central bank was in a race to pump dollars into the market in order to maintain the value of the real, but it reduced the pumping operations in recent weeks. International banks are usually hesitate in dealing with the Iranian counterparts as they fear the consequences of the remained US sanctions that have not been lifted yet after the nuclear deal, and the major international banks still refuse to work with Iran, which would preclude the return of the oil money to Iran.
According to a report published by the Associated Press, the non-interference of the central bank in addition to the lack of international banks’ cooperation in bringing back the oil’s money, that led to the Iranian currency falling about 17% since the nuclear deal so far, which will impact on the course of the next presidential election.
International banks and big businesses still refuse to return or invest in Iran, despite lifting the sanctions, and that is due to losing faith in the Iranian economy by the international community, investment companies and banks because of the systemic rampant of corruption in it and the Revolutionary Guards’ control over it and the loss of transparency. All of that made it difficult to conclude any trade, investment or agreements or establishing financial or commercial relations.
Al Mezmaah Studies & Research Centre
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