Rial collapse stirs Iranian rallies, clashes

DUBAI - Reuters

Iranian riot police stand next to a garbage container which is set on fire by protesters in central Tehran, near the main bazaar yesterday, in the first sign of public unrest over Iran’s plunging currency. Falling value of the currency has greatly increased inflation in Iran. AFP photo

Riot police clashed with demonstrators and foreign exchange dealers in Tehran yesterday over the collapse of the Iranian currency, which has lost 40 percent of its value against the dollar in a week, witnesses said.

Police fired tear gas to disperse the demonstrators, angered by the plunge in the value of the rial. Protesters shouted slogans against President Mahmoud Ahmadinejad, saying his economic policies had fuelled the economic crisis.

Western economic sanctions imposed over Iran’s disputed nuclear programme have slashed Iran’s export earnings from oil, undermining the central bank’s ability to support the currency. Panicking Iranians have scrambled to buy hard currencies, pushing down the rial. With Iran’s official inflation rate at around 25 percent, the currency’s weakness is hurting living standards and threatening jobs.
The government blames speculators for the rial’s collapse and ordered the security services to take action against them.

“Everyone wants to buy dollars and it’s clear there’s a bit of a bank run,” said a Western diplomat based in Tehran. “Ahmadinejad’s announcement of using police against exchangers and speculators didn’t help at all. Now people are even more worried.”

Close watchers of Iran say the protests pose a threat to Ahmadinejad rather than the government, but his term will end in June when a presidential election is due and he cannot run for a third time in any case.

They expect the government to stop the foreign exchange dealings and pump in money to stabilise the currency and prevent the protests from spreading.

Tehran’s main bazaar, whose merchants played a major role in Iran’s revolution in 1979, was closed yesterday, witnesses said. A shopkeeper who sells household goods there told Reuters that the instability of the rial was preventing merchants from quoting accurate prices.

Currency record low

The protests centred around the bazaar and spread, according to the opposition website Kaleme, to Imam Khomeini Square and Ferdowsi Avenue -- scene of bloody protests against Ahmadinejad’s re-election in 2009.

The national currency dived to a record low on Oct. 2 to 37,500 to the U.S. dollar in the free market, from about 34,200 at the close of business on Oct. 1, foreign exchange traders in Tehran said. On Sept. 24, it traded at around 24,600.

 Ahmadinejad on Oct.2 blamed the crisis on the U.S.-led economic sanctions on Iran and insisted the country could ride out the crisis. He urged Iranians not to change their money for dollars and said security forces should act against 22 “ringleaders” in the currency market.

Iran is working to shrink and eventually eliminate the free market in its tumbling rial currency, the economy minister was quoted as saying amid signs that foreign exchange trade outside a government-sanctioned center was drying up.

“The unofficial currency market will be gathered up,” Shamseddin Hosseini was quoted as saying by the Mehr news agency yesterday. “The foreign exchange centre is being completed step by step, and its development will eventually lead to the elimination of the tricksters’ market.”