Iranian trade officials have confirmed a massive outflow of capital from the Islamic Republic. This has been blamed by many for the recent significant depreciation of the country’s currency, the rial.
The head of the Tehran Chamber of Commerce, Industry, Mines and Agriculture Masoud Kansari said in an interview with Tehran’s ILNA website on Monday that the annual outflow of capital has reached about $10 billion.
Noting that the country’s social and economic situation is becoming difficult, he said that startups and new fintechs can make up for the losses, but the current situation has forced a large number of professionals and elites to emigrate from the country. He said that
He cited Turkey as an example, stating that the economies of these two neighbors were similar when the Islamic revolution broke out in 1979, but that Turkey now outperforms Iran by at least $500 billion a year. rice field.. Turkey’s Gross Domestic Product is $815.3 billion and Iran’s GDP is $231.5 billion.
Hansali also claimed that the Islamic Republic’s inability to sell oil through normal channels has cost the country’s economy more than $100 billion. According to OPEC, he looks somehow strange, Iran lost more than $450 billion in revenue from oil sales Sanctions were to blame in the last decade.
According to a recent report by Iranian state media, at least $97 billion in capital flowed out of the country’s economy in the decade to March 2022.
Masoud Kansari, Chairman of Industry, Mining and Agriculture, Tehran Chamber of Commerce
The constant outflow of capital demonstrates a widespread and strong distrust of the Islamic Republic’s economy and, moreover, its political stability. Many of those sending money out of the country may be the very regime insiders who profit from their political ties and make large financial gains.
The crashed Iranian currency recovered 10% of its value after the crash this week. Appointed new central bank governor After falling to historic lows in December. The US dollar is hovering around 400,000 rials after last week’s high of 440,000, a 10% gain for Iran’s currency, which has fallen more than 10-fold since 2018. Despite Jan. 1 gains, the currency is still 30% lower than it was in mid-2021, when current hardline President Ebrahim Raisi was elected and appointed other hardliners to the top positions. , almost 50% lower than in mid-2021.
New central bank governor Mohammad Reza Farzin announced the bank’s “appropriate intervention” in the market when he started his first official working day on Dec. 31, but did not explain why. The rial fell to an all-time low.
At the ministerial meeting where Farzin was appointed, President Ebrahim Raisi stressed the importance of controlling the value of foreign currencies and called on the central bank governor to “manage” the situation.
While Farzin, a senior official under Mahmoud Ahmadinejad, has made vague promises of controlling a depreciating currency, the devaluation of the rial does not appear to be the result of only manageable temporary factors. The country’s economic system is corrupt and nepotistic, and only a select few have access to cheap government-provided dollars. Governments occasionally inject dollars into the free market to upend the supply and demand chain, but given the sanctions that prevent the free flow of petrodollars to the country, all remedies are likely to have temporary effects. Proven.
The rial’s current wave of declines began in early 2018 when the US decided to withdraw from the Obama-era nuclear deal with Iran known as the JCPOA and to impose “maximum pressure” sanctions. The country’s oil exports, economic lifelines, and international banking operations were subject to US third-party sanctions. That means companies and countries themselves that violate restrictions could be subject to US sanctions.
The rial, which was worth 34,000 rials to the dollar at the time, began to depreciate, forcing the government to provide cheap foreign currency to importers of essential goods to protect people from inflationary shocks. The government’s fixed interest rate of 42,000 rials to the dollar soon became the cause of abuse by those who claimed to be importing essential goods such as food and raw materials, instead importing luxury cars or simply turning around. I sold cheap dollars on the free market. making huge profits.
