THE RIAL is in freefall. The Iranian currency last week lost a quarter of its value on top of a third the week before. The dollar has trebled in value against it since early last year. International sanctions over the country’s nuclear programme are beginning to bite. Inflation, officially at 25 per cent, is being fed by growing shortages of basic supplies, and sanctions have hit the country’s ability to earn hard currency from oil exports. President Mahmoud Ahmadinejad, losing both economic and political control, is facing what may be his toughest challenge yet.
On the streets of Tehran last week there were riots over the currency. In the Grand Bazaar stallholders have been on strike. Police over the weekend moved to close currency shops, arresting over 30 traders and confiscating large amounts of hard currency and gold. To little avail. Now the black market is filling the gap, flourishing, with no sign that the rial is paying the slightest attention to Ahmadinejad’s Canute-like injunction that it should maintain its value.
He is at odds with conservative clerics and the judiciary close to the country’s supreme leader, Ayatollah Ali Khamenei, who accuse him of undermining clerical power and promoting nationalism. And he has lost control of parliament, including many former supporters some of whom have called on him to quit. Over the weekend 179 of the 240-strong body, citing the pain inflicted by the currency fall, voted to consider suspending the reform of food and fuel subsidies, a central plank of the government’s strategy to restore the public finances. It involves cutting tens of billions of dollars from state subsidies while offsetting the impact on Iran’s poorest, and ensuring they continue to back the president, by giving them monthly cash payments.
Meanwhile the protest movement triggered by his dubious re-election in 2009, then brutally crushed, remains dormant. Opposition leaders Mir Hossein Mousavi and Mehdi Karroubi, remain under house arrest, but the movement was never broken. It is biding its time, Iran’s Spring in prolonged hibernation.
Ahmadinejad’s term finishes next year. Unable to run again because of term limits, he now appears increasingly unlikely to be able to foist one of his entourage on the Iranian people. And the reality is that whether or not international sanctions succeed in forcing a U-turn on Iran’s nuclear programme, they may yet contribute to what many would see as an equally desirable end, regime change.