Economy Oct 4, 2012
By Ali Akbar Dareini and Brian Murphy/Associated Press
Tehran, Iran: Iranian authorities used aggressive measures Wednesday in an attempt to halt the nosedive of the country's currency, making arrests, vowing to stamp out sidewalk money changers and warning merchants against fueling the mounting public anger over the economy.
Associated Press photos showed riot police blocking a street with the charred hulks of a garbage can and a motorcycle that had been set on fire. Smoke was rising from the area in central Tehran near the main bazaar.
The sweeping responses to the freefall of the rial - which has lost more than a third of its value in a week - underscored the worries for Iranian leaders after months of dismissing the West's economic squeeze seeking to rein in Tehran's nuclear program. A declining currency causes shifts in an economy such as making imported goods more expensive.
Although the currency crisis is blamed on a combination of factors - including internal government policies - the rush to dump rials appears to reflect an underlying perception that international sanctions have deepened problems such as runaway inflation and soaring prices for imports and that the only safe hedge is to grab dollars or euros.
If the economic turmoil intensifies, it could boost pressure on the ruling system before elections next June to pick President Mahmoud Ahmadinejad's successor. That has the potential to hinder nuclear talks with the West until after the elections.
One of Ahmadinejad's main critics, parliament speaker Ali Larijani, has led the calls to blame the currency crisis mostly on allegedly misguided government monetary policies.
In reply, Ahmadinejad warned that he could consider resigning if his government is put under too much pressure.
"Now is not the time for anybody to settle accounts," Ahmadinejad said Tuesday as the rial hit a record low. "If my presence is a burden on you, (the solution is for me to) write one line to say goodbye."
Tuesday's rate of 35,500 rials against the US dollar compared with 24,000 a week ago on the unofficial street trading rate, which is widely followed in Iran. It was close to 10,000 rials for $1 as recently as early 2011.
Exchange houses were closed Wednesday, and currency websites were blocked from providing updates on the latest rates.
Public grumbling has grown steadily louder over a punishing combination of a falling currency and rising prices, which have put some staples such as chicken and lamb out of reach of many low-income Iranians. Earlier this week, a petition signed by about 10,000 workers was sent to the labor minister to complain that even paying rents has become a struggle.
The owner of a furniture showroom said he hasn't made a sale in 10 days while his workshop rent has been increased by 30 percent. He said one of his workers bought a can of tuna for lunch Saturday for 35,000 rials, or about 98 cents at the current exchange rate. The next day it was 45,000 rials, or $1.26, said Hamid, who gave only his first name because of warnings by Iranian officials not to discuss the economic situation with the media.
"Even Afghan workers are going home since it doesn't make sense to work in Iran with a currency that's worth less and less," he said.
At Tehran's bazaar - the traditional business hub in Iran's capital - merchants appeared to stage widespread closures to protest the stumbling economy. The sprawling bazaar has played a critical role in charting Iran's political course - leading a revolt that wrung pro-democratic concession from the ruling monarchy more than a century ago and siding with the 1979 Islamic Revolution.
The semiofficial Mehr news agency quoted police Col. Khalili Helali as saying the bazaar was not officially closed and that authorities will take action against many merchants who have shuttered their shops.
"Police will deal with the guilds that have closed their shops to cause (economic) disruption," Mehr quoted Helali as saying.
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