Currency Crisis in Iran as Sanctions Start to Bite

by Wadsam | August 25, 2012 12:34 pm

[1]Iran is suffering from currency crisis, as the West is pushing its sanctions harder on Iran to halt the country’s nuclear program.

The adversity of this crisis is apparent in Afghanistan as well.

Afghan moneychangers say that Iranian currency, Rial, loses its value against US dollars every day that passes by.

Kabul has witnessed Rial currency depreciating against dollar drastically. However, in Herat, Afghanistan’s province bordering with Iran, there is a totally different story.

Head of moneychangers union, Haji Abdullah Dashti, says that the demand for Afghanis in exchange for Rial is rising.

“Several Iranian traders have contacted us via our sites, telling us they are willing to transfer toman [1 toman=10 rial] to our accounts in exchange for Afghanis at any rate.”

According to Mr. Dashti, these people who made such offers were investors, who could be linked to the government, or they were Iranian moneychangers.

Recently, it was reported that a number of Iranians are packing trucks with devalued Iranian currency and entering Afghanistan to trade for dollars.

How come now the demand for Afghanis in comparison to Rial or Toman is higher?

In response to the question, Mehrdad Umadi Foreign Economic Affairs Advisor to the EU said: “Rial currency is under scrutiny these days. If a moneychanger owns Rial currency in large amounts, he would be investigated about how and where he received them from. However, when it comes to Afghanis, they are never inspected about the origin of their money. Although Afghanis is not an international currency, it is unrestricted within the concerned geographic area.”

According to Mr.Umadi, Iran has approached other nations to obtain foreign currency.

“Someone from Armenia had contacted, saying that Iran has offered them Rial in exchange for Armenian Drams. This shows that Iran is trying to pool up different currencies, even though they are not international currencies. To me, however, this seems to be a short-term solution.”

This is a clear evidence of inflammation of the banking system in Iran, and it narrates a tale of the fragility of the entire state, added Mr. Umadi.

According to the moneychangers, on a daily basis one million dollars are exchanged with Rial in Kabul.

 Though such volume of exchange is not sufficient to save Iran from increasing pressure from international sanction, U.S. officials are worried about it.

Arian bank, whose owners are two Iranians, is located in Afghanistan. According to a report, Iranian government is trying to carry out financial transactions in Afghanistan through the Arian bank.

Mr. Umadi believes that availability of currency trading with Iran in Afghanistan puts a serious question mark about whether Afghan officials are aware of this or they are trying to turn a blind eye.

Noorullah Delawari, Head of Da Afghanistan Bank, denied the claim and said that in accordance with the agreement with the Embassy of the United States of America in Kabul, all banks are informed to comply with international sanctions; otherwise their license would be suspended.

“Arian bank has been informed as well. We have not made any restrictions on the bank as of now, but we are in contact with the concerned parties to find a solution.”

Mr. Delawari said that no action has been taken against the Bank so far due to some political issues involved, given the presence of 3 million Afghan refugees in Iran.

 

Endnotes:
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