Iran’s foreign currency exchange market experienced one of its biggest ever crises when the rial fell to a record low last week, with the price of a single US dollar reaching a reported 50,000
rials. Panicked Iranians withdrew their cash from the banks and stood in long lines in front of the money exchange offices in downtown Tehran waiting to buy foreign currencies.
While President Hassan Rouhani tried to calm the people and promised to manage this turbulent “fake market,” the market reacted even more aggressively and there was an increase in the rate in response to the president’s message.
Last Wednesday, police and security services attacked traders with batons and made 90 arrests while shutting down dozens of money exchange shops. But it would be naive to think that a few currency traders are responsible for this crisis. To put it simply, people can no longer trust the government and they are worried about the fate of Iran’s nuclear deal and all the possible consequences the nation might face if President Donald Trump decides to pull the US out of the agreement on May 12.
Trump has told his Western allies to discuss Iran’s ballistic missile program and regional policies if they want the US to remain committed to the deal. Trump threatened to withdraw if the gaps he has highlighted in the deal are not bridged by May 12. This would also mean no more waiving of sanctions.
Perhaps Iran’s currency market reacted to Trump’s possible action ahead of the deadline, since the regime is simply refusing to have any engagements leading to talks about the issues concerned. French President Emmanuel Macron last Tuesday asked Iran to open up talks like those they had on the nuclear deal over its missile program. He said this program can be overseen by the international community and proposed making regional countries involved as well.
The Iranian answer was “no,” as expressed by foreign ministry spokesperson Bahram Ghasemi, who said last Thursday that Iran would not limit its defensive capabilities.
Possible sanctions because of its ballistic missile program could force Tehran to withdraw from the nuclear deal and this scenario is the one that makes all insiders and outsiders believe the deal may be called off in May.
UK Prime Minister Theresa May and German Chancellor Angela Merkel met at a security conference in Berlin last week and both expressed their wish to remain committed to the Iran deal, but added that other issues such as Tehran’s missile program have to be addressed. “We share the US concerns about Iran’s destabilizing activity in the Middle East, and we stand ready to take further appropriate measures to tackle these issues,” said May.
This is a clear message to Tehran that times are changing and not in its favor. Iran was counting on the EU to stand up to Trump’s decision, but now Iran is facing the prospect of new sanctions and greater economic hardship if it refuses to talk about its missile program.
Iranians are already angry and frustrated with the regime, which promised to improve their lives after the nuclear deal was signed in 2015, but not much has changed since. It would be hard to now tell Iranians to accept more sanctions and to resist Western imperialism, when the people associated with the regime are all earning well and enjoying comfortable lives.
This currency crisis has already created a new threat of public anger and possible protests because of its impact on the price of goods and on inflation.
The regime’s choices are very limited, as it is under public pressure to reform and implement quick changes, while the international community is also demanding cooperation on regional issues and is challenging its aggressive behavior.
None of these extra pressures would have been necessary if, since the nuclear deal, Iran had shown a more relaxed regional policy and the Islamic Revolutionary Guard Corps — whose presence is today being felt from Lebanon to Iraq, Syria and Yemen — was limiting its presence outside its borders.
Of course it is never too late for negotiations but, at this stage, when the Iranian people seem to have given up hope of any improvements under the current regime, it is hard to say if the
international community thinks differently. This is not about the US dollar’s value rising; it is about the level of trust the Iranian public displays toward the regime, which seems to be fading and thereby making the local currency worthless.