The escalating confrontation over Iran’s nuclear arms program is having a telling effect on Iran’s economy. One stark manifestation of this is described in today’s New York Times:
Facing a wave of panic selling by Iranians worried that international sanctions and inflation are destroying the value of the rial, Iran’s president reversed himself on Wednesday and allowed bank interest rates to rise sharply in an effort to stop a slide that has depressed the currency to a relentless string of record lows.
More from Reuters:
Iran increased bank interest rates on Wednesday and indicated it would further restrict sales of foreign currency, hoping to halt a spiraling currency crisis after new Western sanctions accelerated a dash for dollars by Iranians worried about their economic future.
By the way, the central bank knows there is more than one reason to hold foreign currency.
The central bank also told Iranians they should only buy dollars if they are traveling and not hoard them to guard against economic uncertainty.
And as a matter of fact, a number of Iranians are doing just that … traveling. One of our contacts in Iraq said in a recent e-mail:
[A]lready I’ve seen hundreds of well off Iranian families renting apartments in southern Iraq and moving their families there in case of trouble in Iran. Other countries in the gulf like the UAE and Kuwait have placed visa restrictions against Iranians due to the influx of people trying to flee potential trouble.
Previously Iranians would come to Iraq for a one week visit. Now we have some Iranians coming and bringing a lot of luggage with them and settling down for a longer stint. Of course, not everyone in Iran can afford to do this. The richer Iranians tend to go to Dubai / Kuwait. The poorer ones to Syria / Iraq. But with the troubles in Syria, Iraq has become one of the few exit points for Iranians now.
The number of Iranians staying [in Iraq] is still a trickle compared to what would be the numbers if things really kicked off, but it has been already noticed locally that some Iranians are staying now rather than just visiting.
Update. January 27th, from the Iraqi province of Wassit which borders Iran:
Thousands of Iranians poured into the Zurbatia border (crossing) with the province to buy US dollars from Iraqi merchants, a Wassit Province official said today.
The source told Aswat al-Iraq that the buying campaign came after the deterioration of the Iranian currency.
The source added that the Central Bank of Iraq witnessed greater purchasing demand on the US dollar during the last two days, following the sanctions imposed against the Iranian government.
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5 Comments
“Already I’ve seen hundreds of well off Iranian families renting apartments in southern Iraq and moving their families there in case of trouble in Iran.”
Now I have seen everything, choosing to move to Iraq.
This should be interesting. Over the last decade ‘we’ve’ had the opportunity of watching Arabs, Kurds, Punjabi’s, Berbers, Pathan’s, etc., react/respond to external/internal ‘pressure.’ Now we get a chance to observe the Persians & the Azeri’s.
the Iranians like to put on a brave face and say that sanctions won’t accomplish anything except punish the innocent citizenry. That’s total bunk! Sanctions are seriously crippling Iran’s economy et.al. Even tougher, more stringent sanctions can be applied and even a sea and air blockade if necessary. They will eventually capitulate without any shots having to be fired. They also like to perpetuate the myth that the Iranian people don’t understand why the West is applying these sanctions just because the Iranians want to pursue “the peaceful use of nuclear power.” That’s absolute hogwash as well. The Iranians know full well that they live under an authoritarian regime that is actively seeking nuclear weapons against the wishes of the rest of the civilized world. The Iranian people tried to remove the regime two years ago and we didn’t support them. I believe that after Syria’s regime is toppled the Iranian’s will once again start staging mass demonstrations, especially if their economy is being decimated by the imposed sanctions. The next time the American President will have to take a more influential role.
No, it’s not total bunk! The sanctions are punishing the innocent citizenry, not the ones in power which they are supposed to be targeting.
People like you said the same thing about North Korea and we all know how that turned out. If you think that sanctions will force Iran to capitulate to the West’s demands then you are going to be in for a rude awakening!
People like you said the same thing about North Korea and we all know how that turned out.