How currency collapse compounds Iranian regime’s crisis of legitimacy

Special How currency collapse compounds Iranian regime’s crisis of legitimacy
Tehran’s growing international isolation has had grave consequences for the value of the Iranian rial. Analysts say that economic woes are inflaming anti-government protests across the country. (AFP)
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Updated 29 January 2023
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How currency collapse compounds Iranian regime’s crisis of legitimacy

How currency collapse compounds Iranian regime’s crisis of legitimacy
  • Rial, the Iranian currency, has lost 29 percent of its value since protests and a harsh regime crackdown began
  • Double blow of a depreciating currency and high inflation has sparked a cost-of-living crisis and discontent

IRBIL, Iraqi Kurdistan: Iran’s currency has been hitting record lows against the US dollar, which observers say is a reflection of the regime’s increasing isolation on the international stage and the seriousness of the new EU sanctions against its paramilitary enforcer, the Islamic Revolutionary Guard Corps.

Coming as it does on top of ongoing mass protests sparked by the death of 22-year-old JIna Mahsa Amini in police custody last September, the currency crash has defied measures such as the replacement of the central bank chief last month and fueled speculation that it would destabilize, or even bring down, the regime in 2023.

The rial has lost 29 percent of its value since anti-government protests and a harsh regime crackdown commenced late last year. On January 22, it was trading at around IRR450,000 against the US dollar, representing a new all-time low.

Dr. James Devine, associate professor in the Department of Politics and International Relations at Mount Allison University, believes it is Iran’s growing political isolation — due to its brutal crackdown on protesters, its military support for Russia’s war with Ukraine, and doubts about a revival of the 2015 nuclear deal — that has dragged down the value of the rial.

“All of this is compounded by mismanagement and corruption, which have dogged Iranian economic planning since the regime took power,” Devine told Arab News.

Although Iran’s economic situation seems particularly bleak at present, Emily Hawthorne, a senior Middle East and North Africa analyst at the risk intelligence company RANE, describes the rial’s depreciation as serious, “but certainly not unprecedented.”

“High inflation, international isolation, low investor confidence, and low consumer confidence are all driving the decline,” she told Arab News.

The double blow of a depreciating rial and high inflation has triggered a cost-of-living crisis, which in turn has spread discontent and stoked anger at the regime.




More protests are expected due to rising prices and a scarcity of goods for Iranian consumers. (AFP)

Arash Azizi, author of “The Shadow Commander: Soleimani, the US, and Iran’s Global Ambitions” and a doctoral candidate in history at New York University, says the collapse of the currency “has long had an important psychological weight in Iran,” with potential political and economic consequences.

“Those who yearn for the pre-1979 Iran, for instance, usually like to talk about how a US dollar was worth IRR70 — as opposed to more than 450,000 today,” Azizi told Arab News.

“It also continues to have a real downward effect on wages, which have not nearly kept up with inflation and with the fall of the currency.

“Much in Iran is imported and paying for these imports has become increasingly difficult for individuals and companies. It has also made foreign travel very hard for most Iranians, even for nearby places such as Dubai and Turkiye, although the latter has also seen its own currency collapse.”

According to Hawthorne, the “poor and fragile” state of the global economic environment makes this period worse than previous ones and creates “additional external pressure on the Iranian economy.”

“Also, some Iranians feel growing anti-government anger, as reflected in the Mahsa Amini protests and some recent organized labor strikes and demonstrations, which contributes to the sense of economic insecurity,” she said.

However, Hawthorne is doubtful that new EU sanctions against the IRGC would “have a significant impact on the rial, beyond the downward pressure already created by increasing sanctions from Europe on other Iranian individuals and entities.”

For his part, Devine is convinced that with increasingly aggressive sanctions “there is a cumulative effect that is becoming serious for the regime.”

However, while the currency collapse has piled further pressure on Tehran, he is not sure it is the regime’s “most vulnerable spot.”

“I have not seen any clear sign that the currency collapse or the sanctions represent the final straw for the IRGC,” Devine said. “The IRGC controls between 25 percent and 40 percent of the Iranian economy, so they will still have access to goods and services within Iran.”

