Iran's Battered Currency Falls As Nuclear Talks End Without Results

The Revolutionary Guard, which usually tries to justify the high cost of involvement in the Syrian war, has been arguing that trade and investment in Syria will pay off and compensate billions of dollars Tehran has spent to support Bashar al-Assad.

Tasnim news affiliated with IRGC quoted Syria's economy and trade minister on Friday as saying that Syria's new investment law is very favorable to Iranian investors.

What Mohammad Samer al-Khalil said was that the law would offer benefits, tax exemption, and guarantees to all investors, including Iranian companies. Al-Khalil expressed hope for greater bilateral economic cooperation and trade.

The extent of Iranian military expenditures and financial aid to Syria to keep President Bashar al-Assad in power is not known. In May 2020 a member of the Iranian parliament's National Security and Foreign Policy Committee, Heshmatollah Falahatpisheh, made an unprecedented declaration that Iran has spent $30 billion in Syria and must recoup the loss.

Iran has also spent blood on top of treasure to defend Assad's government. No one knows how many servicemen have been killed in Syria, but Iran at one point was deploying 20-30 thousand fighters, mostly Afghan and other mercenaries and allies, but also some of its own troops.

A program on Iranian national television Thursday highlighted obstacles to increasing trade. Keyvan Kashefi, chairman of the Iran-Syria chamber of commerce, highlighted the difficulties caused to both countries by US sanctions as well as the absence of safe land and maritime trade routes.

The director of the Trade Promotion Organization of Iran, Alireza Peymanpak, told the program that Iran's Trade Development Fund had allocated $50 million to supportIranian companies' exports to Syria.

The deputy chairman of Iran's Chamber of Commerce, Mohammad Amirzadeh, in November blamed the government for what he said was a low level of Iran’s exports to Syria, which make up 3 percent of Syria’s imports compared to 30 percent from Turkey. Some Iranian trade officials recently said Syria had completely stopped importing Iranian vehicles, which had been a major export item.

The odd thing is that Turkey has been supporting Assad’s Sunni opponents in Syria for years and is the protector of Idlib province where all the Sunni factions, defeated in the war, have found a relatively safe haven.

In early November, reports said that Syria had expelled top IRGC commander, General Seyyed Javad Ghaffar, a move that was seen as Assad’s attempt to improve ties with rich Sunni Arab states.

While Tehran has been portraying the development as an ordinary event, The Times of Israel on November 11 quoted Saudi sources as saying that Ghaffari was expelled from Syria as he was "accused of ‘major breach of Syrian sovereignty’ after attacking US forces, and deploying Iranian weapons to unapproved places."

However, Tasnim acknowledged in an earlier report that according to "foreign news sources," Ghaffari was forced by the Syrian government to leave Syria after a visit to Damascus by the Foreign Minister of the United Arab Emirates, Sheikh Abdullah bin Zayed Al Nahyan's on November 9.

Iranian state media have occasionally reflected dissatisfaction in recent years that Iran’s share of the Syrian economy is small and Russia, which intervened in the war decisively to save Assad, has more influence and more chance of benefitting from Syria’s reconstruction than Iran.

In the aftermath of a war where reconstruction costs are put at $250-$400 billion, Syria badly needs to boost economic relations with regional countries. While Arab League countries are gradually resuming diplomatic relations, Syria faces United States and European Union sanctions.

Iran, itself under US sanctions and coping with a serious economic crisis does not have the financial resources to help Syria’s reconstruction.

Iranian media had reported earlier that budget planners believe Iran can achieve the unprecedented rate of 8 percent economic growth, despite United States sanctions, which have crippled the economy since 2018.

Massoud Mirkazemi, the head of the Planning and Budget Organization, in tweets on Friday confirmed the news, while some economists told media in Iran they have serious doubt about achieving any growth under US sanctions.

Iran’s economic growth has been zero for the past 15 years, as international and US sanctions interrupted its oil exports and global banking relations. Although there were years when there was a positive rate of growth, overall the economy has stalled.

