Protests erupt in Iran amid panic over rial drop

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Protests erupted in central Tehran Wednesday after police closed black market currency exchange shops amid panic over the steep plunge in the value of the Iranian currency.

The protests in Tehran’s central Bazaar district, some calling for the resignation of Iran’s President Mahmoud Ahmadinejad, come as the value of the rial to the dollar has plummeted by over 40% in the past week, as Iranians rushed to buy hard currency.

According to purported video of the protests posted to YouTube, some of the protesters shouted chants calling on Tehran’s “dignified” merchants to “support us, support us.” Other chants called on the Iranian regime to “leave Syria, think of us“–a reference to Iran’s efforts to prop up its ally, Syrian President Bashar al-Assad.

The value of the rial continued to fall after Ahmadinejad gave a speech Tuesday in which he blamed international sanctions and a handful of Iranian speculators for the rial’s drop, and urged Iranians to stop selling their rials to buy foreign currency.

But external factors alone do not account for the rial’s latest dive, some economists said.

Djavad Salehi-Isfahani, an economist at Virginia Tech, attributed the precipitous fall of the rial over the past week to the government’s decision to put more funds into a central exchange for approved importers and exporters. “Because they moved it suddenly,” he told an audience at the Woodrow Wilson International Center for Scholars on Tuesday, there was a shortfall in the free market.

Secretary of State Hillary Clinton, speaking to reporters Wednesday, also said internal Iranian government decisions–“having nothing to do with the sanctions”–had played a role in the rial’s dive. “Of course the sanctions have had an impact as well,” she said, adding, “but those could be remedied in short order if the Iranian Government were willing to work” with the international community to resolve concerns over Iran’s nuclear program.

While ostensibly fueled by economic anxiety, rumors swirled that the rial protests Wednesday may also have been spurred in part by rival political factions hostile to Ahmadinejad, some Iran analysts said.

“I think we must be careful before jumping into any kind of conclusion about this particular protest,” Nazila Fathi, a journalist previously based in Iran for the New York Times and currently a fellow at the Harvard Belfer Center for International Security, told Al-Monitor by email.

“It might be part of the attack against Ahmadinejad to bring him down before his term is over,” Fathi said, noting the hostile tone of speeches this week by Ahmadinejad and one of his chief political rivals, Iran parliament speaker Ali Larijani.

Iranian media reports said over 100 people were arrested in the protests Wednesday. Meantime, journalists with the BBC and RFE/RL Persian services reported that their satellite broadcasts into Iran had been jammed Wednesday, to impede Iranians seeing news of the protests.

Iran watchers said the economy-fueled unrest was unlikely to be a one-off affair, given Iran’s economic predicament is likely to only get worse in the months ahead because of its dispute with the international community over its nuclear program.

“Iran’s economic outlook is more limited than at anytime in 50 years,” Suzanne Maloney, an Iran expert at the Brookings Institution, said at the Woodrow Wilson forum Wednesday.

“There are tremendous opportunity costs” to Iran for refusing to budge on its nuclear program and other policies, she said. “These are revenues and markets that will never be recaptured” and Iran’s ambitions for economic development and trade will be “clipped in the long term in a way that is degrading for the country.”

While Iran can weather sanctions, “the average citizen is very distressed,” and “in the short term, Iranian industry is suffering,” Bijan Khajehpour, another specialist on the Iranian economy, told the Wilson Center forum.

“The Iranian regime is going to face immense pressures in the months ahead,” agreed Alireza Nader, a senior policy analyst at the Rand Corporation, in an email to Al-Monitor. “President Ahmadinejad, in particular, is in big trouble.”

“This is not just about the currency crisis,” Nader added, predicting greater instability in the country. “This is about everything that’s wrong with Iran today.”

–With Barbara Slavin  (@barbaraslavin1), Al-Monitor’s Washington correspondent, and Eskander Sadeghi-Boroujerdi (@eborujerdi), of Al-Monitor’s Iran Pulse news blog.