FASTFACTS

• At the end of December, the governor of Iran’s central bank resigned after the rial lost around 30% of its value in 2 months, falling from IRR330,000 to IRR430,000 per US dollar.

• On Jan. 22, the national currency traded at around IRR450,000 per dollar, a new all-time low, after inflation reached 45% at the end of December 2022.

Given this privileged position, the IRGC is best placed to take advantage of black markets and smuggling, according to Devine. And while it is undoubtedly feeling the pressure, neither its leaders nor rank and file are likely to consider changing course or defecting from the regime.

Devine added: “If the regime goes, the IRGC goes with it. It has no raison d’etre without the Islamic Republic. Moreover, if there was a change in government, the IRGC leadership would likely face prosecution at home and/or abroad.

“At the lower levels of the rank and file, there may not be the same ideological commitment or privilege, but they are still better off than the average Iranian and the post-regime future is uncertain for them as well.

“In short, it will take a lot to decouple the IRGC and security services from the regime.”

While the growing global consensus against Iran does not include China and Russia, the ability of the two non-Western powers to help reverse the rial’s decline is open to question.

“China and Russia share with Iran a dislike for unilateral sanctions from any one country or institution and are likely to continue transacting with Iran, especially Russia, which is also isolated from the rest of the global community due to sanctions linked to its invasion of Ukraine,” Hawthorne told Arab News.

“However, this won’t provide enough of a lifeline for Iran to help the rial stay afloat. Rather, it could provide some trade and some exchange of goods and equipment but won’t save the economy.”

Devine also believes that although Iran is selling a “healthy” number of barrels per day of oil, mainly to China, this is unlikely to be enough to “reinvigorate the rial.”

Furthermore, Washington has begun clamping down on Iran’s smuggling of dollars from neighboring Iraq, which is also negatively affecting the rial’s value.

“While Russia and China may not be able to bail out the rial, they can make sure that going forward, Iran will not be as economically isolated as it was in the past,” Devine said.

Hawthorne predicts there will be more “economically motivated protests” in Iran throughout 2023, but doubts the Iranian government will collapse this year or in the near future, “even though economic strain will contribute to its unpopularity.”

Azizi also says “the regime has long survived harsh economic crises and this isn’t an exception either.” He added: “It adds to its problems, but it doesn’t seem to lead to state collapse just yet.”

Devine expects more protests due to rising prices and a scarcity of goods for Iranian consumers, which will further undermine the regime’s legitimacy and make it more reliant on coercive power to maintain its control.

But whether or not this is a tipping point for the regime is a much more complicated question.

“I think the regime has the institutional and coercive capacity to survive the current level of unrest and probably quite a bit more,” Devine said. “However, they could lose control if they make political mistakes.




The rial has lost 29 percent of its value. (AFP)

“For instance, if they overreact to the protests and begin killing large numbers of Iranians in the street, particularly young women. The execution of dissidents also has the potential to cause a backlash.”

Devine believes the “complicating factor” at play is the “coherence of the regime.”

“Reformists and moderates have criticized (President Ebrahim) Raisi for being too hard on the protesters and by the hardliners for being too soft,” he told Arab News. “This kind of environment could lead the regime to mis-calibrate its response.

“At a certain point, the more moderate members of the regime may go beyond criticism and disown the regime. If enough of them do that, it could snowball into a crisis, particularly if the regular military joins.”

In the meantime, Devine says, the protesters require better organization. While they can create “small disturbances,” he added, they do not seem to have the kind of organization that could really challenge the regime’s “control of the country and economy.

“Perhaps the currency crisis will provide the impetus for this to happen, but I have not seen it yet.”


