Emirates halt trade in Iranian rial (HAŽARETZ NEWS) By Zvi Bar´el 03/18/12)
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Iran´s economy suffered yet another blow after banks and currency
exchange houses in the United Arab Emirates announced they would
cease trading in the Iranian rial. This measure was not part of the
trade sanctions the United States is demanding the U.A.E. impose on
Tehran. Rather, it was the direct result of the impact of
international economic sanctions on the value of the Iranian
currency, which lost more than half its value in the past two weeks.
The result of this decision is that Iranian merchants and citizens
can no longer use the Iranian currency in the U.A.E. They cannot
exchange their rials for another currency. The move slams shut an
important trading window for the Iranian regime, through which it had
been able to bypass international sanctions.
Meanwhile, the Iranian leadership has publicly rejected the
possibility of an Israeli strike against its nuclear facilities.
Parliament Speaker Ali Larijani said "a barking dog will not dare
attack Iran," while the deputy chief of staff said in an interview to
Iran´s Al-Alam network that Israel´s threats are void of substance
and reflect the weakness of the "Jewish entity."
Iran´s Revolutionary Guards had used Iranian rials deposited in banks
in Dubai to fund military and economic activities. The guards control
about a third of the Iranian economy, including oil and petrochemical
terminals and refineries.
On Friday a corporation controlled by the Revolutionary Guards won
the tender to build a subway in Tabriz, estimated to cost $12 billion.
A significant portion of the income from the Revolutionary Guards´
various business endeavors are deposited in banks outside Iran,
mostly in the Gulf states.
Due to the drop in the value of the rial the government has imposed
limits on the transfer of foreign currency outside Iran, sparking a
profitable industry of cash-running. Until recently Iranians used to
carry suitcases full of local currency abroad, depositing them mainly
in Dubai-based banks in exchange for foreign currency.
The immediate result of the decision of banks in the U.A.E., whose
trade with Iran is nearly $12 billion a year, will be a 50-percent
drop in trading volume. But it will also affect the availability of
Western goods in Iran. Most of these are procured through the U.A.E.,
where some 400,000 Iranian citizens reside, operating thousands of
Government-backed media outlets have yet to address the decision to
remove Iranian banks from SWIFT, the system which is used by banks
internationally for financial transfers.
Iranian opposition figures say the regime is looking for alternative
mechanisms for international trade. One of the possibilities is to
operate through Iranian firms based in Russia, Turkey, India and
Pakistan, countries which have to date imposed only the United
Nations sanctions and have not joined the much more severe sanctions
regime of the European Union and the United States.
During the past year the Iranian government opened a number of bank
accounts in countries in Asia, while in Turkey, which imports about a
third of its oil from Iran, banking for the regime is done through
the government controlled Halk Bankasi. Private banks in Turkey have
ceased doing business with Iranian businesses. Through the Turkish
bank, payments are made by Indian companies for oil they buy from
In the past year more than 300 new Iranian companies were registered
in Turkey, 170 of them in February alone. Tehran and Ankara have
announced that they intend to expand their volume of trade during
2012 to $16 billion.
Another way Iran is trying to contain the damage caused by the
inability to use SWIFT, is to build a network of barter trade. That
would allow countries buying Iranian oil to pay for it with their own
goods or ones they would buy for Iran. However, this is a very
expensive and inefficient way to trade and is likely to cause a
further rise in the prices of consumer goods. Since the start of 2012
the prices of consumer goods in Iran rose by 30 percent to 70 percent.
It is still difficult to gauge the impact of the sanctions on Iranian
public opinion, especially on the nuclear issue. A December-January
poll by Gallup reported that 40 percent of respondents said they
supported Iran´s development of military nuclear capability, while 57
percent supported the development of nuclear technology for civilian
use. (© Copyright 2012 Ha´aretz 03/18/12)
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