$1 equals 25 lakh rials in Iran:Currency hits record low as US sanctions worsen economic crisis

mIran’s currency, the rial, fell to its lowest-ever level on Tuesday. It now takes 25 lakh rials to buy $1. Before the war began, on February 27, $1 was worth around 17 lakh rials. This means Iran’s currency has fallen by nearly 50% in just seven months. The Central Bank of Iran’s official exchange rate is around 16.5 lakh rials per dollar. However, ordinary people have to buy dollars at the market rate. The rial’s decline against the dollar is largely attributed to the war, US sanctions and the US blockade on Iranian oil. These have affected Iran’s revenues and the availability of dollars, causing the rial to weaken continuously. US blocking 3 major sources of Iran’s revenue 1. Impact on oil revenues A large share of Iran’s foreign earnings comes from oil exports. Therefore, the US has been continuously imposing sanctions on companies, tankers and shipping networks involved in buying Iranian oil. A large share of Iran’s oil goes to China. According to the US Treasury, China buys around 90% of Iran’s oil exports. The US is therefore also taking action against Chinese refineries and businesses that purchase Iranian oil. 2. Making it difficult for oil money to reach Iran Stopping oil sales alone is not enough. It is also necessary to prevent the money earned from those sales from reaching Iran. For this, the US is targeting Iranian banks, currency exchanges and ‘shadow banking’ networks. These networks move Iranian money through the international financial system using companies, banks and intermediaries in different countries. In August, the US took action against such networks, which were accused of moving hundreds of crores of dollars on behalf of Iran. 3. Action against banks and companies in other countries US pressure is not limited to Iran. If a foreign bank or company helps with Iran-related business that falls under US sanctions, the US can also take action against it. These are known as secondary sanctions. What problems has the falling rial caused in Iran? 1. Everyday goods have become very expensive The weakening rial has caused prices of food and other essential goods to rise sharply. According to Reuters, Iran’s annual inflation rate was 66% in July, while food prices had risen 128% in a year. 2. People are getting less for the same amount of money According to Al Jazeera, before the war, 20 lakh rials could buy around 4 kg of tomatoes, half a kilogram of chicken and about 1 litre of cooking oil. In August, the same amount could buy only around half that quantity. Tomatoes had become 71% more expensive, chicken 74% more expensive and cooking oil 177% more expensive. 3. Medicines have become expensive and harder to find Around 800 medicines are reportedly in short supply in Iran, including 90 essential and life-saving medicines. The price of insulin has increased nearly six-fold in a year. Paracetamol has become 93% more expensive, while the prices of several other medicines have also risen significantly. 4. Jobs have also been affected According to Reuters, Iran’s unemployment rate was 9.1% in spring, while the number of people working had fallen by around 450,000 in a year. The war has also disrupted work in construction, industry and other businesses. Iran has been under sanctions for years Iran’s economy has been under pressure from international sanctions for years. New sanctions imposed after the war began, along with the US blockade on Iranian oil, have further intensified the crisis. Iranian Foreign Minister Abbas Araghchi told Iranian media late on Monday that the main focus at present is the Strait of Hormuz. The waterway is at the centre of the war. Iran has said talks over Hormuz have become more serious. Mediators are trying to broker an agreement between the two sides to end the fighting and reopen the Strait of Hormuz. Trump rejects Iran’s proposal to end the war US officials told the Associated Press that efforts to negotiate are continuing despite US President Donald Trump rejecting an Iranian proposal. Trump rejected Iran’s proposal on Saturday to end the war and reopen the Strait of Hormuz. Trump said Iran was in trouble and therefore wanted to reopen Hormuz immediately. Iran proposed reopening Hormuz within 7 days Iran sent the US a seven-day roadmap through Foreign Minister Abbas Araghchi and Qatar. It proposed stopping the fighting and reopening the Strait of Hormuz once the conditions were met. Under the proposal, Iran sought relief from restrictions on its oil sales. Iran also asked the US to lift the naval blockade of its ports and release around $12 billion in assets frozen overseas. Iranian President Masoud Pezeshkian said it was now up to the US to decide whether it wanted to end the conflict. US-Iran war has been going on since February 28 The US and Israel began military action against Iran on February 28. In response, Iran launched attacks on Israel and Gulf countries where US military bases are located. The US says its aim is to weaken Iran’s nuclear capabilities. Iran, meanwhile, has consistently maintained that its nuclear programme is for peaceful purposes and that it has the right to use nuclear technology. ​