Iran’s Rial Crisis
Last week on WUPR Radio, my co-hosts and I spent almost half our segment (KWUR.com, Thursdays 6-7 CST) on the developing situation in the Middle East, with particular focus on Iran.
While we don’t normally receive favorable news out of Iran, today’s headline that the Iranian currency, the Rial, depreciated by 20% in one day proves the efficacy of U.S. led sanctions. According to the BBC, the Iranian Rial has fallen by nearly 80% of its value since the end of 2011. This fall is a direct result of a U.S. led economic sanctions and freezing Iranian financial assets. As a result, the Rial has plummeted with a lack of foreign currency coming in due to trade. While a weak currency is usually good for exports (your country’s goods are cheaper relative to those of other countries), this does not apply to Iran since the sanctions are forbidding countries from trading with them.
What does this mean for the Iranian regime? According to Sebastian Usher, the BBC’s Middle East Analyst:
The collapse was so precipitous that the Iranian currency websites blanked out the rate. International attention may be focused on the country’s alleged ambitions for a nuclear bomb, but for ordinary Iranians it is the economy that is the real issue. Inflation is raging, making some basic foodstuffs prohibitively expensive.
To combat this issue, the Iranian government recently established an “exchange center” to provide a better than market currency for key imports. Reuters reports that this initiative has largely backfired, however, as the currency market believes that the Iranian government’s intervention is a sign of panic, and hence sends the currency even lower.
As we have seen countless times before, oppressed people will only agree to the status quo as long as they are being provided basic necessities. This currency crisis may very well spark the beginning of the end of this Iranian regime. If the Iranian economy continues to suffer from the U.S. sanctions and the people start to lose faith in their own government’s ability to handle a crisis, they may look for new leaders who have the faith of the people. Once the payoffs associated with a government overthrow become great enough, the Iranian people will act on them.
No matter your political affiliation this election season, I think we all wish for a peaceful political resolution in Iran. The plummeting Rial is our best chance of avoiding another costly conflict in the Middle East, so keep your eyes posted on this developing story.