Protestors outside of the Iran’s embassy in London on January 2, 2018. Photo: Simon Dawson/Reuters
The Iranian rial has seen its value plummet against the dollar this past week amid rumors that the U.S. will impose a new round of economic sanctions in the coming days. Iranians have scrambled to exchange in their rials for dollars in recent months, not knowing what the future may hold for their economy. These transactions, along with the speculation of sanctions, have caused the currency to see a sharp decline in value year to date. The currency is currently being traded at 103,000 rials per dollar but saw its value plummet to 119,000 per dollar on July 30th, according to Bonbast.com, a tracker of the rial’s black-market (read as free-market) value. A black-market for rials has developed in result of the instability and uncertainty of Iran’s economic future; Iranians are currently paying a 35.4% premium to exchange their rials to U.S. dollars. This decline in currency value has caused inflation to skyrocket, leaving Iranians with unbearably high prices for basic goods. The charts below show the current situation in Iran.
Thousands of protestors have taken to the streets across Iran to protest the high inflation rates and alleged financial corruption. Many of these protests have quickly evolved into anti-government rallies. There were similar protests following the decline of the rial earlier this year in April and May.
The currency could see an even steeper fall, however, as the Trump Administration is set to release a new wave of sanctions on Tuesday, August 7th that bans the purchase of U.S. dollars, prevents the Iranian government from trading gold and precious metals, and stops the country’s sales and acquisitions of industrial metals. There have also been reports that the U.S. is scheduled to impose sanctions on Iran’s oil and shipping industries in November if relations between the two countries do not improve. Things became difficult for Iranian President Hassan Rouhani, since President Trump pulled out of the Joint Comprehensive Plan of Action (JCPOA), more colloquially known as the Iran nuclear deal in early May, as the agreement stated that the Iranians would halt their nuclear weapons program in exchange for protection from any economic sanctions. In President Trump’s address to the media regarding the United States’ withdrawal, he said, “It didn’t bring calm, it didn’t bring peace, and it never will.”
While the Americans withdrew from the JCPOA, the European Union (EU) has stayed committed to the deal. The EU foreign policy chief Federica Mogherini and foreign ministers of France, Germany, and the UK said in a joint statement that the nuclear deal is “crucial” for global security. They have also implemented a “blocking statute” that will take effect on Tuesday, which prevents U.S. legal action against European companies working in or with Iran.
The Treasury Department gave U.S. corporations until August 6th to wind down any operations in Iran before facing punishments from the sanctions. The sanctions and public sparring between American and Iranian leaders have been a part of an effort by President Trump to sequester Iran and its economy from international finance systems.
Despite the rhetoric from both sides, President Trump offered to sit down with President Rouhani and his team to negotiate, but the Iranians quickly declined citing the U.S.’s lack of trust. Iran’s Foreign Ministry spokesman Bahram Ghasemi shot down any possibility of meeting with the U.S and said during his weekly press briefing last week, “With this America and the policies it’s pursuing, there’s definitely no possibility of negotiations.”