Mirkazemi claimed that non-oil exports increased by 40 percent since the beginning of the Iranian year in March.

Iran’s steel production fell by 15 percent in October, following smaller declines earlier in the year resulting from lack of electricity.

Iran’s method for generating revenues has been a relentless increase in liquidity, which has led to a 50-percent inflation rate and a ninefold drop in the value of the currency.

According to postings on social media, police and security forces including Basij militia deployed around the city's landmark Khajoo Bridge, the center of last Friday's protests, and in nearby areas.

Security forces also set up checkpoints in the city. Two videos acquired by Iran International show a roadblock, and dozens of riot police and other security forces maneuvering on motorcycles.

The large-scale police operation on Friday amounted to an undeclared martial law in the city.

The few people managing to tweet from Esfahan Friday said mobile internet was disrupted and that wi-fi connections were too slow for their photos and videos. Some also reported disruption to mobile phone connections.

Mohammad-Reza Mohammadi, chief of Esfahan traffic police, announced Thursday that roads along the river and leading to the bridge would be closed to cars, motorcycles and pedestrians from 5am Friday, and parked vehicles would be clamped and removed.

An anonymous call was widely circulated on social media in recent days called for people to gather for Friday prayers in the dry bed of Zayandeh Roud. Germany-based journalist Mehdi Mahdavi-Azad told Iran International this was a “very clever move” to draw people away from the usual Friday prayers led by “state-appointed imams.”

While security forces prevented people from reaching the river bed, Mojtaba Mirdamadi, the Friday prayer imam of Esfahan, said previous administrations had ignored the plight of farmers facing water shortages and that the issue lay now “in God's hands." Mirdamadi in previous times criticized the government of former president Hassan Rouhani for alleged mismanagement of water resources.

"We hope rain sent by God will solve all the problems," Mirdamadi told his congregation and advised them to hold special prayers for rainfall.

In Mashhad in north-eastern Iran, Friday prayer leader Ahmad Alamolhoda told those congregated that that among last week's protesters had been "mercenaries of the enemy" who had used Molotov cocktails. He said the people of Esfahan would not “oppose the Revolution for the sake of food and water.”

Authorities and state media in the past few days called the call for Friday’s rally politically motivated and suggested "rioters" were trying to take advantage of water protests.

Esfahan’s governor, Mohammad-Ali Ahmadi, said in a radio program Thursday that no one had applied for a permit to protest. He argued that that the authorities had heard farmers' voices and that farmers had realized "anti-revolutionary groups" were looking to manipulate any protests. "Security forces will prosecute those who spread rumors and fake news on social media," he warned.

The Islamic Republic routinely ignores applications requesting permit for political gatherings and only issues permission for rallies organized by the government. When a group congregates for a protest, they are usually dispersed or arrested.

Esfahan farmers' union in a statement Wednesday said it was not planning further protests Friday. Many on social media have alleged they had been coerced by security forces.

The justice department of Esfahan province said that in a statement Thursday that farmers no longer intended to protest, so that protests on Friday would be unjustified, illegal, and aimed at "abetting and aiding the enemies of the Islamic Republic.”

The highest price increase was related to sugar, which jumped by 76 percent compared to October 2020 as the government stopped allocating cheap dollars for its import. The data was released this week by the Ministry of Industry, Mines and Trade.

Since April 2018, Iran has been providing US dollars to importers of essential goods at the preferential rate of 42,000 rials, while the dollar has steadily climbed against Iran’s rial, reaching 290,000 in November.

This was in fact a food subsidy first provided when looming US economic sanctions in early 2018 were already creating high inflation in the country.

The cash-strapped government has been winding down the preferential dollar rate, which could push the current 50-percent inflation rate even higher. This indirect subsidy has cost the government at least $8 billion a year, roughly equal to its oil income in the same period.

Sugar is a vivid example as an essential food staple, with the price expected to rise even higher as stockpiles of subsidized imports decline and importers have to buy dollars at much higher rates.

