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Iran’s leaders laid groundwork for currency crisis

Iranian President Mahmoud Ahmadinejad speaks during a news conference at the United Nations in New York, Sept. 26, 2012.


Anyone who doubts that international sanctions are taking a heavy toll on Iran need only look at the stunning collapse of the country's currency, the rial, in recent days or listen to the latest ravings of its president, Mahmoud Ahmadinejad. But as much as he would love to lay all the blame at Washington's feet for Iran's worsening plight, he ought to look in the mirror for another key culprit.

The rial has been in a steep slide for months, but went into free fall this week, plunging about 40 per cent against the U.S. dollar. Mr. Ahmadinejad, fresh from his annual controversial turn in the world spotlight at the United Nations, was quick to cite the usual suspects – the United States and other Western countries that have imposed an embargo on Iranian oil, blocked financial transfers and curtailed shipping. This time, he tossed domestic political opponents and unscrupulous black-market currency speculators into the mix.

"Two elements have joined hands to pressure the people of Iran," Mr. Ahmadinejad said in widely broadcast comments Tuesday. "One is external and one is internal."

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Calling Iran a victim of a "psychological war" perpetrated by the U.S., the ever voluble president acknowledged for the first time that sanctions were hurting, vowed to crack down on speculators, and appealed for public calm in the face of the diving currency and soaring prices for food and other basic goods.

But he took no responsibility for his government's dreadful mismanagement of the economy, a hallmark of the country's theocratic rule long before policy makers chose to develop nuclear capability in defiance of world opposition.

Iran's supreme leader, Ayatollah Ali Khamenei, said the country was under pressure because "it did not yield to the demands of tyrannies," the Guardian reported.

The public reaction was not quite the rally-round-the beleaguered-leader for which Mr. Ahmadinejad must have been hoping with his America-bashing. More than 90 per cent of those surveyed in one poll found his response less than credible. Tehran's Grand Bazaar closed for business, as shopkeepers joined hundreds of other protesters shouting anti-government slogans and calling for Mr. Ahmadinejad's ouster. Riot police fired tear gas and wielded batons.

None of this was covered on Iranian TV and some foreign broadcasts were jammed. But as previous bloody government clashes with its own citizens have shown, it's tough to maintain any kind of news blackout in this age of social networking and instant messaging.

Iranians face a hard winter, with rising prices, Greek-like unemployment levels and Western restrictions on oil exports, the main source of income for the economy. And the ruling mullahs may have to offer up Mr. Ahmadinejad as a sacrifice to maintain a semblance of order.

"I think the Iranian government deserves responsibility for what is going on inside Iran and that is who should be held accountable," U.S. Secretary of State Hillary Clinton said Wednesday. "They have made their own government decisions having nothing to do with the sanctions."

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Far from seeing the U.S. as the perpetrator of their misery, many Iranians seem to be embracing the same view.

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About the Author
Senior Economics Writer and Global Markets Columnist

Brian Milner is a senior economics writer and global markets columnist. In a long career at The Globe and Mail, he has covered diverse business beats, including international trade, the automotive industry, media, debt markets, banking and the business side of sports. More


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