No panic in Iran despite currency collapse, international sanctions

Iran’s currency virtually collapsed last week.

Oh come on. If that were true, then Iran would have no currency, no banking system, no government, and no society.

The public protests that followed in Tehran stirred memories of the massive anti-regime protests of 2009.

Wrong again. Iranians do not oppose “the regime.” They oppose Iranian politicians in general. They are hungry and afraid.

This has caused excited speculation in the United States and its allies about the imminent fall of President Mahmoud Ahmadinejad, the abandonment of Iran’s uranium enrichment program, or even the end of the whole Islamic regime. Don’t hold your breath.

I’m not. Ahmadinejad will be out next year in any case.

Ahmadinejad blamed the currency crisis on the foreign sanctions that are crippling Iran’s trade, of course. His critics at home just blamed him: “The smaller part of the problem relates to sanctions while 80 per cent of the problem is rooted in the government's mistaken policies,” said Ali Larijani, the speaker of the Iranian parliament. But he would say that, wouldn’t he?

The Iranian government has mishandled the blockade, preferring to live in denial. Recently, however, it shut down most currency speculators, and closed most currency trading shops. That was a major step in the right direction, since it restored faith in the currency, thereby averting hyperinflation. But if Iranian politicians don’t stop being politicians, and start becoming nationalists, then Iran will fall. It is their stupidity that makes them so attractive a target for the West. If Iranian politicians had genuine solidarity, and they thought of Iran instead of themselves, then Iran would become so strong that non-Western nations would beat a path to Iran. This would dearly cost Europe, and the blockade would have to be lifted. 

It’s true that Ahmadinejad has used the country’s large oil revenues to paper over some serious mistakes in running Iran’s economy, but the current crisis was caused by a steep fall in those revenues, which is directly due to the sanctions.

Only partly true. When prices rise dramatically for any reason (e.g. the Western blockade, combined with the gobal depression), the masses start trading their local currency for foreign currency, which they (mistakenly) think has more “value.” At that point, currency speculators step in and deliberately fan the craze into a panic. The masses lose faith in the currency, resulting in hyperinflation. This has nothing to do with the money supply. Therefore the Iranian government rightly shut down the speculators. However the currency crisis has continued to worsen every year (and will go on worsening) because Iranian politicians are not doing anything to control prices for food, rents, etc. If Iranian politicians don’t shape up, then the masses will throw them out, regardless of what the USA does. Already the stupidity and corruption of the Islamist contingent among politicians is costing them the faith of the poor, which has been their primary base. If the poor join the middle and upper classes in opposing the politicians, then it will be over for the politicians. The West will move in, take over, and change Iran back into a kingdom ruled by a pro-Western, pro-Israeli shah. The Iranians masses won't care as long as economic stability returns. Soon, however, the shah will enslave the poor, and make the rich richer. When that happens, then today's Iranian politicians will ask themselves, "Why were we so greedy and stupid?" 

Four rounds of United Nations-backed trade sanctions, ostensibly meant to stop Iran from developing nuclear weapons, had already cut the country’s oil exports from 2.5 million barrels a day to 1.5 million barrels by early this year.

Hooray! Actually Iran deliberately reduced its oil output. Iran still sells to many nations, which seek to exploit the blockade to get lower prices for Iran’s oil. Iran responded by cutting back production in an attempt to create scarcity, so that foreign nations cannot beat up Iran about price and payment schedules.

Then came new American sanctions that blocked any international bank doing business in Iran from access to the immense U.S. market – so most of them ended their dealings with Iran.

Not all banks are blocked. The big Western banks still secretly do business with Iran. Sanctions and blockades are a way to create monopolies for government-connected banks and corporations.

In July came new European Union sanctions banning oil imports from Iran entirely. Since Europe was taking one-fifth of Iran’s remaining oil exports, that blow was enough to send the Iranian rial into free fall.

It was the blockade plus the ineptitude of Iran’s government that caused a rise in prices for food, etc. This in turn caused a rise in rents and everything else. Iran is being starved. The masses say to the politicians, “Okay, we are surrounded. DO SOMETHING! We can grow enough food to feed ourselves, but this will require government oversight. DO SOMETHING!” Unfortunately, politicians are politicians.

Until 2009, the rate of exchange was fairly stable at about 10,000 rials to the dollar. Then it started to fall slowly, and then faster – and in a hectic few days last week, it tumbled a further 40 per cent to a low of 35,000 rials to the dollar. That was when the protests began in Tehran’s Grand Bazaar, whose merchants were among the strongest supporters of the revolution in 1979.

Yes, Iran was okay until the global depression made imports more expensive. When the depression combined with the blockade, the result was drastically higher prices for food and everything else. When higher prices caused currency speculation, the Iranian rial was in trouble. When the masses lose faith in the currency, the government can start printing rials, but this further weakens the faith in the currency. (Remember: money-printing is the result of hyper-inflation, not the cause of it.)

The protests were contained without any deaths, and the shops in the bazaar are now open again. The rial has recovered slightly, stabilizing at around 28,000 to the dollar. But that is one-third of what it was worth three years ago, and the effects are being felt in almost every household in the country. Formerly comfortable middle-class families are scrambling to put food on the table, and the poor are really suffering.

Solution: Iranian politicians must cease their selfishness, get serious about the blockade, boost self-sufficiency in food, and get prices under control. And when we say that “the rial is still is one-third of what it was worth three years ago,” we mean in ratio to foreign currencies traded inside Iran. I think Iranian politicians should ban currency trading altogether, but then, many politicians own currency trading outfits, and they would lose personal profits. The way things are going, Iran will surely fall. The West will not need to bomb, or even send in the terrorists.

So the sanctions are working, in the sense that they are hurting people.

They are working because Iranian politicians are not working.

But what are they accomplishing in terms of their stated purpose of forcing Iran to abandon its nuclear weapons program?

Nothing. This is part of the US plan. The USA knows that Iranian politicians use the nuclear program to say, “The sanctions cannot stop us. They have no effect. Therefore we politicians don’t have to do anything for Iran.” This defiance and denial work to the USA’s advantage, since it increases public hatred of politicians.

More importantly, perhaps, what are they achieving in terms of their unstated purpose: triggering an uprising that overthrows the whole Islamic regime?

Here the sanctions are working quite well.

Iran doesn’t have a nuclear weapons program. So what are these sanctions really about?
Overthrowing the Iranian regime, of course. American sanctions against Iran long predate any concerns about Iranian nuclear weapons, and would not be ended even if Iran stopped all work on uranium enrichment tomorrow. The U.S. legislation that imposes the sanctions makes that very clear.

Hey! Some truth! Yes, the goal is to destroy the government so that Western banks and oil companies can get in and take over. Unless Iranian politicians change, I predict that Iran will fall, perhaps without a shot being fired.