Iranian currency hits historic low as US imposes major sanctions against Iran
Iran’s rial is at a historic low as major sanctions against the regime for its nuclear program are looming.
In May 2018, the United States withdrew from the Joint Comprehensive Plan of Action, commonly known as the Iran nuclear deal. It was reached between the Iran and six world powers: China, Russia, France, the United Kingdom, the United States and Germany. The terms of the agreement were flimsy and one-sided; it offered Iran’s theocratic establishment significant leverage, financial relief and enhanced legitimacy on the global stage. In addition, Iran repeatedly violated the terms of the deal and pursued more aggressive policies in the region.
On several occasions, the Trump administration offered Tehran the chance to renegotiate the terms. The Iranian regime declined and boasted that the US does not possess the power to conduct any action against the nuclear deal. The US withdrawal automatically triggers 90-day and 180-day windows to reimpose primary and secondary sanctions.
These are related to the sanctions relief that the Obama administration provided to Tehran. The 90-day and 180-day windows are designed to give those dealing with the Iran the time to wind down their transactions. Effective August 6, the US will reimpose the first set of sanctions.
Although on the surface, Iran’s leaders are brushing aside the reimposition of sanctions as trivial, Tehran is significantly concerned. First of all, sanctions will be imposed on Iran’s automotive industry. This includes Iran Khodro and Saipa, which account for over 90 percent of its auto production. Many of Iran’s automotive corporations are owned by the regime’s extensions such as the Islamic Revolutionary Guard Corps (IRGC).
Although on the surface, Iran’s leaders are brushing aside the reimposition of sanctions as trivial, Tehran is significantly concerned.
Dr. Majid Rafizadeh
Second, trade linked to Iran’s gold or precious metals industry will be considered illicit, and it makes billions of dollars every year from trading gold and precious metals. In addition, Tehran exchanges gold and precious metals for other commodities. One prominent example includes Turkey trading gold for gas from Iran.
Third, sanctions will be imposed on those who buy, sell or conduct major transactions with Iran’s currency. Individuals or entities who also have bank accounts or funds outside Iran with the Iranian currency will be breaking the federal law. Fourth, the US will impose sanctions on any buying or selling of US dollars by the Iranian government. When both the rial and the US dollar are sanctioned, it will definitely discourage many companies from continuing their activities with Tehran.
Fifth, any direct or indirect purchase, trade, transfer or selling of major construction materials such as aluminum and steel will be illegal as well. More important, it will be against federal law to be involved or facilitate any action that is associated with the Iranian regime’s sovereign debt.
This sanction is significant due to the latest development, where foreign investors have invested billions of dollars in Iran’s debt market as Tehran’s economy is cash-strapped.
Although the Iranian regime may be framing the sanctions as only affecting the US, it is extremely critical to point out that the sanctions are applied to non-US individuals and entities as well.
As the treasury department stipulates: “Non-U.S., non-Iranian persons are advised to use these time periods to wind down their activities with or involving Iran that will become sanctionable at the end of the applicable wind-down period.” Although the US may not attempt to bring foreign entities to court for violating the sanctions, non-US persons and companies run the risk of losing their business with the US as well as potentially being sanctioned.
Despite the regime’s efforts to dismiss the looming sanctions, Iranian leaders are indeed highly concerned and apprehensive.
- Dr. Majid Rafizadeh is a Harvard-educated Iranian-American political scientist Twitter: @Dr_Rafizadeh