News | IRI Devalues Rial, Warns 'No One Can Sell Oil if Iran Cannot'
27 Jan 2012 00:05
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Iran Standard Time (IRST), GMT+3:3012:05 a.m., 7 Bahman/January 27 The Islamic Republic of Iran announced Thursday that it was devaluing the rial, the national currency, by 8 percent and would be taking steps to ensure that it was bought and sold domestically only at the official exchange rate. Reuters reports on the declaration of the new rate:
"I announce it right here at 12,260 rials [to the dollar]," Central Bank Governor Mahmoud Bahmani told state television.
"This new price will go into effect starting Saturday in all banking outlets and all banking transactions will be calculated on the basis of this new rate," he told Channel 1.
The bank's reference rate, posted on its website on Thursday, was 11,296 rials to the dollar.
Although a devaluation from that official rate, the new price is much lower than what the dollar has been sold for by exchange offices and touts this year, soaring above 20,000 rials as Iranians sought to convert their savings into hard currency.
The rial's severe weakening over the past 16 months has had widespread effects, fueling inflation and leading many Iranians to pour their savings into gold in search of some financial stability. Earlier this week, there were reports that Iranians were heading to Iraq by the thousands to acquire U.S. dollars at lower prices. According to IRNA, the Islamic Republic's official state news agency, the domestic open-market rate for dollars fell to between 17,000 and 18,000 rials in response to Bahmani's announcement. For an analysis of what has been happening -- and what may be still to come -- with the rial, see here.
The website of Press TV, the English-language subsidiary of Islamic Republic of Iran Broadcasting, has been prominently featuring an item headlined "'No One Can Sell Oil if Iran Cannot,'" which focuses on statements made by one of the country's most influential political figures:
"In the absence of Iranian supply, oil prices will go up and they [the Western states] know it. However, Iran will never allow itself to be in a situation in which it cannot sell oil but other regional states can," Ali Akbar Velayati, senior adviser to the Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei, told Press TV on Thursday.
Europe's decision to embargo Iranian oil exports is in no one's interest, Velayati said, adding, "Western policy makers know just too well that their sanctions regime is a political maneuver."
"Iran doesn't need any favor from any country to sell its oil, because global demand is always there."
If there was any question as to what Velayati was suggesting, the conclusion of the Press TV article answers it:
Iranian authorities have warned that the imposition of sanctions against the country's energy sector will prompt Tehran to choke the oil flow through the Strait of Hormuz.
The Strait of Hormuz is a narrow waterway which connects the Persian Gulf on the west to the Sea of Oman. Statistically, the waterway is one of the world's most important shipping lanes, with a daily flow of about 15 million barrels of oil.
While many security and military experts in the Middle East and the West do not find Iran's threats to overtly block the Strait of Hormuz credible, the Islamic Republic may have the capability to disrupt the flow of oil through the strait in more sophisticated ways; see here for an analysis.
On Thursday, as well, deputies in the Majles, Iran's parliament, declared that they may block the sale of oil to European countries before July 1, the date the European Union's ban on purchases of Iranian oil by its member nations goes into effect. According to Reuters:
Parliament will debate on Sunday a bill that would oblige the government to halt oil exports ahead of the July 1 deadline the EU set in order to soften the blow to the ailing economies of Greece, Italy and others to whom Iran is a major supplier.
"All European countries that made Iran the target of their sanctions will not be able to buy even one drop of oil from Iran and oil taps will be turned off to them so that they will not play with fire again," lawmaker Nasser Soudani told the semi-official Mehr news agency.
In public statements broadcast by the state radio network, President Mahmoud Ahmadinejad declared Thursday, "It is the West that needs Iran and the Iranian nation will not lose from the sanctions.... There was a time when 90 percent of our trade was with the Europeans. It has now dropped to 10 percent. We didn't call for this. Cut it [trade] and let's see who will incur the loss." According to recent estimates, almost 20 percent of Iran's oil exports currently go to European countries.
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