Iran and the US have one month to find their way to the nuclear deal negotiating table, France’s foreign minister warned on October 4.
At last week’s UN General Assembly gathering of world leaders in New York, French President Emmanuel Macron attempted, but failed, to broker talks between US President Donald Trump and Iranian President Hassan Rouhani.
After giving up on a period of “strategic patience” during which Tehran waited in vain for Europe to come to its assistance in helping to protect the Iranian economy from the sanctions-led “economic war” the US has pursued against Iran since Trump unilaterally walked out of the JCPOA in May 2018, Iran has been gradually stepping up its non-compliance with the nuclear deal. The policy is designed to pressure Europe to help secure good reasons for Iran to stay in the nuclear deal, under which Iran commits not to pursue the development of a nuclear weapon in return for a shield against heavy international sanctions.
Iran has said its next non-compliance moves will occur at the start of November. Diplomats are anxious that the moves could force European powers to respond, unlike after previous breaches.
So tough are the US sanctions that Tehran describes them as an “economic war” and “economic terrorism”. There’s little love lost between Iran and regional arch rival Saudi Arabia and the fact that the Saudis are perhaps only behind the Israelis in their enthusiasm for the US plan to throttle the Iranian economy with sanctions—and thereby force Tehran to accept a diminished role in Middle East affairs and stop arming proxies in regional conflict zones—means the Iranians struggle to contain their anger at Riyadh. But October 2 also saw Iran’s oil minister, Bijan Zanganeh, attempting to ease tensions with Saudi Arabia, which threatened to boil over after the September 14 cruise missile and drone attacks on Saudi oil facilities. Zanganeh called his Saudi counterpart, Prince Abdulaziz bin Salman, “a friend” and said Tehran was committed to stability in the region.
The impact of US sanctions on Iran’s economy is projected to peak this year, with growth resuming in 2020, according to the June issue of the World Bank’s twice-yearly Global Economic Prospects report. Iran was thrown back into recession last year by the Trump administration’s decision to reapply sanctions, suffering an economic contraction of 1.9%, following 2016 growth of 13.4% and 2017 growth of 3.8%. The World Bank’s latest forecast is for Iranian GDP to contract 4.5% in 2019, but to grow 0.9% in 2020.
Some international economists put Iran’s inflation rate a good deal higher than what is portrayed by the country’s official statisticians. Iran’s annual inflation rate rose sharply from about 10% in mid-2018 to about 52% in April 2019.
The Central Bank of Iran (CBI) on September 21 updated the official exchange rates. The pound edged up to IRR51,875 while the euro declined to IRR46,408 on the official CBI exchange rate board. The US dollar, now essentially on official lockdown in Iran, remained fixed at IRR42,000. Iran continues to remove the greenback from daily transactions, partly to get around the US sanctions.
Iran should work to eliminate the gap that currently exists between the Iranian rial (IRR) market exchange rates and official exchange rate, according to the IMF, which will help tame and control inflation and reduce pressure on the exchange rate. The IRR is around two-thirds weaker against the dollar on the unofficial market compared to where it stood before it became clear early last year that the US was switching its Iran policy back to a sanctions-led approach.
Meanwhile, Iran’s redenomination bill was sent to the Iranian parliament by the cabinet on August 21 for debate among MPs, according to ICANA.
Iran is set to remove four zeros from its currency, the Iranian rial (IRR) in the next two years, provided all relevant bodies, including the Guardian Council, government committees and parliament give their blessing. As part of the new currency, to be officially called the “toman”, a new sub-currency named the “parseh”, equal to 100 toman, will be legislatively introduced.
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