Israel says two border crossings to examine Gaza aid

Israel says two border crossings to examine Gaza aid
Updated 39 sec ago
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Israel says two border crossings to examine Gaza aid

Israel says two border crossings to examine Gaza aid
  • The UN General Assembly will meet Tuesday to discuss the humanitarian crisis, after the United States last week vetoed a Security Council resolution for a cease-fire

JERUSALEM: Israel said Monday that more humanitarian aid will enter Gaza as it announced two additional checkpoints for examining relief supplies before dispatching them to the Palestinian territory through Rafah gateway.
International aid organizations have struggled to get supplies to desperate Gazans under Israeli bombardment, with only the Rafah crossing in Egypt open.
No new direct crossings will be opened, Israel stressed on Monday, but the Nitzana and Kerem Shalom crossings will be used to carry out checks before sending the trucks through Rafah.
“This is being done to improve the volume of security screenings of aid entering Gaza via the Rafah Crossing and will enable us to double the amount of humanitarian aid entering Gaza,” the army said on X.
UN humanitarian agency OCHA said Sunday that around 100 trucks per day were bringing humanitarian supplies from Egypt into Gaza since a week-long truce ended on December 1, compared with a daily average of 500 before the war.
The additional checkpoints will screen “trucks containing water, food, medical supplies and shelter equipment,” according to a joint statement from the Israeli army and COGAT, the defense ministry body responsible for Palestinian civilian affairs.
It emphasised that “no supplies will be entering the Gaza Strip from Israel,” only via Egypt.
The UN General Assembly will meet Tuesday to discuss the humanitarian crisis, after the United States last week vetoed a Security Council resolution for a cease-fire.
Heavy urban battles raged Monday in the bloodiest-ever war in Gaza, with more than 18,200 Palestinians and 104 Israeli soldiers reported dead.
Israel’s assault on Gaza was triggered after Hamas, which rules the territory, launched a bloody attack on southern Israel on October 7 that left 1,200 people dead, mostly civilians, according to Israeli officials.


Anti-Daesh coalition forces targeted in Iraq and Syria: US official

Anti-Daesh coalition forces targeted in Iraq and Syria: US official
Updated 34 min 29 sec ago
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Anti-Daesh coalition forces targeted in Iraq and Syria: US official

Anti-Daesh coalition forces targeted in Iraq and Syria: US official
  • Washington has recorded at least 92 attacks in Iraq and Syria since October 17, 10 days after the war between Israel and Hamas broke out

BAGHDAD: A drone and rockets targeted two military bases in Iraq and Syria on Monday housing forces of the international coalition against the Daesh group, a US military official said.
Both attacks were claimed by the Islamic Resistance in Iraq, a loose formation of armed groups affiliated with the Hashed Al-Shaabi coalition of former paramilitaries that are now integrated into Iraq’s regular armed forces.
These pro-Iran groups violently oppose US backing for Israel in its war against Hamas in the Gaza Strip, which erupted on October 7 when the Islamist group launched a deadly attack into Israel.
The United States leads the international coalition battling jihadists in Iraq and neighboring Syria, and its forces have come under repeated attack in recent weeks.
On Monday in western Iraq, a drone attack targeted the Ain Al-Asad air base, without causing casualties or damage, the US military official said, speaking on condition of anonymity.
And in northeast Syria, “several rockets” were fired at a base in the Al-Shaddadi region, the official added.
Washington has recorded at least 92 attacks in Iraq and Syria since October 17, 10 days after the war between Israel and Hamas broke out.
Early on Friday, salvos of rockets were fired at the American embassy in Baghdad’s heavily fortified Green Zone for the first time since the Gaza war began.
At least five attacks targeted US troops and the international coalition in Syria and Iraq that day.
On Saturday the Iran-backed Hezbollah Brigades issued a statement saying the attacks represented “new rules of engagement,” and that they would continue until the last American soldier left Iraq.
There are roughly 2,500 US troops in Iraq and some 900 in Syria as part of international efforts to prevent a resurgence of IS.
US Defense Secretary Lloyd Austin has accused the Hezbollah Brigades and another pro-Iran group, Harakat Al-Nujaba, of being behind most of the attacks on coalition personnel.
A US statement on Friday following a call with Iraq’s Prime Minister Mohammed Shia Al-Sudani said Austin stressed “that the United States reserves the right to act in self-defense against those launching any attack against US personnel.”
The Pentagon has launched several strikes against fighters belonging to both groups in Iraq, as well as in Syria against sites linked to Iran.
On Friday, Sudani in a statement said targeting embassies “is unacceptable,” and called on Iraq’s security forces to track down those who fired rockets at the American embassy so they could be brought to justice.


