Iran's Currency Falls To Four-Month Low, Amid Bread Crisis
Iran’s currency, rial hit a four-month low on Saturday against the US dollar, as soaring bread prices created political and economic uncertainty in the country.
Iran’s currency, rial hit a four-month low on Saturday against the US dollar, as soaring bread prices created political and economic uncertainty in the country.
The US dollar rose to 285,000 rials in Tehran, the highest point since early January, when the currency was marginally recovering from previous lows on optimism over nuclear negotiations with the West. After talks in Vienna came to a standstill in mid-March, the currency began gradually losing its value again.
The rial has fallen almost ninefold since late 2017 when signs emerged that former US president Donald Trump intended to withdraw from the 2015 nuclear agreement, JCPOA, and impose economic sanctions on Iran.
Trump eventually pulled the United States out of the Obama-era agreement in May 2018 and imposed oil export and other sanctions that began to squeeze Iran’s oil-dependent economy. High double-digit inflation and a falling currency followed, leading to at least two years of a deep recession.
The falling currency makes everything else more expensive for people who earn depreciated rials. Key foodstuff, such as cooking oil, and 15 million tons of wheat are imported annually. In addition, animal feed is also imported and a falling currency makes meat and poultry more expensive. Most Iranians have stopped buying meat according to industry people in Iran.
This week the government finally acted on an earlier decision to stop a subsidy in the form of cheap dollars for imports of essential commodities, such as flour and animal feed. Immediately, cooking oil disappeared from supermarket shelves and flour prices increased fivefold, leading to a bread crisis.
The government’s handing of the price jump has been haphazard, claiming to be ready to provide cash assistance to citizens for buying bread but offering contradictory information on how the process would work. Pundits and citizens have reacted by saying that apparently the government failed to prepare for the eventuality.
There were reports on Friday of bread protests breaking out in the oil-rich Khuzestan province
President Ebrahim Raisi and his oil minister Javad Owji have been insisting that Iran’s illicit oil exports and revenues have risen in the past year, with evidence that Iran has been exporting anywhere between 750,000 to one million barrels per day. However, the economic impact of higher oil revenues is nowhere to be seen.
The key to lifting US sanctions and getting a reprieve form economic pressure is reaching an agreement with the United States over the nuclear issue, but talks in Vienna have stopped since mid-March.
As bread prices shot up almost fivefold in two days, economy minister Ehsan Khandouzi promised Saturday that the government will start a system of cash assistance to buy bread, but his statement was vague as to who what income groups would be eligible to receive the cash subsidy.
Meanwile, Hamshahri newspaper reported that the government is also planning to hike the price of cooking oil and gasoline, to begin reducing decades of subsidies paid by oil export income.
A gasoline price hike in November 2019 led to nationwide protests in which security forces shot dead at least 1,500 people and arrested 8,000.
Prices for all these commodities are very low in Iran compared to other countries, but so are wages. An Iranian worker earns an average of $150 per month and when one flatbread costs one dollar, the family can only afford to buy 3-4 breads a day, and nothing else.
Some clerics and para-military organizations have warned that the sudden rise in the price of items such as bread could lead to protests and riots.
Meanwhile, journalists in Tehran Friday reported on Twitter that the price of bread has risen nearly five-fold in Tehran despite statements by economic officials that higher flour prices would not affect traditional bread bought at neighborhood bakeries and the rise will be limited to baguettes and other western-style rolls.
The Friday Prayer Imam of Tehran, Mohammad Hassan Abutorabi Fard, said in his sermon that the government should focus its efforts on improving the nation's livelihood. He called on the government to explain the reasons of recent price increases and to make sure people understand that the government strives to compensate the higher cost of living by introducing economic reform.
On Tuesday, in Eid al-Fitr sermons, other clerics including firebrand Ahmad Khatami promised that the economic situation will improve but did not say how. Kazem Seddiqi, another prayer leader in Tehran had also expressed concern over the consequences of rising prices.
On Friday, imams in cities including Dayyer, Bojnourd, Zahedan, Shar-e Kord, Bushehr, Kermanshah, as well as many other cities warned the government that people are suffering from rising prices of bread and other everyday necessities.
In Tehran, the commander of the students Basij militia of the IRGC warned President Ebrahim Raisi on Thursday that the situation could lead to a major riot in the country. Meanwhile, prominent reformist cleric Mohammad Taqi Fazel Maybodi also warned Raisi that "if the rise in prices is not controlled Iran should wait for riots more dangerous than a revolution."
Social media users in Iran on Friday shifted from complaints about the scarcity and high price of pasta to more serious complaints and warnings about the possible impact of the rising prices of all sorts of bread in Tehran.
Somaye Naghi, an economic journalist in Tehran wrote that they sent someone from the newspaper’s office to buy traditional stone-baked bread called Sangak, but they were told that the price has increased from 60,000 rials to 250,000 rials ($1) per loaf. She pointed out that's this comes while Raisi's Minister of Agriculture had promised the day before that the price of traditional bread will not rise and it will impact "luxury western-style" rolls.
In the meantime, many Iranian journalists have interpreted Vice President for Executive Affairs Solar Mortazavi's strong defense of doing away with cheap government dollars for importing essential commodities, including flour, as a sign that the living conditions for workers, teachers, pensioners and low wage earners will dramatically deteriorate.
The government has resorted to rationing bread in some cities and the general perception is that the practice is going to be widely introduced all over the country. Journalist Ameneh Mousavi wrote on Twitter that rationing has started in Zanjan.
None of the clerics who spoke about the rising price of bread on Friday talked about the impact of sanctions apparently because they find it difficult to explain why the country is under sanctions and why Iranian officials cannot negotiate with the United States to have the sanctions lifted. They fear this will offend Supreme Leader Ali Khamenei who is responsible for major decisions, including the talks with the United States.