WASHINGTON – Iran’s currency broke a psychological barrier this week when it began trading at 50,000 rials to the US dollar – a sign of the country’s growing concern over the fate of the 2015 nuclear deal.
Iran’s Central Bank and police forces are blaming speculators at exchange offices, claiming they are driving fears that the nuclear deal will lead to a currency collapse.
Authorities arrested 100 money changers, froze the accounts of speculators, raised interest rates and shuttered 10 exchange offices last month after a “month of surveillance,” Gen. Hossein Rahimi, the police chief, told the state-run Fars News Agency at the time.
But the rial had already lost a fifth of its value against the dollar this past year, and financial institutions based in Iran report that signs of economic anxiety have been growing brighter for some time.
The nation’s leading business publication, Donya-e-Eqtesad, reported recently that real estate prices were up 21% over the prior year as people seek to sock away their savings.
Some of it has been engineered by the Central Bank, which has sought a gradual depreciation of the rial to compensate for Iran’s high inflation and to help make exports more competitive. The official Central Bank rate remains around 37,686 rials to the dollar.
But officials are warning that some small Iranian banks are now running out of cash as locals sit apprehensively on their money.
And as Iranians reportedly lined for hours outside currency exchange counters ahead of the Persian new year of Nowruz, they too were often denied large withdrawals, according to several local media reports.
That anxiety could aggravate inflation even further, already running at nearly 10%.
Mahmoud Sadeghi, a reformist politician in Iran’s parliament, wrote on Twitter of his own theory for the rial crisis: “This inflammation is more the mental aspect, and some news channels also have fueled it.”
But it comes at a consequential time for the nuclear deal brokered three years ago between Iran, Germany and the permanent five members of the UN Security Council.
The White House has warned for months that President Donald Trump is serious about withdrawing from the nuclear agreement, a move that would mean the return of crippling US sanctions on Iran.
Before international sanctions on Iran’s nuclear program first began to bite, in 2012, the rial was trading closer to 10,000 to the dollar.
And governments are beginning to take Trump’s threat seriously, as US and European diplomats work toward a May 12 deadline to come up with “fixes” to the accord that Trump will find acceptable.
Leaders in Iran and Israel say they believe it is now more likely than not that Trump will pull out of the deal.