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The Foreign Currency Crisis is Causing Mayhem in Iran


By Nazanin Kamdar, Rooz Online

Students Gather; Bazaris Protest

Along with the first protest gathering in Tehran because of the foreign exchange crisis that has engulfed Iran in recent weeks, and the publication of news about the closure of some bazaars in the country, government officials and media are calling for “security measures” to deal with the situation. The state of affairs even prompted the head of Tehran’s Chamber of Commerce to call for “an emergency” meeting of the Supreme National Security Council while a security member of Ahmadinejad’s administration asked “security agencies” to intervene in the issue.

On Monday, a group of students and their families gathered in front of the Majlis and demanded the allocation of foreign exchange at government rates to them. One protesting student told Iran’s ILNA labor news agency, “We gathered in front of the Central Bank to protest the non-allocation of Majlis-approved foreign exchange at the rate of 1,200 to 1,300 Toman (for a Dollar) for students who are going abroad to study or who are there already. We also sent a letter to the Governor of the Central Bank but these were left unanswered. Then we gathered in front of the Majlis and wrote a letter to cleric Mesbah Moghadam, a member of the social committee of parliament. And even though they have promised to respond to our letter, we have no hope in getting a clear answer because of the rapid changes to the exchange rate. Now we are going to the president’s office to present our demands. We were expecting the Ministry of Science to send a letter (confirm) to students who paid 20,000 Toman with the promise that they would receive foreign exchange at the rate of 1,200 or 1,300 Toman for the US Dollar” confirming that they would be given that foreign exchange. He continued, “But some banks since the beginning of summer have refused to provide foreign exchange at this. On September 26th, the Central Bank sent a directive that only scholarship students would receive foreign exchange at this rate. This directive about not giving foreign exchange at the official rate to students who are going to study abroad or who are already abroad was issued without approval from the Majlis or the Ministry of Science. This is taking place while most students are from middle class families and do not have sufficient funds to pay for their studies.”

The result of this gathering was that those media and personalities that had been saying that calm had returned to the foreign exchange market in recent days, again have called on the security agencies to intervene.

Foreign Exchange is a Security Issue

The state-appointed editor-in-chief of hardline Kayhan newspaper Hossein Shariatmadari on Sunday wrote in an editorial, “The foreign exchange and precious coins market whose disruption began about ten days ago and has since continued to spin out of control with unbelievable speed has now reached the most chaotic state in recent days and has also pushed up the price of other goods and services needed by the public. The question that comes up is whether the security and intelligence agencies of the country have still not identified those who are responsible for this? Have they taken measures and identified the perpetrators but not presented them to judiciary officials? The first scenario is unlikely to have taken place because minister of intelligence cleric Moslehi has repeatedly shown that in matters that impact national interest and the well being of the public, he acts like cleric Ejei and has been very sensitive and committed to intervene. So, two other possibilities remain: first, is that individuals or groups are preventing intelligence and security centers from presenting the names of the perpetrators to judiciary officials; second, officials in the intelligence and judiciary communities view this chaos in the foreign exchange and precious coins market to be normal, which if true is disastrous and it must be asked what unexpected event has taken place in the last ten days that explains the unprecedented and spiral rise in the price of precious coins. The impact of some imposed bottlenecks is certainly undeniable but these are not proportional to the steep rise in the foreign exchange rate.”

Shariatmadari in his piece asks why other cabinet ministries, including the Central Bank, have remained silent on the subject. “Why do they not explain that tens of billions of Dollars have been allocated for the importation of basic commodities but that much of this has not yet actually come to the country yet? And why are there no legal mechanisms to get back the allocated funds? The minister of economy says that managing the foreign exchange market is not his job, the minister of commerce gives a similar answer and the Governor of the Central Bank talks of foreign exchange that has been allocated to specialized banks that have the money for other purposes, and does not ask why. Authorities at the customs do not explain how goods are imported and exported and whether this is taking place according to law. Majlis representatives have gone on leave after very hard work!”

