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Iran's Refusal to Dial Back Nuclear Program Lit Fuse on Currency Crisis
(Wall Street Journal) Benoit Faucon - Iran's currency has slumped to a historic low against the dollar and inflation is surging. Iran isn't a typical candidate for a currency crisis. It is oil-rich, with an educated population and a glistening stock of foreign reserves. The issue is that its economic problems have a specific political source: Its leaders won't contemplate dialing back their nuclear program, which the U.S. and its allies fear is a cover for developing an atomic weapon. Barring a deal over its nuclear program, "Iran is likely to continue limping along toward deeper economic insolvency, recurrent protest cycles, and a default reliance on force rather than reform to maintain control," said Sanam Vakil, director of the Middle East and North Africa program at Chatham House, a London think tank. Iran has suffered from years of economic mismanagement. The Islamic Revolutionary Guard Corps controls much of the economy and much of the government's budget outlays. Patronage systems allocate jobs, public-works contracts, cheap loans and access to foreign cash, hollowing out the entrepreneurial class. But it is the immediate aftermath of the disastrous war with Israel that brought the swift dive in the Iranian rial and the latest crisis. For years, international sanctions have restricted Iran's ability to bank and trade with the rest of the world. Nor can it access the bulk of its foreign-exchange reserves held offshore; international banks don't allow transfers to Tehran because of sanctions. "Without access to reserves, the artificial pressure on the rial won't subside," said Esfandyar Batmanghelidj, chief executive of Iran-focused think tank Bourse & Bazaar. The cash-strapped government is now running out of options to cushion its population from the impact of sanctions, said Sina Toossi, a senior fellow at the Center for International Policy. A poll in October 2024 found that 78% of Iranians see Tehran's foreign policy as the cause of their economic problems, according to the Middle East Institute. 47% of Iranians want Tehran to halt uranium enrichment to prevent another war, while 36% want the program to continue, according to a November survey by Gamaan, a Netherlands-based research group.