The escalating confrontation over Iran’s nuclear arms program is having a telling effect on Iran’s economy. One stark manifestation of this is described in today’s New York Times:
Facing a wave of panic selling by Iranians worried that international sanctions and inflation are destroying the value of the rial, Iran’s president reversed himself on Wednesday and allowed bank interest rates to rise sharply in an effort to stop a slide that has depressed the currency to a relentless string of record lows.
More from Reuters:
Iran increased bank interest rates on Wednesday and indicated it would further restrict sales of foreign currency, hoping to halt a spiraling currency crisis after new Western sanctions accelerated a dash for dollars by Iranians worried about their economic future.
By the way, the central bank knows there is more than one reason to hold foreign currency.
The central bank also told Iranians they should only buy dollars if they are traveling and not hoard them to guard against economic uncertainty.
And as a matter of fact, a number of Iranians are doing just that … traveling. One of our contacts in Iraq said in a recent e-mail:
[A]lready I’ve seen hundreds of well off Iranian families renting apartments in southern Iraq and moving their families there in case of trouble in Iran. Other countries in the gulf like the UAE and Kuwait have placed visa restrictions against Iranians due to the influx of people trying to flee potential trouble.
Previously Iranians would come to Iraq for a one week visit. Now we have some Iranians coming and bringing a lot of luggage with them and settling down for a longer stint. Of course, not everyone in Iran can afford to do this. The richer Iranians tend to go to Dubai / Kuwait. The poorer ones to Syria / Iraq. But with the troubles in Syria, Iraq has become one of the few exit points for Iranians now.
The number of Iranians staying [in Iraq] is still a trickle compared to what would be the numbers if things really kicked off, but it has been already noticed locally that some Iranians are staying now rather than just visiting.
Update. January 27th, from the Iraqi province of Wassit which borders Iran:
Thousands of Iranians poured into the Zurbatia border (crossing) with the province to buy US dollars from Iraqi merchants, a Wassit Province official said today.
The source told Aswat al-Iraq that the buying campaign came after the deterioration of the Iranian currency.
The source added that the Central Bank of Iraq witnessed greater purchasing demand on the US dollar during the last two days, following the sanctions imposed against the Iranian government.
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