Israeli defense chief resists pressure to halt Gaza offensive, says campaign will ‘take time’

Israeli defense chief resists pressure to halt Gaza offensive, says campaign will ‘take time’
Updated 46 min 47 sec ago
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Israeli defense chief resists pressure to halt Gaza offensive, says campaign will ‘take time’

Israeli defense chief resists pressure to halt Gaza offensive, says campaign will ‘take time’
  • Gallant said the next phase would be lower-intensity fighting against “pockets of resistance” and would require Israeli troops to maintain their freedom of operation. “That’s a sign the next phase has begun,” he said

TEL AVIV, Israel: Israel’s defense minister on Monday pushed back against international calls to wrap up the country’s military offensive in the Gaza Strip, saying the current phase of the operation against the Hamas militant group will “take time.”
Yoav Gallant, a member of Israel’s three-man war cabinet, remained unswayed by a growing chorus of criticism over the widespread damage and heavy civilian death toll caused by the two-month military campaign. The UN secretary-general and leading Arab states have called for an immediate cease-fire. The United States has urged Israel to reduce civilian casualties, though it has provided unwavering diplomatic and military support.
Israel launched the campaign after Hamas militants stormed across its southern border on Oct. 7, killing some 1,200 people and kidnapping about 240 others.
Two months of airstrikes, coupled with a fierce ground invasion, have resulted in the deaths of over 17,000 Palestinians, according to health officials in the Hamas-run territory. They do not give a breakdown between civilians and combatants but say that roughly two-thirds of the dead have been women and minors. Nearly 85 percent of the territory’s 2.3 million people have been driven from their homes.
In an interview with The Associated Press, Gallant refused to commit to any firm deadlines, but he signaled that the current phase, characterized by heavy ground fighting backed up by air power, could stretch on for weeks and that further military activity could continue for months.
“We are going to defend ourselves. I am fighting for Israel’s future,” he said.
Gallant said the next phase would be lower-intensity fighting against “pockets of resistance” and would require Israeli troops to maintain their freedom of operation. “That’s a sign the next phase has begun,” he said.
Gallant spoke as Israeli forces battled militants in and around the southern city of Khan Younis, where the military opened a new line of attack last week. Battles were also still underway in parts of Gaza City and the urban Jabaliya refugee camp in northern Gaza, where large areas have been reduced to rubble and many thousands of civilians are still trapped by the fighting.
Israel has pledged to keep fighting until it removes Hamas from power, dismantles its military capabilities and gets back all of the hostages. It says Hamas still has 117 hostages and the remains of 20 people who died in captivity or during the initial attack. More than 100 captives were freed last month during a weeklong truce.
Gallant keeps a framed picture on the desk of his spacious office with pictures of all the children taken hostage. All but two are marked with small hearts, signaling their release from captivity.
HEAVY FIGHTING
In central Gaza, an Israeli airstrike overnight flattened a residential building where some 80 people were staying in the Maghazi refugee camp, residents said.
Ahmed Al-Qarah, a neighbor who was digging through the rubble for survivors, said he knew of only six people who made it out. “The rest are under the building,” he said. At a nearby hospital, family members sobbed over the bodies of several of the dead from the strike.
In Khan Younis, Radwa Abu Frayeh saw heavy Israeli strikes overnight around the European Hospital, where the UN humanitarian office says tens of thousands of people have sought shelter. She said one strike hit a home close to hers late Sunday.
“The building shook,” she said. “We thought it was the end and we would die.”
Gallant blamed Hamas for the heavy civilian death toll, saying that the militant group maintains a network of tunnels underneath schools, streets and hospitals.
He claimed that Israel has inflicted heavy damage on Hamas, killing half of the group’s battalion commanders and destroying many tunnels, command centers and weapons facilities.
Israeli officials have said some 7,000 Hamas militants — roughly one-quarter of the group’s fighting force — have been killed throughout the war and that 500 militants have been detained in Gaza the past month. The claims could not be independently verified. Israel says 104 of its soldiers have been killed in the Gaza ground offensive.
The result, he said, is that in the northern Gaza Strip, Hamas has been reduced to “islands of resistance” acting on the whims of local commanders.
In southern Gaza, he said the situation is different. “They are still organized militarily,” he said.
Gallant also said Israel has recovered “hundreds of terabytes” of information about Hamas from computers its troops have seized.
Despite the reported battlefield setbacks, Hamas on Monday fired a barrage of rockets that set off sirens in Tel Aviv, where Gallant’s office and Israeli military headquarters are located.
One person was lightly wounded, according to the Magen David Adom rescue service. Israel’s Channel 12 television broadcast footage of a cratered road and damage to cars and buildings in a suburb.
HARROWING JOURNEY

