The dollar rate being imposed on Saturday sought to strengthen the rial by 25 percent
Iranians count and exchange US 100-dollar bills and Iranian rials in Tehran in January. Iran on Saturday sought to reverse a collapse of its currency by imposing a fixed dollar rate, days after protests erupted over the rial's plunge, according to money changers who were refusing to comply. © Atta Kenare - AFP/File
The dollar rate being imposed on Saturday sought to strengthen the rial by 25 percent
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AFP
Last updated: October 6, 2012

Iran imposes currency cap to combat rial's plunge

Iran sought on Saturday to reverse a collapse of its currency by imposing a fixed dollar rate, days after protests erupted over the rial's plunge on the open market, said money changers who were refusing to comply.

The order came as ordinary Iranians struggled with growing economic problems that have caused a big jump in daily prices.

"We received an order from the Money Changers' Association (under the control of the Central Bank) telling us to buy the dollar at 25,000 rials and sell at 26,000," one exchange bureau employee told AFP.

"Nobody is selling at this price and we are not trading," he said.

The bureaux in the central Ferdowsi area of Tehran were open for the first time since Wednesday's protests, in which scuffles broke out between police and stone-throwing individuals.

Sixteen exchange market "disrupters" were arrested, according to prosecutors.

The rate imposed on Saturday sought to strengthen the rial by 25 percent after it plunged 40 percent to around 36,000 on Tuesday.

In the nearby Grand Bazaar -- a historic maze of shops whose owners collectively enjoy political influence -- stalls were also reopened. But gold coin vendors said they were refusing to sell because the currency market was still too volatile.

The Fars news agency reported that Bazaar prices had more than doubled in the past few days.

"A Samsung fridge which used to be sold for a 10 million rials is now ticketed at 20 million rials -- and the retailer is not selling," one housewife told Fars.

"He told me to jot down my number and told me I'll hear from him when the prices have settled," she said.

President Mahmoud Ahmadinejad has put the blame of the currency collapse on Western economic sanctions.

But his hardline critics say the fault mostly lies with his government's monetary policies.

The US government has said sanctions relief could quickly occur if Tehran curbed its disputed nuclear programme, which Western countries suspect is cover to develop a nuclear weapons capability.

Iran's leaders, who insist their atomic programme is exclusively peaceful in nature, have vowed never to yield to the pressure.

Ordinary Iranians are divided in whom to blame for the economic problems, but many agree they expect Ahmadinejad's government to take action to restore their decimated purchasing power.

Saeed, a family man in his 40s who declined like others interviewed to give his full name, said his weekly grocery costs have relentlessly risen.

In March, his bill was "1,400,000 to 1,500,000 rials, in mid-summer (end July) it became 2,000,000 to 2,100,000 rials and on Friday we paid 3,000,000 rials," he said.

And some products, especially imported ones, "are no longer on the shelves."

For poorer Iranians, the dietary staples of chicken and red meat have become unaffordable luxuries after tripling in price since last year.

The middle class, which enjoyed years of climbing revenues thanks to high oil prices last decade, is being squeezed too.

Roya, a 60-year-old owner who lives off the rent of three apartments she owns, said she scrapped a planned trip to Southeast Asia.

"Due to the devaluation of the rial, it has become too expensive, not worth it. Also, I can't raise the rents. There is a limit to what people can pay," she said.

Imported medicine, though technically spared from the sanctions, was getting difficult to find.

"When you go to pharmacy, inexpensive medicine has become a rarity," said Haleh, a woman in her 30s suffering multiple sclerosis.

"The Iranian generics are also expensive, since the pharmacies say the key ingredients are imported with open market rate. Some are not telling the truth," she said.

Many who can still afford it -- and who have another country's passport or the necessary visas -- are leaving the country, saying their savings and investments have taken too heavy a blow.

Hamid, a businessmen in the import sector, said "my apartment, which used to be worth $500,000 is now worth only $200,000." He added that he was leaving Tehran this month to live in Dubai.

The currency slide is also prompting a return of Iranians abroad: thousands of students whose parents can no longer afford to support them.

Other families were having to choose where their diminishing money would go.

Mojtaba, a young doctor, said his father had dropped plans to help him buy the Tehran office apartment he was working out of "to channel more of his money to my sister, who is studying in Britain."

A senior analyst for the Eurasia Group that monitors political risks worldwide, Cliff Kupchan, said in a statement that, while the dissatisfaction in Iran over the economy would likely last, and the bickering in the regime was notable, "there is no evidence at this point that the temperature is reaching boiling point."

Repression against unrest was the most likely scenario as was the imposition of a "command economy" that would result in runaway inflation and a long-term threat to stability, he said.

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