Iran currency crunch hits foreign tourists

Tourists visit the Azadi Tower in the capital Tehran on April 19, 2018. On April 15, the central bank banned foreign exchange bureaus "until further notice" from buying or selling foreign currency.
AFP

Tabriz (Iran) (AFP) – Newly arrived in the city of Tabriz in northwestern Iran, Corneilis Vamoorschot wanted to change his euros into rials, but quickly realised it wouldn’t be a simple task.

“We wanted to change at the bank, but the banks accept neither euros or dollars. We came to the foreign exchange bureau, but they had no money,” said the Dutch tourist, enchanted by the city’s brick bazaar, despite the inconvenience.

Iran’s central bank on April 15 forbade “until further notice” all exchange bureaus from dealing in foreign currency, leaving banks as the sole authorised buyers and sellers. But in practice, banks are now often refusing to trade.

Iran only began to emerge from years of isolation thanks to the signing of a 2015 nuclear accord with the US, major European powers, Russia and China — a freeze to its nuclear programme was agreed in exchange for easing sanctions.

But intense market pressure on the local currency, exacerbated by threats by US President Donald Trump to withdraw from the nuclear deal unilaterally, saw Iran on April 10 terminate the rial’s free float and peg it to the US dollar.

Before the fix, the local currency had lost around a third of its value in six months, to trade at 58,650 to the dollar.

The rate was set at 42,000 rials per dollar, a benchmark now meant to be used for all foreign currency transactions.

So with one euro trading at 1.20 dollars, the official Iranian market rate for the euro is 50,400 rials.

Eventually, tourist Vamoorschot, who works as a project manager for Rotterdam city hall, pitched up at a tourist office.

He gave his euros to someone who disappeared for a while and came back with rials.

While waiting, he was served tea and in the end “they gave a good rate,” he added — he received 71,000 rials for each of his euros.

This rate reflects the rial’s continued weakness on the black market since the fixed exchange rate came into force.

– ‘Everywhere is closed’ –

If the inability to change money “persists, it will definitely create problems,” said Ahmad Zarrabi, manager of a travel agency in Tabriz.

Even before the new foreign currency rules, carrying out transactions in Iran was already a challenge for foreign visitors.

Lingering US financial sanctions against the country mean credit cards can’t be used, so tourists have to pay for everything in liquid cash.

Western visitors mainly come from Germany, France, Britain, Italy and Holland, but only numbered in the tens of thousands between March and October 2017, according to official Iranian figures. Over the same period, 650,000 mainly Shiite tourists came from neighbouring Iraq.

The cash crunch isn’t isolated to provincial towns and cities. It is also affecting the capital, Tehran.

Tourists visiting key attractions including the city’s Grand Bazaar and the Palace of Golestan also said they were finding it hard to get their hands on local currency.

“Everywhere is closed, the banks are closed, (the foreign exchange bureaus) are shut and so we are not able to change money,” said Simona, a German tourist.

“For us it’s a small problem, but I think for people who sell things it’s a bigger problem because we would like to buy something but it’s not possible,” she added.

While tourists seek rials, Iranians need to find foreign currency ahead of travelling abroad. Sometimes, this translates into a happy co-incidence.

“We had no problems because we have Iranian friends who took care of everything for us,” said Catherine, a French tourist.

Simona also eventually found a solution.

“Our guide brought us to a man on a corner and we changed money in the street, not at the bank. It was not very good,” she said.

But as ever in situations where money controls come into force, hustlers find a way to exploit and profit from the situation.

“We came with rials, they came with euros,” another Iranian tour guide said with a smile after a transaction with tourists, while dodging a question about the rate.

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