The UN humanitarian office, known as OCHA, described a harrowing journey through the battle zone in northern Gaza by a UN and Red Crescent convoy over the weekend that made the first delivery of medical supplies to the north in more than a week. It said an ambulance and UN truck were hit by gunfire on the way to Al-Ahly Hospital to drop off the supplies.
The convoy then evacuated 19 patients but was delayed for inspections by Israeli forces on the way south. OCHA said one patient died, and a paramedic was detained for hours, interrogated and reportedly beaten.
The fighting in Jabaliya has trapped hundreds of staff, patients and displaced people inside hospitals, most of which are unable to function.
Two staff members were killed over the weekend by clashes outside Al-Awda Hospital, OCHA said. Shelling and live ammunition hit Al-Yemen Al-Saeed Hospital, killing an unknown number of displaced people sheltering inside, it said. It did not say which side was behind the fire.
HARSH CONDITIONS IN THE SOUTH
With Israel allowing little aid into Gaza and the UN largely unable to distribute it amid the fighting, Palestinians face severe shortages of food, water and other basic goods.
Israel said it will start conducting inspections of aid trucks Tuesday at its Kerem Shalom crossing, a step meant to increase the amount of relief entering Gaza. Currently, Israel’s Nitzana crossing is the only inspection point in operation. All trucks then enter from Egypt through the Rafah crossing. Aid workers, however, say they are largely unable to distribute aid beyond the Rafah area because of the fighting elsewhere.
Israel has urged people to flee to what it says are safe areas in the south. The fighting in and around Khan Younis has pushed tens of thousands toward the town of Rafah and other areas along the border with Egypt.
Still, airstrikes have continued even in areas to which Palestinians are told to flee.
A strike in Rafah early Monday heavily damaged a residential building, killing at least nine people, all but one of them women, according to Associated Press reporters who saw the bodies at the hospital.
The aid group Doctors Without Borders said people in the south are also falling ill as they pack into crowded shelters or sleep in tents in open areas.
Nicholas Papachrysostomou, the group’s emergency coordinator in Gaza, said “every other patient” at a clinic in Rafah has a respiratory infection after prolonged exposure to cold and rain. In shelters where hundreds share a single toilet, diarrhea is widespread, particularly among children, he said.

 


Antique stoves in Gaza the only way to cook during war

Antique stoves in Gaza the only way to cook during war
Updated 11 December 2023
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Antique stoves in Gaza the only way to cook during war

Antique stoves in Gaza the only way to cook during war
  • Hundreds of thousands of civilians have fled northern Gaza due to relentless bombardment and a ground invasion by Israel, leaving their belongings behind

RAFAH: In a workshop in the war-torn and besieged Gaza Strip, Ibrahim Shouman is bringing old brass stoves back to life, giving hope to displaced people deprived of gas for cooking.
With a squeeze of pliers, a new wick, and a refill of homemade fuel, a flash of fire miraculously begins to crackle.
“People have gone back to the old times and are bringing their brass camping stoves for repair because there is no gas or fuel available,” Shouman said in Rafah in the south of Gaza, near the border with Egypt.
Hundreds of thousands of civilians have fled northern Gaza due to relentless bombardment and a ground invasion by Israel, leaving their belongings behind.
The civilians hoped to be safer in the south, but the Israeli military has progressively extended its strikes across the tiny coastal territory in its war aiming to destroy Hamas.

