'Enemies caused Iran rial's fall'

'Enemies caused Iran rial's fall'

President Ahmadinejad blames Iran's "enemies" for the sharp falls in its currency, the rial, which has hit fresh record lows against the US dollar.
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    Iran rial: Mahmoud Ahmadinejad blames slide on 'enemies'

    Iran rial The value of the rial continues to fall sharply

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    Iranian President Mahmoud Ahmadinejad has blamed the "enemies" of his country for the sharp falls in its currency, the rial.
    The currency has fallen to fresh record lows against the US dollar.
    Iranian Industry Minister Mehdi Ghazanfari has blamed speculators for the fall.
    But US officials say the slide reflects the success of US economic sanctions targeted at Iran's controversial nuclear programme.
    Mr Ahmadinejad said Western sanctions amounted to an economic war, but they would not stop the country's programme.
    "We are not people to retreat on the nuclear issue," he told a news conference in Tehran. "If somebody thinks they can pressure Iran, they are certainly wrong and they must correct their behaviour."

    Analysis

    Experts say several factors are at work. The main underlying one is the impact of Western financial sanctions. Iran's foreign currency income from oil exports has been squeezed. With fewer dollars in the system, their value relative to the local currency has gone up.
    In addition, nervous Iranian savers have rushed to swap their rials for hard currency dollars, further exacerbating the pressure on the Iranian currency.
    And then there is the Tehran government's faltering policy response. Longstanding measures designed to hold up the value of the rial appear to be breaking down.
    In the past, importers of food, medicines and other priority areas have been supplied dollars at much lower than market rates.
    The scope of these arrangements has been cut back, which means previously favoured importers are now scrambling to acquire dollars on the open market, driving the price of those dollars even higher.
    The central bank has placed a $5,000 (£3,100) limit on the amount of foreign currency travellers can take in or out of Iran.
    The rial has reportedly lost more than 80% of its value since 2011 because of US-led trade sanctions.
    Reports from Tehran suggest the rial plunged 18% in Monday's trading and then another 9% on Tuesday.
    Since the start of the year, the currency has lost four-fifths of its value, says the BBC's Mark Gregory.
    'Security move' The US-led sanctions are being imposed on Iran because of the country's disputed nuclear programme. The US accuses Iran of aiming to build nuclear weapons, while Iran counters that it simply wishes to develop nuclear power stations.
    The sanctions, which are backed by the European Union, include a ban on the purchase of Iranian oil.
    The US has also threatened to take action against foreign firms and institutions dealing with the Iranian central bank.
    While Iranians are said to be scrambling to convert their rials into hard currency, thereby adding to the downward pressure on the rial, the government has blamed speculation by money changers.

    Iranians on the crisis

    • Amin, a manufacturer who closed his factory on Monday: I turned off my computer half an hour ago as I couldn't take checking the prices any more. We don't even know how much we should sell the goods we have. If we want to sell them at the price of the free market, no-one could afford to buy them.
    • Vahid, a young man in Tehran: Now I witness our national money has turned to the cheapest currency in the world. How is that possible? Why did it not happen at the time of the Shah? Now I have to pay for my yoghurt, butter and milk in dollars, I can't spend rials!
    • Leila, a student in Tehran: A year ago, I decided to continue my studies at a European University. I was planning to leave Iran in February. But I am faced with a huge leap in currency prices. It totally ruined my plans, it made it totally impossible for me to continue my studies outside.
    According to the Iranian Fars news agency, Mr Ghazanfari said: "We have greater expectations that the security services will control the branches and sources of disruption in the exchange market.
    "Brokers in the market are also pursuing the increase in price, because for them it will be profitable, and there is nobody to control them."
    On Tuesday, the rial was said to be trading in Iran at about 37,500 to the dollar, down from about 34,200 late on Monday.
    The rial is not traded on the global currency markets, so it is not possible to produce accurate figures for its value.
    The weakness of the rial has harmed the wider Iranian economy, as it means the country cannot afford to import as many foreign goods and raw materials which are priced in hard currency.
    "We are clearly seeing the devastating effects of international sanctions, but also a regime that is in increasing disarray," Prof Annabelle Sreberny of the SOAS Centre for Iranian Studies in London.
    "The combined effects of draconian Western sanctions, corruption and sheer mismanagement are hitting the economy badly. High inflation and rising unemployment are adversely affecting working people and the salaried middle class. Food prices are rising from one day to the next, and many are being pushed further into poverty."COPY  www.bbc.co.uk

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