The Iranian Supreme Court on Tuesday upheld death sentences against financial traders Vahid Mazloumin and Mohammad Esmail Ghasemi on charges of “spreading corruption on earth” because their currency trades were allegedly intended to “disrupt the economy” at a time of “enemy pressure” on Iran, that enemy being the United States.
Mazloumin and Ghasemi were tried in early September and their names were only disclosed to the public two days ago. A third defendant named Hamid Bagheri-Dermani was also sentenced to death but his appeal is still pending.
The whirlwind prosecution is essentially Tehran’s attempt to scapegoat currency traders for its own dismal economic policies and avoid admitting how hard U.S. sanctions are hitting Iran. The regime quickly established special courts to prosecute traders and send a “warning to opportunists,” as judiciary spokesman Gholamhossein Mohseni Ejehi put it.
Ghasemi was nicknamed “the Sultan of Coins” because two tons of gold coins were allegedly discovered in his possession when he was arrested. As the Associated Press points out, many Iranians have “stocked up on gold coins and other safe-haven investments as the local currency has plummeted in recent months.” Not many of them managed a two-ton hoard (assuming that figure is not just regime propaganda) but a message will definitely be sent to the public by killing Ghasemi.
The Iranian rial took a nosedive after President Donald Trump withdrew from the Obama nuclear deal and reimposed sanctions against Iran. The Associated Press found signs of financial chaos in September:
Those who went to work at the start of the Iranian week on Saturday saw their money shed a quarter of its value by the time they left the office on Wednesday. Signs of the currency chaos can be seen everywhere in Tehran: Worried residents lined up outside beleaguered money changers, travel agents offered vacation prices only in hard currency, and diapers disappeared from store shelves.
Many exchange shops in downtown Tehran simply turned off their electronic signs showing the current rate for the American dollar, while some Iranians who wanted hard currency sought out informal money traders on street corners. Exchange shops that remained open offered 150,000 rials to the U.S. dollar.
“Everyone’s just nervous,” said Mostafa Shahriar, 40, who was seeking dollars.
There was no immediate acknowledgment of the drop on state media.
The ayatollahs tried yelling about a shortage of baby diapers ostensibly created by Trump’s sanctions, while much of the Iranian public looked at gigantic sums spent by their government on war and terrorism in other countries and wondered how many baby diapers a missile sent to the Houthis of Yemen would be worth.
A currency rally seemed ready to take flight this week but stalled out on Wednesday. Voice of America caught Iran’s state-run media pumping out Fake News about cheap dollars that were not actually available:
Some Iranian media had reported the rial surging to around 100,000 to the dollar in unofficial trading Tuesday from a record low of 190,000 set last week, an almost 50 percent jump in the Iranian currency’s value in one day. But, the Bonbast.com website that tracks Iran’s unofficial exchange rates showed the rial later retreated to 147,000 to the dollar by late Wednesday.
Iranian state media had reported long lines at currency exchange shops Tuesday as people rushed to convert their dollars into rials, driving down the value of the U.S. currency.
The reports attributed Tuesday’s rial rally to a variety of factors, including the Iranian government authorizing the central bank on Sept. 29 to intervene more strongly in the market to support the national currency. They also cited psychological factors, including public perceptions that various external pressures on the Iranian economy could be easing.
But Wednesday, several callers from Iran to VOA Persian’s Straight Talk program said Iranian state media reports of dollars becoming much cheaper did not reflect the reality.
Plan B will probably involve arresting and executing a few more scapegoat currency traders, which is not likely to invigorate the already nervous Iranian financial sector.
All of this is happening in the shadow of the even tougher round of U.S. sanctions scheduled to take effect on November 5. Tehran got some very bad news on Tuesday when China’s Kunlun bank, the largest facilitator of financial transactions between China and Iran, announced it will stop taking payments from Iran on November 1. This would, in theory, halt almost all Iranian imports from China and severely impact Chinese purchases of Iranian oil.
Iran has been unsuccessfully demanding rescue from Europe and hoping China would ease the pain of U.S. sanctions. Turkey is still hoping for exemptions from the sanctions that would allow it to continue buying Iranian energy products. Iran’s second-biggest customer India is still a question mark, but it has already reduced its reliance upon Iranian oil to make its waiver request to the U.S. Treasury more reasonable, and analysts from the Switzerland-based think tank Horasis told Indian media on Tuesday they believe the economic impact from lost Iranian oil will be minimal.
Tehran was dealt another stiff blow this week when Saudi Arabia announced it will increase oil production by enough to keep the loss of Iranian crude.
“We will meet any demand that materializes,” Saudi Energy Minister Khalid al-Falih said, assuring an investment conference that OPEC will shift to “pump as much as you can” mode as Iranian exports are choked off by sanctions.
CNBC credited President Trump’s trade war against China with mitigating the global impact of lost Iranian exports because the tariffs and a strong dollar have kept oil prices down and reduced demand. The global market appears confident Saudi Arabia and OPEC will minimize turbulence after the November 5 sanctions take effect.
Iranian President Hassan Rouhani reshuffled his cabinet over the weekend to brace for the new round of U.S. sanctions, naming a new economy and finance minister among other changes. The new cabinet is not an A-team of renowned experts brought in to deal with the economic emergency; it is a gaggle of unknowns chosen by Rouhani because all the big names in Iranian politics are either distrusted by parliament or loathed by the public.
“Rouhani faces a dilemma. He cannot improve the economy even if he changes all the relevant ministers because of sanctions, corruption in the country and the mismanagement. He has to allay tension and that is why he has selected less political and unknown figures,” Iranian political analyst Hamid Farahvashi explained to Reuters on Sunday.
This is all very different from the confident predictions of “experts” that pulling out of the Iran nuclear deal would only hurt American companies because Europe, China, and Russia would rush to pick up the valuable Iranian business left on the table by President Trump’s actions. The International Monetary Fund concluded on October 8 that the Iranian economy is now in recession and likely to get much worse after the November 5 sanctions kick in.
The IMF also forecast “a darker outlook for the world economy” as a result of the tariff battle between the U.S. and China and downgraded its growth estimates for both the United States and China. As it has been all along, the vital question is which side in each of these conflicts blinks first. Hustling financial traders through drive-thru trials and executing them looks a lot like blinking.