Cartoon by Fahimeh Alavi

Iran's currency nosedives as government grapples with protest movement

By Kourosh Ziabari

Middle East Eye: Iran's currency has weakened to record lows against the US dollar, as general strikes and popular protests triggered by the death of 22-year-old Mahsa Amini in police custody continue to paralyse the country.

The rial dropped to 384,000 against the US dollar earlier this week, an almost 50-percent decline in 15 months. It was trading at 280,000 in August 2021, when hardline President Ebrahim Raisi was elected.

Businesspeople, students and holidaymakers have been the hardest hit, with government efforts to control currency markets backfiring.

High inflation has significantly eroded ordinary Iranian's disposable income, with outbound travel another fallout from the economic crisis.

In October, the head of the Association of Air Transport and tourist agencies of Iran Hormatollah Rafie revealed that trips overseas had fallen by 50-60 percent, which he primarily ascribed to the economic and social aftershocks of the protests.

In November, the three Iranian cities of Isfahan, Kish and Mashhad that were slated to operate exclusive flights to Doha for the Qatar World Cup had to cancel them due to a lack of demand.

The Islamic Republic has been gripped by one of the largest and longest-lasting demonstrations in its history, following the death of Mahsa Amini, a young Kurdish woman, in police custody.

More than 480 people, including 68 children, have been killed in government crackdowns, according to Amnesty International.

A bad situation has been made worse with the government instituting a crippling internet shutdown that has already knocked out the last two remaining social media platforms that were officially accessible, namely Instagram and WhatsApp.

The restrictions were initially rolled out to contain the protests, but the authorities plan to make them permanent. Access hiccups continue to be in place, and thousands of websites remain unavailable without Virtual Private Networks (VPNs).

"Many businesses do not know what the next week will look like, and they cannot plan for any timeline either short or long," said Ali Dadpay, an associate professor of finance at the University of Dallas.

"Definitely, there are businesses that have closed and halted their activities to show solidarity, particularly small and medium-sized enterprises. However, I must add that the government attack on worldwide internet and extreme blackouts have pushed many online businesses to shut down as well," he told Middle East Eye.

"As the risk and uncertainty increase, many Iranians will seek other means of storing value and saving to face the days and weeks ahead. A sudden increase in demand for foreign hard currency is likely, and the government does not have resources to quell it," he added.

Tehran’s chamber of commerce has estimated that the damages incurred due to connectivity outages amount to 800 trillion rials ($2.28 billion) and that up to 700,000 online stores working through Instagram have been shut down.

"Clearly, the protests and the crackdown have further weakened Iran’s economic performance. The biggest factor has been the throttling of the internet, which has adversely affected businesses that during the Covid period became even more dependent on social media apps," said Barbara Slavin, the director of the Future of Iran Initiative at the Atlantic Council.

"Indeed, Raisi, who promised economic improvements when he was inaugurated, has been a failure on all fronts. To have reactivated the so-called morality police on top of all these failures just underlines his lack of judgment and expertise," Slavin said. “He makes [former President Mahmoud] Ahmadinejad look competent in comparison." >>>