HIGHLIGHT

Vast areas of Gaza have been devastated and the UN estimates 1.9 million of Gaza’s 2.4 million people have been displaced, facing dire shortages of food, fuel, water and medicine.

Vast areas of Gaza have been devastated and the UN estimates 1.9 million of Gaza’s 2.4 million people have been displaced, facing dire shortages of food, fuel, water and medicine.
“People have been searching all over for firewood, but it’s no longer available,” Shouman said. “They would have to buy it for a higher price, and people have very little money left.”
In his workshops, clients wait patiently as he rubs, twists and adjusts parts of decades old stoves’ pistons, burners and fuel tanks.
“These camping stoves were used 100 years ago, this is how far we’ve regressed,” said Adnan Abu Al-Aish, 55, who has been desperately searching for a way to cook his meager rations of semolina and vegetables.
With a shortage of kerosene, Shouman fuels the stoves with a mix of motor oil and home heating oil.
“There is diesel available but it’s very hard to find,” he said. “You need to spend an entire day searching for it.
“There isn’t even firewood, people are searching for pieces of cardboard thrown on the ground,” he added. “One has to make do.”
Mohammed Al-Malahi also brought his old stove, which he said belonged to his great-great-grandfather, saying: “What can we do? We need it to create fire and cook.”
Shouman said that, in these dire circumstances, the trusty old stoves “get the job done.”

 


Downing of drones in Red Sea ‘legitimate defense’: France

Downing of drones in Red Sea ‘legitimate defense’: France
Updated 11 December 2023
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Downing of drones in Red Sea ‘legitimate defense’: France

Downing of drones in Red Sea ‘legitimate defense’: France
  • In a statement posted on social media, the Houthis said they will prevent the passage of ships heading to Israel if humanitarian aid is not allowed into Gaza

PARIS: A French frigate that shot down two drones in the Red Sea was acting in self-defense after coming under attack from the unmanned aerial vehicles, the Foreign Ministry in Paris said on Monday.
The French general staff reported on Sunday that the Languedoc frigate, operating in the Red Sea, had opened fire on two drones heading straight toward it from the Yemen coast, destroying both.
The incident came after Houthis threatened on Saturday to attack any vessels heading to Israeli ports unless food and medicine were allowed into the besieged Gaza Strip.
The Foreign Ministry said the drones were engaged in an “attack” on its vessel and had been downed in “legitimate defense.”
The incident occurred amid “attacks and acts of piracy committed by Houthis in the Red Sea,” which represented a “worrying increase of assaults on the freedom of navigation in that zone,” it added.
The ministry urged the Houthis to “immediately stop attacks on civilians” and the freedom of movement.

FASTFACT

The Foreign Ministry urged the Houthis to ‘immediately stop attacks on civilians’ and the freedom of movement.

France was closely following developments in the Red Sea and called “on all actors to avoid any regional flare-up.”
The general staff said on Sunday the drone interceptions happened at 2030 GMT and 2230 GMT on Saturday, 110 km from the Yemeni coast and the port of Hodeidah, which is under Houthi control.
The drones “were flying directly toward the vessel,” the general staff said. The frigate used surface-to-air missiles of the Aster 15 type, designed for defense against short- to medium-range threats, a military source said.
The French navy had not used surface-to-air missiles in self-defense before.
The incident came amid heightened tensions in the Red Sea and surrounding waters, following a series of maritime attacks by Houthis since the start of the Israel-Hamas war on Oct. 7.
In a statement posted on social media, the Houthis said they will prevent the passage of ships heading to Israel if humanitarian aid is not allowed into Gaza.
The Houthis have recently attacked ships they allege have direct links to Israel but the latest threat widens the scope of their targets.
Hamas welcomed the Houthi stance as “bold and courageous.”
A US destroyer shot down three drones earlier this month while providing assistance to commercial ships in the Red Sea that were targeted by attacks from Yemen, according to Washington.
It condemned what it said was “a direct threat” to maritime security.
Saturday’s incident was the first time that Houthis had targeted a French military vessel since Hamas attacked Israel on Oct. 7.