Iran’s Murky Political Future
With a troubled economy and uncertainty about the next president, Iran is facing considerable political tension, says Iranian political expert Farideh Farhi. Though sanctions seem to be having effect, many critics inside the country say “the economic mismanagement on the part of the Ahmadinejad government and the incompetence of those who are running the Iranian economy are also at fault,” she says. There are a number of people who could run to replace President Ahmadinejad when his term runs out next June, Farhi says, “but it’s not at all clear in terms of the political orientation of the candidates.” She says that potential candidates are “hesitant to come forth at this particular moment when the economic situation is quite unstable, as well as with the nuclear issue that is hanging in the air.”
Iran’s currency, the rial, keeps plummeting. It has lost 40 percent of its value in the past week. What’s going on in the economy in Iran? Is it really that affected by the sanctions?
President Ahmadinejad, in a press conference, acknowledged that the drop in oil revenues as well as the difficulty that the Iranians are having with the transfer of their currency is having an impact in terms of the ability to infuse currency into the Iranian market. Because of the budget commitments in the Iranian economy, there is suspicion that the government itself is involved in the devaluation of the Iranian currency in order to be able to generate enough rials to pay for its commitments. It is not clear whether this dynamic has gone out of control. They had tried to put a stop to it by creating a currency exchange market, but once they did that, the market reacted in a very volatile fashion. The government and the central bank have suggested that the country should give them about two weeks before some sort of stability comes back to the market.
The reality is that the Iranian currency was overvalued, and the sanctions regime has effectively forced the government to do a devaluation. The problem necessarily is not the devaluation that many exporters, for example, in Iran wanted, it’s the volatility. And we will just have to wait and see whether the government will be able to manage and bring some sort of stability to this market