Trump's Bashing of Iran at UN Adds to Economic Pain on Streets
(Bloomberg) -- President Donald Trump’s tirade against Iran at the United Nations extended the slump in the value of its currency, as the economic pain accumulates weeks ahead of a November resumption of oil sanctions.
The rial was trading at a record low of 181,000 to the dollar on Wednesday, compared to 160,000 on Monday. It has declined almost 30 percent in less than three weeks, figures quoted by three black-market traders in Tehran showed.
On Tuesday, Trump used his speech to the UN General Assembly to accuse Iran’s leaders of sowing “chaos, death and destruction” in the Middle East and call on other countries to isolate the oil-rich Persian Gulf state. The U.S. exited the multi-party nuclear deal with Iran in May, triggering panic-buying of hard currency and a free-fall in the rial.
“It’s about survival now and I’m afraid this will continue for the next two months and reach maximum pressure by November,” said Cyrus Razzaghi, who runs a management consultancy in Tehran providing advice to foreign companies. Some of the biggest purchasers of Iranian oil have already slashed orders.
As Iran’s confrontation with the U.S. has deepened, scores of businesses have either downsized or closed, fueling unemployment. People have seen the value of their wages slashed and the cost of everyday goods rise. European signatories to the nuclear accord outlined at the UN a mechanism they hope can limit the impact of U.S. sanctions but there are doubts over its likely effectiveness.
The 2015 deal limited Iran’s atomic program in exchange for sanctions relief. But the Trump administration, supported by U.S. allies in the Gulf and Israel, opposed the agreement, claiming it delivered financial gains to a country they accuse of destabilizing the region.
Countering Trump at the UN, Iranian President Hassan Rouhani accused the U.S. of “economic terrorism” and denounced an “authoritarian” U.S. foreign policy that amounts to a “might-makes-right” stance.
Iran has banned imports of mostly non-essential and luxury items since June as the government tries to prevent foreign currency from leaving the country. Earlier this week, the government also barred exports of tomatoes after prices jumped.
Razzaghi said pressure on the rial will likely only ease once sanctions are fully implemented. The currency may then stabilize, “especially if Europe manages to secure this payment system.”
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