OPINION: US President Donald Trump may well be watching with sheer delight the free fall of Iran’s national currency, seeing it as vindicating his policy of maintaining draconian sanctions on the Islamic Republic.
The rial has lost about 50% of its value since May and there seems to be no end in sight to the precipitous collapse arising from Trump’s tightening financial noose that has severely constricted Iranian crude exports.
The currency woes worsened after Trump doubled down on his campaign of maximum pressure on Tehran on 21 September, moving to slap a raft of new sanctions on the country’s perceived nuclear weapons programme.
The move came in defiance of other members of the UN Security Council that reject Washington’s right to reimpose international sanctions because it withdrew from the 2015 nuclear agreement with Tehran.
Judging from the outside, one could be forgiven for thinking that Trump's strategy is bearing fruit and will soon see Iran’s ruling clergy caving in to US pressure by abandoning their alleged pursuit of nuclear weapons.
Despite the ballooning currency crisis — brought on mainly by a shortage of physical cash caused by Iran’s loss of access to the international banking system — food and other basic necessities are in no short supply.
The Tehran administration — ever ready to employ brutal force to suppress dissent — has recently moved against currency traders, confiscating their holdings and imposing heavy fines to limit transactions.
At the same time, the central bank has limited the injection of cash dollars into the market to safeguard reserves.
Iran is no bankrupt country, boasting an estimated $70 billion in foreign currency reserves mainly blocked abroad by the US sanctions.
Nonetheless, despite the cash crisis, supermarket shelves are well stocked even though prices change constantly, mirroring the rial's fall from grace.
Heavy food subsidies and give-away fuel prices have largely cushioned the poor. Petrol costs around 10 US cents a litre, while diesel, used in transportation and shipping, fetches a fraction of a cent.
And unlike Venezuela, Iran is not experiencing any major impact on its capacity to produce and process oil and gas, with output of the latter at a peak.
Although crude exports are paralysed, Iran is ensuring that oil production capacity remains intact and can be brought back on stream at short notice.
According to shipping data, crude and condensate exports are now recovering from record lows of below 400,000 barrels per day as Iran hones its skills of circumventing US sanctions through ship-to-ship transfers and turning off ship-tracking devices.
Drawing on its resilience and logistical know-how, Iran has come to the rescue of fellow US sanctions victim Venezuela by sending vital shipments of fuel.
Beleaguered President Nicolas Maduro is said to have airfreighted to Iran nine tonnes of gold in April alone in exchange for fuel and the repairing of Venezuela’s crumbling refineries.
The run on the rial, while reflecting the sad status of its economy, may also be part of a calculated ploy by Tehran to hedge its bets by preserving precious cash in case Trump is re-elected in November.
As such, the ruling clergy hope they can wait out another Trump term in office as they have seen off numerous US presidents since the 1979 Islamic Revolution.
(This is an Upstream opinion article.)