Shariatmadari’s warning was immediately welcomed by Mehdi Ghazanfari, the minister of industries who also said that “non-economic perpetrators” were the cause of the foreign exchange crisis and called on “security agencies to intervene.”

He told semi-official Fars news agency, “Security, political and cultural issues play a role in the rise in the foreign exchange rate but officials are unfortunately not very active to address it.” He also said that foreign exchange traders contributed to the rise in the rate. “The government till now has not used the Central Bank on this issue and only the foreign exchange related to the petrochemical industry and the National Development Fund will use the foreign exchange provided by the Central Bank, if they needed it.”

Speaking at the nineteenth session of the representatives of chambers of commerce, Yahya al-Ishaq, the head of Iran’s Chamber of Commerce described the foreign exchange situation in the country in these words: “Today the country is in a state of war and in such a state military courts have to be set up if violations are made.” Just as the national Security Council would meet if a missile head a section of Tehran, a missile has today hit the foreign exchange field of the country, so why is the national Security Council not meeting? The day they invited us for the inauguration of the Foreign Exchange Center, we said that this body could solve some of the problem but certain requirements had to be observed. One requirement is that the rate of foreign exchange has to be falling in the Foreign Exchange Center which must not validate the chaotic free market outside. We shall pass through this phase. If proper management takes place under these conditions we can solve all our problems. We must sometimes be bold. If a national interest issue is at stake, the absence of decisions is a crime. Officials must make timely decisions.” In his remarks, he implicitly called for the removal of Ahmadinejad and the senior economic officials in the administration and said, “Someone who does not have the power to solve the crisis must remove himself, while critics too must strive prevent a deterioration of the crisis. While the economic conditions of the country are going through a hard and sensitive time, all resources must be used to solve the problem and nobody has the right to prevent the expression of opinions and presentation of solution by economic specialists because today the interests of the nation have been endangered. The inflation of the money supply from 90 billion Toman to 400 billion shall bring about destructive high prices and will have a negative impact on the foreign exchange system of the country.”

Larijani: We Have Foreign Exchange; Bahonar: We Don’t

Amid the crisis in the foreign exchange market and the unrest in the country, and as repeated calls for using security measures to control the situation have been made by officials in different political quarters, some have criticized Ahmadinejad and his “futile management.” In this regard, Ali Larijani, the head of the Majlis, also echoed these words and without naming Ahmadinejad called his administration “unqualified” and called for the government to be “honest with the public” about the foreign exchange crisis and said, “We must be honest with the public. The amount of Iran’s foreign exchange has dropped and we must talk to people and tell them that we have to use some of the revenues of the country to meet public needs and for medicine with the 1,226 Toman per Dollar, while also keeping some for the production of factories.”

He labeled the administration’s policies to be Robinhoodish and said, “Eighty percent of our problems and economic issues are related to our management system. The west mistakenly thinks that they have succeeded in disrupting our economy because of the sanctions whereas we ourselves must be aware of this issue. We must ask whether the growth in liquidity inside the country had anything to do with sanctions. You have expanded the liquidity but what does that have to do with the sanctions?”

As Larijani was presenting his views, his deputy Mohammad Reza Bahonar, according to Mehr news agency, said, “I completely reject holding the government responsible because in the last 5 months of this year, about 20 billion Dollars have been injected into the market at the 1,226 Dollar rate. According to officials, 100 million Dollars were traded in this chamber and the government has no shortage in providing foreign exchange and can inject it into the market for a long time.”

The spokesperson for Majlis’ national security committee Hossein Naghavi however announced that a bill in this regard had been presented to the floor and said, “By intervening the foreign exchange market and with the cooperation of the government, the foreign exchange bubble will be busted. After banning the trade of foreign exchange in the open market, the channel that opportunists use to disrupt the market will be shut.”

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