Tehran slide

Beginning October 1,Irans currency,the rial,has been in a free-fall against the US dollar,plummeting to such record lows that Iranian currency websites blanked out the rate and the government shut licensed exchange shops. Plunging to 35,000 to the dollar on Monday,the rial has now lost approximately 80 per cent of its value since late-2011. The sharp falls,15 per cent daily,triggered violent protests in Tehran. There have been demands for the resignation of the governor of the Central Bank of Iran CBI and the Mahmoud Ahmadinejad regime is being blamed for mismanaging the economy.

The significance of these riots is that those demonstrating now,apart from the money dealers,are conservative traders from Tehrans central bazaar who have been financiers of the revolutionary regime. Their anger doesnt yet spell danger for Irans political system,but it means trouble for Ahmadinejads government. The rials fall has made it nearly impossible for traders to operate,with many of them closing shop,and Iranians are buying staples in bulk because the price is climbing even as they stand at the counter. Not many Iranians need foreign currency in lieu of the rial,but its value has long been one of the few genuine indicators of the economy.

The protests are evidence that the US- and EU-imposed sanctions are biting,although it is state policy that made the rial so vulnerable. The CBI could artificially maintain the rials value as long as there were enough petro-dollars. With the embargo on Iranian oil,Tehran has lost almost half its oil exports. Iran may yet find a way to tackle the crisis but for that,Ahmadinejad will have to take a call on what is at the heart of it all working with the P51 on the nuclear controversy. Given the Arab worlds volatility,Israels rhetoric and Irans Syria debacle,it may be too much to expect of the regime.