To discuss the impact being felt in Iran by the weakening of its currency, we spoke to a professor at the Burgundy Business School in France, home to a notable Iranian expatriate community, who is a researcher and lecturer in economics.
Reihaneh Mazaheri, euronews:
Dr. Jamshid Assadi, we’ve become well-acquainted with Iran’s currency fluctuations over the past several years, but not with what we are seeing today. What are the main reasons for this record?
Dr. Jamshid Assadi, Burgundy Business School:
This crisis began around a year ago. We’ve seen a steady drop in the value of the rial against the dollar and the euro. The main reason is the lack of confidence of all Iranians in their government, whether they’re families or businesses. The rial’s instability has driven people to invest in the dollar, so logically it has gone up, and as there are fewer dollars on offer, the exchange rate has climbed more and more.
The US State Department is linking the rial crisis to the international community’s sanctions against Iran’s nuclear programme. In your opinion, have the sanctions affected Iran’s economy?
Ever since the Iranian revolution the government’s economic policies have failed. That counts against Iran’s economy. On top of that there are the international sanctions, making it worse, driving strong inflation, though there was already unemployment before the sanctions. Today they have a dangerous side. On the one hand this crisis is due to an economy that is completely sick. Also, the Islamic Republic’s economic policy has been anti-progressive since the start. Once Ahmadinejad came to power, everything got worse. For example with export and import policy, most Iranian producers have gone bankrupt in the last several years. Then there is also the corruption in government, which hasn’t helped.
Part of the Iranian opposition thinks that the government, and notably Mahmoud Ahmadinejad, is the main cause of this market fluctuation, saying it somehow benefits from the turbulence. Do you agree?
Ahmadinejad does play a big role in this crisis, it’s true, but we mustn’t forget that other authorities in the regime also bear responsibility. But since he got into power the crisis has become more intense. But Ahmadinejad is drawing profit from this. The government still holds foreign currency and profits from the difference between the official rate of exchange and the rate on the black market.
Will this crisis last long?
Unfortunately, I have to say that things are going to get even worse. The explanation is simple: Iranians’ lack of confidence towards the regime, in every area, whether economic or political. But there is also the spectre of war with Israel, which means that most people either want to leave the country or shelter their savings abroad.
What is the weakest point in Iran’s economy right now, and how long can the government survive in this crisis?
Oil is still the backbone of the Iranian economy, and it can’t be sold on the international market because of the tensions with the international community. For as long as that lasts, this crisis will have no solution. The regime is obliged to negotiate with the international community, especially about the nuclear matter, and to accept the conditions the international community proposes. Above all, let’s not forget that the Iranians don’t need nuclear energy for the moment.