Rice, which is a central staple of Iranian diet rose by more than 60 percent compared to last year. Imported rice had a smaller price increase, because of the indirect government subsidy, which could run out in the near future.

The reason for the steep price increase of domestic rice could be partly attributed to worsening drought this year, but production cost including fertilizer, and overall inflation also play a role.

Price of chicken meat increased by 42 percent, reaching $1.30 per kilogram. This is a good price compared with other countries, but the falling incomes of Iranians should be considered. A blue-collar worker earns around $100 a month and an office worker $150. If the worker has to feed a family of three, buying poultry becomes difficult and buying red meat at $4-5 becomes a luxury.

Reports say that meet consumption has fallen by around 40% this year as the price rose an average of 60 percent.

An even more alarming inflation news pertains to price increases in just one month, from September to October. Food prices rose between 1.9 to 8.4 percent on month-to-month basis, a sign of more trouble down the road.

Iran has experienced rounds of protests since December 2017, all triggered by high inflation. But every protest quickly turned into anti-government and anti-regime unrest. Economic hardship leads to demonstrations, but protesters have other deep grievances, such as religious restrictions on lifestyle, government corruption, nepotism and pessimism about the future that quickly manifest themselves.

During a visit to the United Arab Emirates on November 24, only a few days before leaving for Vienna for nuclear negotiations with world powers, Iran's Deputy Foreign Minister Ali Bagheri Kani pledged on behalf of the Islamic Republic to begin a new chapter in relations with the UAE, Bloomberg reported.

On the same day, Bagheri described the meeting in Dubai with UAE Presidential Adviser Anwar Gargash as “friendly and cordial.”

Three days before Bagheri's visit, Iran and UAE foreign ministers had welcomed the improvement of ties during a telephone conversation. Meanwhile, the Iranian Foreign Minister Hossein Amir-Abdollahian said that Tehran attaches special importance to its ties with the UAE, particularly in the area of trade.

Iran has been using Dubai as a key outlet to international markets often referring to it as a one-stop-shop that could provide goods to Iran from a variety of Asian and other countries. Many Iranian merchants maintain offices in Dubai where they have residence and business permits. Many other Iranians own real estate in Dubai and foreign-based satellite televisions constantly advertise properties in the UAE Iranians can buy with little or no legal restrictions.

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Reports coming from the UAE by the end of November indicated that the United Arab Emirates would soon send a delegation to Iran as part of efforts to improve ties with rival Tehran. Gargash told reporters that the UAE will keep its Arab neighbors and allies including the Saudis "in the picture" about the developments in bilateral ties with Iran.

Some observers believe that attempts toward a rapprochement with Iran are motivated by the general perception in the region, following US withdrawal from Afghanistan, that Washington has shifted its attention from the Middle East to East Asia, and players in the region may no longer be counting on the US to protect them against Iran's ambitions.

Noor News, a website close to the Iranian Supreme Council of National Security, has opined, that Iranian officials would welcome the upcoming visit by a high-ranking UAE delegation, which could be a positive step to reduce tensions. Meanwhile, the website said it is significant that the UAE has started this move while Iran is holding talks in Vienna. The gesture by the UAE would mean that Iran is not an isolated state.

Furthermore, UAE businesses may be showing their willingness to win the lion's share of Iran's foreign trade once US sanctions on Iran's international commerce and banking are lifted if the talks in Vienna prove successful.

Monday November 29 was the 50th anniversary of Iran capturing the three islands of Abu Musa, and the Lesser and Greater Tunb Islands in the Persian Gulf. While many Iranian media reports and social media accounts were cheerful about the anniversary, Turkey's national TV, TRT, on its Arabic Twitter account described the Islands as UAE islands occupied by Iran. This has annoyed Iranians as the dispute over the ownership of the three islands once again found its way into media. Iran at various points provided documents that indicate the islands were rented out to Arabs during the British colonial period.

Although the UAE has made no new claim about the islands, some Iranian media outlets and social media accounts have been talking about a Turkish conspiracy to damage the rapprochement that has been taking shape over the past weeks between Tehran and Abu Dhabi.