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Iran's economy suffers decline following US sanctions threat

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Iran's economy suffers decline following US sanctions threat

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In the markets and bazaars of Iran people are feeling the pain of a decline in the value of the country's currency, the Rial.

Stores closed down in Tehran’s Grand Bazaar as shopowners reacted angrily to the central bank’s attempts to stem the collapse of the currency which has seen a 40 percent decline against the U.S. Dollar since President Trump’s decision to back out of the Iran Nuclear Deal in May.

But it’s not the only factor according to some analysts.

"Three elements have led to the decline in the value of the Iranian currency. Mismanagement in controlling foreign currencies, internal economic variables and foreign pressure," says Javad Seyyed Pur, an Economics Professor at Tehran University.

"Huge sums of money are held in Iranian homes which people try to exchange for foreign currencies.

"The government has tried, unsuccessfully, to control the rate and banned the import of more than 1300 items signaling the start of a shrinking economy."

In April state media reported that Tehran imposed a fixed rial-to-dollar exchange rate and stopped its supply of foreign currency, initially as a temporary measure.

Expensive imports

As a result, Tehran currency dealers now ask for almost double the official government rate. They are demanding 75,000 rials for one dollar.

So everything from abroad became more expensive.

One young Iranian told us: "When you go to the bazaar to buy something, it is not usually sold and if it is, the price goes up by 20 or 30 per cent every day."

Another highlighted problem: "You can’t even rent a place with 15 million tomans (10 rials) of deposit," she said. "The price of milk has jumped from 1200 tomans to 1800 tomans."

Iran still hopes to get a good deal from the EU to be able to keep its economic ties with the world. But the price of basic goods has skyrocketed especially in areas such as housing, motoring and imported goods. In some cases, salespeople prefer not to sell anything until the dollar exchange rate has become stable.

Euronews' Javad Montazeri explains that the extreme sanctions threatened by the U.S have not been imposed yet but Iran’s economy has been tangibly shadowed by its destructive effects.

Although Iranian authorities are hopefully promising to withstand and fight these sanctions, people are worried about the deterioration of economic conditions with the comeback of sanctions.