Iran Imposes Currency Cap to Combat Rial's Plunge Print article Send a Tip from AFP 6 Oct 2012 post a comment Iran on Saturday sought to reverse a collapse of its currency by imposing a fixed dollar rate, days after protests erupted over the rial's plunge, according to money changers who were refusing to comply. The order came as ordinary Iranians struggle with growing economic problems that have caused a big jump in daily prices. "We received an order from the Money Changers' Association (under the control of the Central Bank) telling us to buy the dollar at 25,000 rials and sell at 26,000," one exchange bureau employee told AFP. "Nobody is selling at this price and we are not trading," he said. The bureaux in the central Ferdowsi area of Tehran had opened for the first time since Wednesday's protests, in which scuffles broke out between police and stone-throwing individuals. Sixteen exchange market "disruptors" were arrested, according to prosecutors. The dollar rate being imposed on Saturday sought to strengthen the rial by 25 percent after it plunged 40 percent in value this week to around 36,000 in trade on Wednesday. But with licenced exchange bureaux baulking, illegal money changers walking in the street were looking to step in at a whispered rate of at least 30,200 rials to the dollar. In the nearby Grand Bazaar -- a historic maze of shops whose owners collectively enjoy political influence -- stalls were also reopened. But gold coin vendors were refusing to sell because, they said, the currency market was still too volatile. President Mahmoud Ahmadinehad has put the blame for the currency collapse on Western economic sanctions. But his hardline critics say the fault mostly lies with the monetary policies of Ahmadinejad's government. The US government, which is leading the sanctions, has also pointed the finger at Iran's economic management, but said sanctions relief could quickly occur if Tehran curbed its disputed nuclear programme. Western countries have imposed their sanctions to stop Iran developing what they suspect is a nuclear weapons capability. Iran's leaders, who insist their atomic programme is exclusively peaceful in nature, have vowed never to yield to the pressure. Ordinary Iranians are divided in where the blame lies over the economic problems. But many agree they expect Ahmadinejad's government to take action to restore their decimated purchasing power. Saeed, a family man in his 40s who declined like others interviewed to give his full name, said his weekly grocery costs have relentlessly risen this year. In March, his bill was "1,400,000 to 1,500,000 rials, in mid-summer (end July) it became 2,000,000 to 2,100,000 rials and on Friday we paid 3,000,000 rials," he said. And some products, especially imported ones, "are no longer on the shelves." For poorer Iranians, chicken and red meat -- normally staples of the Iranian diet -- have become unaffordable luxuries after rising three times in price since last year. The middle class, which enjoyed years of climbing revenues thanks to high oil prices last decade, is being squeezed too. Roya, a 60-year-old owner who lives off the rent of three apartments she owns, said she had to scrap a planned trip to southeast Asia. "Due to the devaluation of the rial, it has become too expensive, not worth it. Also, I can't raise the rents. There is a limit to what people can pay," she said. Imported medicine, though technically spared from the sanctions, was getting difficult to find. "When you go to pharmacy, inexpensive medicine has become a rarity," said Haleh, an ailing woman in her 30s. "The Iranian generics are also expensive, since the pharmacies say the key ingredients are imported with open market rate. Some are not telling the truth," she said. Many who can still afford it -- and who have another country's passport or the necessary visas -- are leaving the country, saying their savings and investments have taken too heavy a blow. Hamid, a businessmen in the import sector, said "my apartment, which used to be worth $500,000 is now worth only $200,000." He added that he was leaving Tehran this month to live in Dubai. The currency slide is also prompting a return of Iranians abroad: thousands of students whose parents can no longer afford to support them. Other families were having to choose where their diminishing money would go. Mojtaba, a young doctor, said his father had dropped plans to help him buy the Tehran office apartment he was working out of "to channel more of his money to my sister, who is studying in Britain." A senior analyst for the Eurasia Group that monitors political risks worldwide, Cliff Kupchan, said in a statement that, while the dissatisfaction in Iran over the economy would likely last, and the bickering in the regime was worth watching, "there is no evidence at this point that the temperature is reaching boiling point." Repression against any further unrest was the most likely scenario as was the imposition of a "command economy" that would result in runaway inflation and a longterm threat to stability, he said.