The Rial’s devaluation spiral gained momentum in March, with news of the likelihood of U.S. President Donald Trump decertifying the nuclear deal with Iran. Fearing the consequences, Iranians stormed the currency exchanges to buy U.S. dollars.
As Trump tweeted Monday, May 7 that he will announce his decision on the Iran deal on Tuesday, the U.S. dollar rate surprisingly dropped to 66,000 Rials in the early hours of Tuesday in Tehran.
People commented on social media that the government has injected a massive amount of foreign currency into the market in order to counter the shock from the likely decertification of the nuclear agreement by Trump.
However, in case that the United States leaves the agreement; as many assume it will, the exchange rate will not hold for long and the dollar will skyrocket again.
The decertification of the nuclear deal would mean that the country will once again face crippling sanctions. Even though Europeans do not intend to follow Washington’s lead, restoring even U.S. sanctions on Iran will leave many European companies no choice, but to stop doing business with Iran, in order to avoid possible punishment by the U.S. administration.
The Iranian government reacted to the crisis by setting the price for the U.S. dollar at 42,000 Rials. Vice-president Eshaq Jahangiri on April 9 announced that trading in U.S. dollars using any other rate was illegal. But the government did not offer anyone dollars at the lower official rate and the price kept rising.
Jahangiri’s announcement forced people to shift their business into underground channels. The vice-president himself became the subject of ridicule by citizens. On social media, many Iranians posted a picture of a one-dollar-bill photoshopped with Jahangiri’s face instead of George Washington.
Finally, Iran’s currency received its latest blow on Monday April 30 when Israeli Prime Minister Benjamin Netanyahu presented a trove of secret nuclear files, alleging hidden Iranian plans to develop nukes.
Netanyahu’s claims convinced many Iranians that the nuclear deal will be scrapped soon and even a military confrontation with Israel or United States is very likely. As a result, Iranians became more nervous and demand for foreign currencies increased.
The currency crisis has been affecting other prices too. The shortage of U.S. dollars encouraged many people to invest in gold and boost the price higher than the international rate.
The World Gold Council wrote in a recent report that due to “concerns over worsening Iranian-U.S. relations and the prospect of currency controls”, gold demand in Iran has jumped to 9.3 tons in the first quarter, a three-year high.