A crude pain

9 January 2012 By Una Galani Follow @ugalani

The Islamic Republic can probably cope with a decline in oil revenue and restrictions on its central bank. But tighter sanctions will worsen already high inflation and put extreme pressure on the rial. President Ahmadinejad risks political fallout, however he chooses to respond.

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Iran’s parliament cracked down on unofficial money traders on Jan. 8 after new U.S. sanctions helped trigger a currency crash as Iranians rushed to buy dollars.
The rial lost about 20 percent of its value against the dollar and fell to an all-time low before the central bank intervened last week to try to stem further losses by injecting hard currency into the market.
At a special debate on the currency crisis, lawmakers passed a measure imposing legal penalties on touts who sell foreign currencies outside official exchange offices and banks where rates can be subjected to government controls.
The move followed the signing of a bill by U.S. President Barack Obama imposing fresh restrictions on the country’s central bank. The EU has also agreed, in principle, to ban the purchases of Iranian oil.
The head of Iran’s central bank Mahmoud Bahmani said the currency fluctuation was a “psychological war”, created by Iran’s enemies, the daily Kayhan reported.
Iran is due to hold parliamentary elections on March 2, the first nationwide poll since a 2009 disputed presidential vote that triggered anti-government protests.

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